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What changed in HeartCore Enterprises, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HeartCore Enterprises, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+367 added−409 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-09)

Top changes in HeartCore Enterprises, Inc.'s 2024 10-K

367 paragraphs added · 409 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

119 edited+28 added−57 removed237 unchanged
Biggest changeYamamoto. 28 To the extent not in conflict with the laws of the United States or the State of Delaware or the rules and regulations of any securities exchange or securities market on which the Company’s securities are traded or listed for trading, and provided that legal counsel to the Company does not advise the Company that any such notification is inadvisable due to such information being material non-public information or due to such disclosure being a breach of the fiduciary duties of the officers or Directors of the Company, the Company or HeartCore Co. also agreed to provide to Dentsu a summary of the following matters pertaining to the Company or HeartCore Co.: ● Damage arising from disasters or operations; ● Filing of a lawsuit by a third party which may affect its financial condition, or becoming subject to a judgment, or any order or award equivalent thereto which may affect its financial condition; ● Petition for an injunction of the business or a provisional disposition order equivalent thereto, or conclusion of legal proceedings not based on an order or a judgement by the court; ● Revocation of license, suspension of business or other equivalent dispositions by an administrative agency based on laws and regulations, or accusation by an administrative agency for violation of the laws; ● Merger or other reorganization involving the Company, HeartCore Co., or any of their related parties; ● Filing of a petition for commencement of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation or enforcement of the corporate security interest by a third party, suspension of payments or dishonor of bills or checks with regard to HeartCore Co. or the Company; ● Commencement of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation or petition for exercise of corporate security interest, suspension of payments or dishonor of bills or checks pertaining to the Company, HeartCore Co. or any of its related parties; ● Suspension of transactions with material customers, suppliers, distributors, agents, or other business partners; ● The occurrence of risk of default by an obligor of the Company or HeartCore Co., or a principal obligor of a guarantee obligation of which the Company or HeartCore Co. is a guarantor; and ● Cancellation of debts by creditors, reduction or extension of interest or assumption or repayment of debts by third parties.
Biggest changeTo the extent not in conflict with the laws of the United States or the State of Delaware or the rules and regulations of any securities exchange or securities market on which the Company’s securities are traded or listed for trading, and provided that legal counsel to the Company does not advise the Company that any such notification is inadvisable due to such information being material non-public information or due to such disclosure being a breach of the fiduciary duties of the officers or Directors of the Company, the Company or HeartCore Co. also agreed to provide to Dentsu a summary of the following matters pertaining to the Company or HeartCore Co.: ● Damage arising from disasters or operations; ● Filing of a lawsuit by a third party which may affect its financial condition, or becoming subject to a judgment, or any order or award equivalent thereto which may affect its financial condition; ● Petition for an injunction of the business or a provisional disposition order equivalent thereto, or conclusion of legal proceedings not based on an order or a judgement by the court; ● Revocation of license, suspension of business or other equivalent dispositions by an administrative agency based on laws and regulations, or accusation by an administrative agency for violation of the laws; ● Merger or other reorganization involving the Company, HeartCore Co., or any of their related parties; ● Filing of a petition for commencement of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation or enforcement of the corporate security interest by a third party, suspension of payments or dishonor of bills or checks with regard to HeartCore Co. or the Company; ● Commencement of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation or petition for exercise of corporate security interest, suspension of payments or dishonor of bills or checks pertaining to the Company, HeartCore Co. or any of its related parties; ● Suspension of transactions with material customers, suppliers, distributors, agents, or other business partners; ● The occurrence of risk of default by an obligor of the Company or HeartCore Co., or a principal obligor of a guarantee obligation of which the Company or HeartCore Co. is a guarantor; and ● Cancellation of debts by creditors, reduction or extension of interest or assumption or repayment of debts by third parties. 25 In addition, to the extent permitted by applicable law, and provided that legal counsel to the Company does not advise the Company that any such notification is inadvisable due to such information being material non-public information or due to such disclosure being a breach of the fiduciary duties of the officers or Directors of the Company, if Sumitaka Yamamoto becomes aware of the occurrence of the following matters pertaining to himself and other matters that are important in terms of credit status, etc., he agreed to immediately report in writing the summary of the following matters that occurred to the investors: ● Filing of a lawsuit by a third party which may affect the financial condition of Mr.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform. There is the potential for non-paying customers to become paying customers again if and when they start utilizing our paid services again.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform. There is the potential for non-paying customers to become paying customers again if and when they start utilizing our paid services again.
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) A cash fee payable in installment payments; and (b) Issuance by issuers to us of a 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.
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) A cash fee payable in installment payments; and (b) 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.
Yamamoto pertaining to a claim on property rights; ● Conclusion or change of important contracts or other important juridical act; and ● Offering of the shares held by Mr.
Yamamoto pertaining to a claim on property rights; ● Conclusion or change of important contracts or other important juridical act; and ● Offering of the shares held by Mr. Yamamoto.
Since our founding, we have embraced rapid, iterative product development lifecycles, cloud automation and open-source technologies, including big data platforms, to power marketing, sales, service, and content management programs and provide insights not previously possible or available. Our CXM Platform is a multi-tenant, single code-based, globally available software-as-a-service delivered through APIs, web browsers or mobile applications.
Since our founding, we have embraced rapid, iterative product development lifecycles, cloud automation and open-source technologies, including big data platforms, to power marketing, sales, service, and content management programs and provide insights not previously possible or available. 7 Our CXM Platform is a multi-tenant, single code-based, globally available software-as-a-service delivered through APIs, web browsers or mobile applications.
As a result, activities performed by many workers today are still manual, mundane, and administrative tasks, limiting workers from focusing on higher-value activities that can directly improve business performance. 5 Automation is the New Frontier of Competitive Differentiation . Enterprises are demanding a new approach to unify, tailor, and run applications without significant IT resources or changes to existing infrastructure.
As a result, activities performed by many workers today are still manual, mundane, and administrative tasks, limiting workers from focusing on higher-value activities that can directly improve business performance. Automation is the New Frontier of Competitive Differentiation . Enterprises are demanding a new approach to unify, tailor, and run applications without significant IT resources or changes to existing infrastructure.
Our RPA products enable users to track, measure, and forecast the performance of automation in their enterprise. ● Governance . We offer powerful, centralized governance capabilities designed to help businesses ensure compliance with business standards. 14 Our software is powered by the following key differentiating elements that are necessary for end-to-end automation within today’s enterprise: ● AI Computer Vision .
Our RPA products enable users to track, measure, and forecast the performance of automation in their enterprise. ● Governance . We offer powerful, centralized governance capabilities designed to help businesses ensure compliance with business standards. Our software is powered by the following key differentiating elements that are necessary for end-to-end automation within today’s enterprise: ● AI Computer Vision .
Through our free products, our customers are able to receive value from us before converting to a paid product or engaging with sales. Mid-Market Focus . We believe we have significant competitive advantages reaching mid-market businesses and efficiently reach this market at scale as a result of our inbound methodology, premium pricing strategy, and our solutions partner channel.
Through our free products, our customers are able to receive value from us before converting to a paid product or engaging with sales. 18 Mid-Market Focus . We believe we have significant competitive advantages reaching mid-market businesses and efficiently reach this market at scale as a result of our inbound methodology, premium pricing strategy, and our solutions partner channel.
Features include manage website pages, business blogging, smart content, landing pages and forms, search engine optimization tools, forms and lead flow, web analytics reporting, calls-to-action, and digital asset management and product information management file manager. 9 Platform Application (“App”) Partners . Businesses that use software outside of our software can leverage our ecosystem of third-party integrations.
Features include manage website pages, business blogging, smart content, landing pages and forms, search engine optimization tools, forms and lead flow, web analytics reporting, calls-to-action, and digital asset management and product information management file manager. Platform Application (“App”) Partners . Businesses that use software outside of our software can leverage our ecosystem of third-party integrations.
There are many cases where GUI is not available for servers such as Linux and UNIX, etc., so our RPA also has a CUI command interface. All robots are provided as JAR files, so as long as customers have a Java environment, they can run the robots and automate their operations without installing RPA. 16 Run Development RPA .
There are many cases where GUI is not available for servers such as Linux and UNIX, etc., so our RPA also has a CUI command interface. All robots are provided as JAR files, so as long as customers have a Java environment, they can run the robots and automate their operations without installing RPA. Run Development RPA .
Many existing automation software offerings are point technologies and cannot offer end-to-end automation capabilities on an integrated software. Not Capable of Emulating Human Behavior, Relying too Heavily on APIs. Many existing offerings do not effectively integrate AI computer vision and machine learning (“ML”) capabilities needed to accurately identify and emulate human actions in conjunction with APIs.
Many existing automation software offerings are point technologies and cannot offer end-to-end automation capabilities on an integrated software. 3 Not Capable of Emulating Human Behavior, Relying too Heavily on APIs. Many existing offerings do not effectively integrate AI computer vision and machine learning (“ML”) capabilities needed to accurately identify and emulate human actions in conjunction with APIs.
The work performed by the robot generates a log that can be reviewed and monitored at any time, allowing administrators to better control and comply with the work. Enhance Customer Experiences . Companies can use our robots to solve known problems faster and more efficiently. We can also identify potential problems and help solve them.
The work performed by the robot generates a log that can be reviewed and monitored at any time, allowing administrators to better control and comply with the work. 10 Enhance Customer Experiences . Companies can use our robots to solve known problems faster and more efficiently. We can also identify potential problems and help solve them.
Furthermore, by updating the data to be captured and monitoring it continuously, it is possible to recognize the performance of business quality, changes, and anomalies in a timely manner, which can lead to improvements. Currently, business process reforms are rapidly advancing, as exemplified by the automation of routine tasks through the introduction of RPA.
Furthermore, by updating the data to be captured and monitoring it continuously, it is possible to recognize the performance of business quality, changes, and anomalies in a timely manner, which can lead to improvements. 12 Currently, business process reforms are rapidly advancing, as exemplified by the automation of routine tasks through the introduction of RPA.
This allows our clients to make full use of their internal resources. Orchestrator . Our Orchestrator can provision, deploy, trigger, monitor, measure, and track the successful operation of robots on any supported device, and when combined with the Robot Automation Portal, it does so through a GUI interface. CUI interface .
This allows our clients to make full use of their internal resources. Orchestrator . Our Orchestrator can provision, deploy, trigger, monitor, measure, and track the successful operation of robots on any supported device, and when combined with the Robot Automation Portal, it does so through a GUI interface. 13 CUI interface .
It is designed to scale its power and technical sophistication without losing its ease-of-use. In addition to being a comprehensive suite itself, our CXM Platform seamlessly integrates with external applications, making it easy to extend the functionality of our CXM Platform and customize it for any business. Power of a Unified Customer View .
It is designed to scale its power and technical sophistication without losing its ease-of-use. In addition to being a comprehensive suite itself, our CXM Platform seamlessly integrates with external applications, making it easy to extend the functionality of our CXM Platform and customize it for any business. 5 Power of a Unified Customer View .
Our software can be easily learned and operated by employees with or without technical knowledge, without the need for large implementation costs or costly professional services. 22 Resilient Automations . Our software is capable of fully emulating the behavior of enterprise workers as they manipulate applications and systems to execute processes.
Our software can be easily learned and operated by employees with or without technical knowledge, without the need for large implementation costs or costly professional services. Resilient Automations . Our software is capable of fully emulating the behavior of enterprise workers as they manipulate applications and systems to execute processes.
It helps to organically surface a number of automation ideas that could not be achieved with the traditional top-down approach. Our Growth Strategies Customer Experience Management Business The key elements to our growth strategy for our customer experience management business are: Grow Our Customer Base . The market for our CXM Platform is large and underserved.
It helps to organically surface a number of automation ideas that could not be achieved with the traditional top-down approach. 20 Our Growth Strategies Customer Experience Management Business The key elements to our growth strategy for our customer experience management business are: Grow Our Customer Base . The market for our CXM Platform is large and underserved.
We also utilize cloud environment to operate customer data at scale, allowing our engineers to choose the best datastore for each task. 10 Agility . Our infrastructure and development and software release processes allow us to update our platform for specific groups of customers or our entire customer base at any time.
We also utilize cloud environment to operate customer data at scale, allowing our engineers to choose the best datastore for each task. Agility . Our infrastructure and development and software release processes allow us to update our platform for specific groups of customers or our entire customer base at any time.
Our partner network includes, among others, content management systems, customer experience management systems, Heartcore Robo (RPA), Apromore, myInvenio and Controlio. We intend to continue to expand and enhance our partner relationships to grow our market presence and drive greater sales efficiencies. 24 Extend Our Technology Leadership Through Continued Innovation and Investment in Our Software .
Our partner network includes, among others, content management systems, customer experience management systems, Heartcore Robo (RPA), Apromore, myInvenio and Controlio. We intend to continue to expand and enhance our partner relationships to grow our market presence and drive greater sales efficiencies. Extend Our Technology Leadership Through Continued Innovation and Investment in Our Software .
Yamamoto may cause a third party to acquire such shares with the approval of Dentsu. 29 The per share-transfer price for the shares in this case shall be the purchase price paid by Dentsu for the acquisition of shares of HeartCore Co., subject to appropriate adjustments for stock splits, stock consolidations, and similar events involving the shares.
Yamamoto may cause a third party to acquire such shares with the approval of Dentsu. The per share-transfer price for the shares in this case shall be the purchase price paid by Dentsu for the acquisition of shares of HeartCore Co., subject to appropriate adjustments for stock splits, stock consolidations, and similar events involving the shares.
Accordingly, we believe enterprises build inefficient business processes to compensate for limited cross-functional automation capabilities. 6 Difficult to Link AI Capabilities to Execution. AI and ML (“AI/ML”) capabilities are needed to automate cognitive, high-value tasks. In recent years, enterprises have made significant investments in developing AI/ML models.
Accordingly, we believe enterprises build inefficient business processes to compensate for limited cross-functional automation capabilities. Difficult to Link AI Capabilities to Execution. AI and ML (“AI/ML”) capabilities are needed to automate cognitive, high-value tasks. In recent years, enterprises have made significant investments in developing AI/ML models.
Our scalability gives us flexibility for future growth and enables us to service a large variety of businesses of different sizes across different industries. 8 Extensible and Open Architecture . Our CXM Platform features a variety of open APIs that allow easy integration of our platform with other applications.
Our scalability gives us flexibility for future growth and enables us to service a large variety of businesses of different sizes across different industries. Extensible and Open Architecture . Our CXM Platform features a variety of open APIs that allow easy integration of our platform with other applications.
Features include email templates and tracking, conversations and live chat, meeting and call scheduling, lead and website visit alerts, sales automation, and lead scoring. Service Function . The service function is our customer service software that is designed to help businesses manage and connect with customers.
Features include email templates and tracking, conversations and live chat, meeting and call scheduling, lead and website visit alerts, sales automation, and lead scoring. 6 Service Function . The service function is our customer service software that is designed to help businesses manage and connect with customers.
Over time, we seek to deploy our solution where every employee interacts with multiple robots. We believe we will be able to accomplish this through our continued democratization of automation and enablement of citizen developers. Grow and Cultivate Our Partner and Channel Network .
Over time, we seek to deploy our solution where every employee interacts with multiple robots. We believe we will be able to accomplish this through our continued democratization of automation and enablement of citizen developers. 21 Grow and Cultivate Our Partner and Channel Network .
The products in our automation category offer centralized tools designed to securely and resiliently manage, test, and deploy automations and ML models across the entire enterprise, with seamless access, enterprise-grade security, and endless scalability of data. ● Orchestration .
The products in our automation category offer centralized tools designed to securely and resiliently manage, test, and deploy automations and ML models across the entire enterprise, with seamless access, enterprise-grade security, and endless scalability of data. 11 ● Orchestration .
Furthermore, depending on the level of understanding and risk sensitivity of the interviewees, infrequent exceptions and so-called local rules were sometimes overlooked. 15 One of the concepts that will drive and enhance digital transformation is digital twin technology.
Furthermore, depending on the level of understanding and risk sensitivity of the interviewees, infrequent exceptions and so-called local rules were sometimes overlooked. One of the concepts that will drive and enhance digital transformation is digital twin technology.
The increasing volume of applications has a compounding effect on the complexity of business processes and the IT environments that support them. The Benefits of Digital Transformation Have Yet to Make Their Way to the Workforce.
The increasing volume of applications has a compounding effect on the complexity of business processes and the IT environments that support them. 2 The Benefits of Digital Transformation Have Yet to Make Their Way to the Workforce .
FujiFilm Sysmex Corporation The Dai-ichi Life Insurance Richo Nippon Steel Corporation Technology Telecommunications Other NTT Data NTT Docomo TOYOTA NEC Softbank HONDA Roland KDDI NNK Canon JAL ANA JR East 19 These customers are representative of the Company’s overall customer base, but that are also particularly well-known customers and often appear in the Company’s case studies.
FujiFilm Sysmex Corporation The Dai-ichi Life Insurance Richo Nippon Steel Corporation Technology Telecommunications Other NTT Data NTT Docomo TOYOTA NEC Softbank HONDA Roland KDDI NNK Canon JAL ANA JR East 16 These customers are representative of the Company’s overall customer base, but that are also particularly well-known customers and often appear in the Company’s case studies.
Our sales organization is supported by a team of pre-sales engineers and our professional services organization that offer technical expertise to help customers speed adoption and return on investment. 18 We sell to organizations of all sizes across a broad range of industries, with a focus on enterprise customers. Our go-to-market strategy is focused on a model.
Our sales organization is supported by a team of pre-sales engineers and our professional services organization that offer technical expertise to help customers speed adoption and return on investment. 15 We sell to organizations of all sizes across a broad range of industries, with a focus on enterprise customers. Our go-to-market strategy is focused on a model.
This will give them the freedom to choose whether to ask a robot or a human to do the work. Simple, Intuitive, Quickly Deployed .
This will give them the freedom to choose whether to ask a robot or a human to do the work. 19 Simple, Intuitive, Quickly Deployed .
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. 17 In providing the Services, we do not perform accounting services, and do not act as an investment advisor or broker/dealer.
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. 14 In providing the Services, we do not perform accounting services, and do not act as an investment advisor or broker/dealer.
As of December 31, 2023, we held one issued patent in Japan. Our issued patent is scheduled to expire between October 2028 and January 2030. As of December 31, 2023, we held one pending U.S. trademark application, and more than two active foreign trademark filings.
As of December 31, 2024, we held one issued patent in Japan. Our issued patent is scheduled to expire between October 2028 and January 2030. As of December 31, 2024, we held one pending U.S. trademark application, and more than two active foreign trademark filings.
As of December 31, 2023, we held two domain names, one registered in the United States and one registered in foreign jurisdictions. We continually review our development efforts to assess and identify the existence and patentability of new intellectual property.
As of December 31, 2024, we held two domain names, one registered in the United States and one registered in foreign jurisdictions. We continually review our development efforts to assess and identify the existence and patentability of new intellectual property.
The revenue in the GO IPO business helped to offset the decline in sales in the CX and DX divisions in Japan. In the first quarter of 2023, we formed HeartCore Financial and HeartCore Capital Advisors as a part of our Go IPO consulting business.
The revenue in the GO IPO business helped to offset the decline in sales in the CX and DX divisions in Japan. In the first quarter of 2023, we formed HeartCore Financial as a part of our Go IPO consulting business.
We believe the principal competitive factors in our market are: ● vision for the market, product strategy and pace of innovation; ● inbound marketing focus and domain expertise; ● integrated all-in-one CXM Platform; ● breadth and depth of product functionality; ● ease of use; ● scalable, open architecture; ● time to value and total cost of ownership; ● integration with third-party applications and data sources; ● name recognition and brand reputation; and ● “free products to paid services” go-to-market motion.
We believe the principal competitive factors in our market are: ● vision for the market, product strategy and pace of innovation; ● inbound marketing focus and domain expertise; ● integrated all-in-one CXM Platform; ● breadth and depth of product functionality; ● ease of use; ● scalable, open architecture; ● time to value and total cost of ownership; ● integration with third-party applications and data sources; ● name recognition and brand reputation; and ● “free products to paid services” go-to-market motion. 17 We believe we compete favorably with respect to all of these factors.
We nurture users through their trial license by providing training and certifications through our Academy, detailing best practices and use cases, and offering continuous support through our interactive forum or pre-sales organization. Customers We have a large and diversified customer base. Three customers accounted for more than 10% of our revenue for the year ended December 31, 2023.
We nurture users through their trial license by providing training and certifications through our Academy, detailing best practices and use cases, and offering continuous support through our interactive forum or pre-sales organization. Customers We have a large and diversified customer base. One customer accounted for more than 10% of our revenue for the year ended December 31, 2024.
As of December 31, 2023, our sales and marketing organization was comprised of 16 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market. Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.
As of December 31, 2024, our sales and marketing organization was comprised of 12 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market. Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.
Go IPO Consulting Services Since we concluded our initial public offering and listed on the Nasdaq Capital Market in February 2022, we have been offering “Go IPO” consulting services to a number of private Japanese companies where we assist such private Japanese companies and/or their affiliates (“issuers”) with their initial public offerings in the United States as well as their simultaneous listings onto the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American.
Go IPO Consulting Services Since February 2022, we have been offering “Go IPO” consulting services to a number of private Japanese companies where we assist such private Japanese companies and/or their affiliates (“issuers”) with their initial public offerings in the United States as well as their simultaneous listings onto the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American.
Pursuant to the Memorandum, the parties agreed on certain matters related to the operations of the Company and HeartCore Co., which would remain in place until the earlier of (1) the parties unanimous agreement to terminate the Memorandum; (2) if Dentsu ceases to be a stockholder of the Company; (3) if an application by the Company for the listing of its shares is approved by Nasdaq; or (4) upon the effectiveness of a registration statement filed by the Company under the Securities Act for an initial public offering of its stock (which was satisfied when the Company closed its initial public offering on February 14, 2022).
(“ISI-Dentsu”), a shareholder of HeartCore Co., which became a stockholder of the Company pursuant to the share exchange agreement. 23 Pursuant to the Memorandum, the parties agreed on certain matters related to the operations of the Company and HeartCore Co., which would remain in place until the earlier of (1) the parties unanimous agreement to terminate the Memorandum; (2) if Dentsu ceases to be a stockholder of the Company; (3) if an application by the Company for the listing of its shares is approved by Nasdaq; or (4) upon the effectiveness of a registration statement filed by the Company under the Securities Act for an initial public offering of its stock (which was satisfied when the Company closed its initial public offering on February 14, 2022).
As of December 31, 2023, our combined business units (customer experience management business unit and digital transformation business unit) had 949 total customers of varying sizes. We pride ourselves in providing what we believe to be a great experience to every single customer and user of our software.
As of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers of varying sizes. We pride ourselves in providing what we believe to be a great experience to every single customer and user of our software.
We will continue to leverage our inbound go-to-market approach, freemium pricing strategy and our network of solutions partners to keep growing our business. 23 Increase Revenue from Existing Customers . With 949 total customers from our combined business units in Japan as of December 31, 2023, we believe we have a significant opportunity to increase revenue from our existing customers.
We will continue to leverage our inbound go-to-market approach, freemium pricing strategy and our network of solutions partners to keep growing our business. Increase Revenue from Existing Customers . With 982 total customers from our combined business units in Japan as of December 31, 2024, we believe we have a significant opportunity to increase revenue from our existing customers.
As a result, effective February 24, 2022, HeartCore Co. is a wholly owned subsidiary of the Company. 30 Recent Developments Related Party Transactions As of December 31, 2023 and 2022, the Company had a due to related party balance of $1,476 and $402, respectively, from Sumitaka Yamamoto, the Chief Executive Officer (“CEO”) and major shareholder of the Company.
As a result, effective February 24, 2022, HeartCore Co. is a wholly owned subsidiary of the Company. 26 Recent Developments Related Party Transactions As of December 31, 2024 and 2023, the Company had a due to related parties balance of $47 and $1,476, respectively, from Sumitaka Yamamoto, the Chief Executive Officer (“CEO”) and major shareholder of the Company.
As of December 31, 2023, we have entered into consulting agreements with eleven 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 one to four percent 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.
As of December 31, 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.
As of December 31, 2023, we have entered into consulting agreements with eleven 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 one to four percent 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.
As of December 31, 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.
Solutions partners and customers referred to us by our solutions partners represented approximately 62% of our customers in Japan, and approximately 52% of our revenue in Japan for the year ended December 31, 2023.
Solutions partners and customers referred to us by our solutions partners represented approximately 62% of our customers in Japan, and approximately 50% of our revenue in Japan for the year ended December 31, 2024.
We host and present at regional and global events, which both launched during the COVID-19 pandemic, to share customer success stories, developer breakthroughs, and analyst insights and to deepen customer relationships. A key marketing objective is to have prospective customers try our software. We provide easy access to our software through our website and partner portal.
We host and present at regional and global events to share customer success stories, developer breakthroughs, and analyst insights and to deepen customer relationships. A key marketing objective is to have prospective customers try our software. We provide easy access to our software through our website and partner portal.
Therefore, the Memorandum ceased to be in effect upon the closing of our initial public offering on February 14, 2022. 27 Pursuant to the Memorandum, the Company and HeartCore Co. agreed to give advance notice to Dentsu when decisions are made with respect to any of the following matters pertaining to the Company or HeartCore Co.: ● Changes to the certificate of incorporation or articles of incorporation, limited to the creation of class shares, changes in the features of common shares as class shares, establishment of or changes in share units, and other changes that may affect the position of common shareholders; ● Dissolution, a petition for commencement of bankruptcy proceedings, civil rehabilitation proceedings or corporate reorganization proceedings filed by the Company, HeartCore Co. or its directors; ● Approval of demand for sale of the shares by Mr.
Pursuant to the Memorandum, the Company and HeartCore Co. agreed to give advance notice to Dentsu when decisions are made with respect to any of the following matters pertaining to the Company or HeartCore Co.: ● Changes to the certificate of incorporation or articles of incorporation, limited to the creation of class shares, changes in the features of common shares as class shares, establishment of or changes in share units, and other changes that may affect the position of common shareholders; ● Dissolution, a petition for commencement of bankruptcy proceedings, civil rehabilitation proceedings or corporate reorganization proceedings filed by the Company, HeartCore Co. or its directors; ● Approval of demand for sale of the shares by Mr.
This will enable us to grow better in serving our customers. 34 Government Regulation Our business is and will continue to be subject to extensive U.S. federal and state and foreign laws and regulations, including laws and regulations involving privacy, data protection, security, intellectual property, competition, taxation, anti-corruption, anti-bribery, anti-money laundering, and other similar laws.
Government Regulation Our business is and will continue to be subject to extensive U.S. federal and state and foreign laws and regulations, including laws and regulations involving privacy, data protection, security, intellectual property, competition, taxation, anti-corruption, anti-bribery, anti-money laundering, and other similar laws.
Properties Our corporate headquarters are located at 1-2-33, Higashigotanda, Shinagawa-ku, Tokyo, Japan, where we lease approximately 7,863 rentable square feet of office space from an unaffiliated third party. This lease has an original term ending in September 2025 with automatic two-year renewal option.
Future dividends, if any, may be less than, equal to or greater than recent dividends. Properties Our corporate headquarters are located at 1-2-33, Higashigotanda, Shinagawa-ku, Tokyo, Japan, where we lease approximately 7,863 rentable square feet of office space from an unaffiliated third party. This lease has an original term ending in September 2025 with an automatic two-year renewal option.
The balance is unsecured, non-interest bearing and due on demand. During the year ended December 31, 2023, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $1,123.
The balance is unsecured, non-interest bearing and due on demand. During the year ended December 31, 2024, the Company repaid to the related party for operating expenses the related party paid on behalf of the Company in a net amount of $1,338.
The balance is unsecured, bears an annual interest of 1.475%, and requires repayments in installments starting from February 2022. During the years ended December 31, 2023 and 2022, the Company received repayments of $45,404 and $44,871, respectively, from this related party.
The loan is made to the related party to support its operation. The balance is unsecured, bears an annual interest of 1.475%, and requires repayments in installments starting from February 2022. During the years ended December 31, 2024 and 2023, the Company received repayments of $42,104 and $45,404, respectively, from this related party.
Corporate History We were incorporated in the State of Delaware on May 18, 2021. We conduct business activities principally through our wholly owned subsidiary, HeartCore Co., a Japanese corporation, which was established in Japan by Sumitaka Yamamoto in 2009.
Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Corporate History We were incorporated in the State of Delaware on May 18, 2021. We conduct business activities principally through our wholly owned subsidiary, HeartCore Co., a Japanese corporation, which was established in Japan by Sumitaka Yamamoto in 2009.
The 2023 Plan provides for various stock-based incentive awards, including incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), and other equity-based or cash-based awards.
The shareholders approved the 2023 Plan at the Annual Shareholder’s meeting on September 29, 2023. The 2023 Plan provides for various stock-based incentive awards, including incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), and other equity-based or cash-based awards.
The office of Sigmaways, Inc. are located at 39737 Paseo Padre PKWY, Suite C1 Fremont, CA, the United States, where we lease approximately 765 square feet of office space from an unaffiliated third party with lease term ending in December 2024. Terms of the office lease provide for a base rent payment of $1,810 per month.
The office of Sigmaways, Inc. is located at 39737 Paseo Padre PKWY, Suite C1 Fremont, CA U.S., where we lease approximately 765 square feet of office space from an unaffiliated third party with lease term expected to end in December 2025. Terms of the office lease provide for a base rent payment of $1,868 per month.
Additionally, we believe that we are unlocking a myriad of still unexplored automation possibilities as we continue to contribute to this market.
Additionally, we believe that we are unlocking a myriad of still unexplored automation possibilities as we continue to contribute to this market. We believe those possibilities represent a significant greenfield opportunity for us.
We also provide education, services and support to help customers be successful with our CXM Platform. We focus on selling our CXM Platform to mid-market business-to-business companies, which we define as companies that have between 100 and 5,000 employees. We sell our CXM Platform on a subscription basis.
We focus on selling our CXM Platform to mid-market business-to-business companies, which we define as companies that have between 100 and 5,000 employees. We sell our CXM Platform on a subscription basis.
Our software robots are not only capable of performing tasks just like humans, but they can also keep changing as the business changes. Our robots can be deployed manned, unmanned, desktop, server-side, or hybrid, and can adjust seamlessly as conditions change.
If companies have to modify their robots each time a change occurs, true efficiency will not be achieved. Our software robots are not only capable of performing tasks just like humans, but they can also keep changing as the business changes. Our robots can be deployed manned, unmanned, desktop, server-side, or hybrid, and can adjust seamlessly as conditions change.
In the fourth quarter of 2023, we formed HeartCore Luvina Vietnam Company Limited in Vietnam, which is engaged in the business of software development. In February 2023, we acquired 51% of the outstanding shares of Sigmaways and its wholly-owned subsidiaries, which are primarily engaged in the business of developing and sales of software in the United States.
In February 2023, we acquired 51% of the outstanding shares of Sigmaways and its wholly-owned subsidiaries, which are primarily engaged in the business of developing and sales of software in the United States.
We believe the best people do not only fit our culture, they further it. ● Diversity, Inclusion, and Belonging. We have launched various initiatives to further our goal of being a more diverse, inclusive, and equitable workplace.
Our culture is built on the firm belief that personal and professional growth is just as important as business growth. We believe the best people do not only fit our culture, they further it. ● Diversity, Inclusion, and Belonging. We have launched various initiatives to further our goal of being a more diverse, inclusive, and equitable workplace.
As of December 31, 2023, our combined business units (customer experience management business unit and digital transformation business unit) had 949 total customers in Japan, of which 691, or 72.8%, were paying customers, and 24 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers in Japan, of which 724, or 73.7%, were paying customers, and 26 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2023, our combined business units (customer experience management business unit and digital transformation business unit) had 949 total customers in Japan, of which 691, or 72.8%, were paying customers and 24 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers in Japan, of which 724, or 73.7%, were paying customers and 26 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
While specialized applications deliver extensive functionality, they do not account for the full spectrum of how work gets done. The proliferation of specialized applications has resulted in humans being the connective tissue in an enterprise, working across a wide range of applications that individually are not built to address the needs of the actual processes they are supporting.
The proliferation of specialized applications has resulted in humans being the connective tissue in an enterprise, working across a wide range of applications that individually are not built to address the needs of the actual processes they are supporting.
Content management systems and customer experience management systems need to provide rich features to fill the new generation of customers’ needs. 4 Digital Transformation Business Robotic Process Automation (“RPA”) is a technology that allows automation for a defined set of tasks. RPA robots can emulate most human-computer interactions to carry out error-free tasks at high volume and speed.
Digital Transformation Business Robotic Process Automation (“RPA”) is a technology that allows automation for a defined set of tasks. RPA robots can emulate most human-computer interactions to carry out error-free tasks at high volume and speed.
As our engaged audience grows, more solutions partners collaborate with us, more third-party developers integrate their applications with our CXM Platform, and more professionals complete our certification programs, all of which help to drive more businesses to adopt our CXM Platform. 21 Digital Transformation Business We believe that the following are key strengths of our digital transformation business: Broad Set of Complementary Solutions .
As our engaged audience grows, more solutions partners collaborate with us, more third-party developers integrate their applications with our CXM Platform, and more professionals complete our certification programs, all of which help to drive more businesses to adopt our CXM Platform.
Furthermore, these capabilities are not supposed to be limited to general websites but also to various kinds of services such as E-commerce, smartphone sites, smartphone apps, social networking services, blogs, and digital signage.
Furthermore, these capabilities are not supposed to be limited to general websites but also to various kinds of services such as E-commerce, smartphone sites, smartphone apps, social networking services, blogs, and digital signage. Content management systems and customer experience management systems need to provide rich features to fill the new generation of customers’ needs.
(including sales by the Company of HeartCore Co.’s shares); ● Acquisition or disposition of shares of any related party of the Company or HeartCore Co.; ● Appointment and dismissal of directors, executive officers, auditors, managers and other important employees; ● Any transaction between HeartCore Co. and its director which requires approval by the board of directors under the Japanese Companies Act and any equivalent transaction between the Company and its director; ● Execution or change of important contracts or other legally significant juridical acts; ● Establishment of subsidiary and affiliates; and ● Any change of business plan.
(including sales by the Company of HeartCore Co.’s shares); ● Acquisition or disposition of shares of any related party of the Company or HeartCore Co.; ● Appointment and dismissal of directors, executive officers, auditors, managers and other important employees; ● Any transaction between HeartCore Co. and its director which requires approval by the board of directors under the Japanese Companies Act and any equivalent transaction between the Company and its director; ● Execution or change of important contracts or other legally significant juridical acts; ● Establishment of subsidiary and affiliates; and ● Any change of business plan. 24 Pursuant to the Memorandum, to the extent not in conflict with the laws of the United States or the State of Delaware or the rules and regulations of any securities exchange or securities market on which the Company’s securities are traded or listed for trading, Mr.
Traditional automation solutions intended to reduce this friction have generally been designed to be used by developers and engineers, rather than the employees directly involved in executing the actual work being automated. As a result, employees are limited by the lack of flexibility of these traditional automation technologies causing employee productivity, innovation, and satisfaction to suffer.
Traditional automation solutions intended to reduce this friction have generally been designed to be used by developers and engineers, rather than the employees directly involved in executing the actual work being automated.
Unless the context otherwise requires, “HeartCore,” “we,” “us,” “our,” or the “Company” refers to HeartCore Enterprises, Inc. and its consolidated subsidiaries, including, but not limited to, HeartCore Co., Ltd. (“HeartCore Co.”) and its subsidiary, HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”), HeartCore Financial, Inc. (“HeartCore Financial”), and Sigmaways, Inc. (“Sigmaways”) and its subsidiaries. HeartCore Financial was incorporated in January 2023.
Unless the context otherwise requires, “HeartCore,” “we,” “us,” “our,” or the “Company” refers to HeartCore Enterprises, Inc. and its consolidated subsidiaries, including, HeartCore Co., Ltd. (“HeartCore Co.”), HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”), HeartCore Financial, Inc. (“HeartCore Financial”), HeartCore Financial, Inc. – Japan Branch Office (“HeartCore Financial - Japan”), HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), and Sigmaways, Inc.
On March 22, 2023, the Company granted 671,350 shares of common shares to the employees and service providers of Sigmaways. On August 1, 2023, the Board approved, and proposed for stockholder approval, the 2023 Equity Incentive Plan (the “2023 Plan”). The shareholders approved the 2023 Plan at the Annual Shareholder’s meeting on September 29, 2023.
The stock options will vest 50% on the grant date and February 1, 2024, respectively. On March 22, 2023, the Company granted 671,350 shares of common shares to the employees and service providers of Sigmaways. On August 1, 2023, the Board approved, and proposed for stockholder approval, the 2023 Equity Incentive Plan (the “2023 Plan”).
On February 3, 2023, the Company granted stock options to an employee to purchase 100,000 common shares at an exercise price of $1.17 per share throughout a period of ten years from the grant date. The stock options will vest 50% on the grant date and February 1, 2024, respectively.
The balance is unsecured, bears an annual interest of 7.5%, and matures on June 30, 2025. Equity Awards On February 3, 2023, the Company granted stock options to an employee to purchase 100,000 common shares at an exercise price of $1.17 per share throughout a period of ten years from the grant date.
Business is always changing, and our software allows employees to focus on addressing critical customer issues and concerns, rather than performing repetitive, routine, and low-value tasks.
Business is always changing, and our software allows employees to focus on addressing critical customer issues and concerns, rather than performing repetitive, routine, and low-value tasks. Our robots improve the overall speed, accuracy, and effectiveness of a company’s customer service, increasing customer retention and loyalty.
During the year ended December 31, 2022, the Company repaid to the related party for operating expenses the related party paid on behalf of the Company in a net amount of $575.
During the year ended December 31, 2023, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $1,123.
The size of our addressable market opportunity is underpinned by the substantial amount of business processes that could be improved through automation but are not currently automated. According to Forbes, there are more than 1 billion knowledge workers globally as of December 10, 2020.
The size of our addressable market opportunity is underpinned by the substantial amount of business processes that could be improved through automation but are not currently automated.
We are proud to be named a Best Place to Work in 2020 and 2021 by Ministry of Economy, Trade and Industry Japan. ● Hybrid Culture and COVID-19. Like other companies, we have learned to adapt during the pandemic.
We are proud to be named a Best Place to Work in 2020 and 2021 by Ministry of Economy, Trade and Industry Japan.
We believe we compete favorably with respect to all of these factors. We face intense competition from other software companies that develop marketing, sales, service, and content management software.
We face intense competition from other software companies that develop marketing, sales, service, and content management software.
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. In the first quarter of 2023, we formed HeartCore Financial in the U.S. and HeartCore Capital Advisors in Japan, as a part of our Go IPO consulting business.
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. In February 2023, HeartCore USA incorporated a wholly-owned subsidiary, HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”), in Japan.
Our competitors offer various point applications that provide certain functions and features that we provide, including: ● cloud-based marketing automation providers; ● content management systems; ● email marketing software vendors; ● sales force automation and customer experience management software vendors; ● customer service platform vendors; and ● large-scale enterprise suites. 20 In addition, instead of using our CXM Platform, some prospective customers may elect to combine disparate point applications, such as content management, marketing automation, analytics, social media management, ticketing, and conversational bots.
Our competitors offer various point applications that provide certain functions and features that we provide, including: ● cloud-based marketing automation providers; ● content management systems; ● email marketing software vendors; ● sales force automation and customer experience management software vendors; ● customer service platform vendors; and ● large-scale enterprise suites.
Our failure to comply with the laws of each jurisdiction may subject us to significant penalties. For example, the data protection landscape in Europe, including with respect to cross-border data transfers, is currently unstable and other countries outside of Europe have enacted or are considering enacting cross-border data transfer restrictions and laws requiring local data residency.
For example, the data protection landscape in Europe, including with respect to cross-border data transfers, is currently unstable and other countries outside of Europe have enacted or are considering enacting cross-border data transfer restrictions and laws requiring local data residency. 29 Legal Proceedings From time to time, we are involved in various legal proceedings arising from the normal course of business activities.
As of December 31, 2023, our sales and marketing organization was comprised of 16 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market. Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.
We have made significant investments in our sales and marketing efforts globally. As of December 31, 2024, our sales and marketing organization was comprised of 12 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market.
Employees and Human Capital Management Helping millions of organizations grow better requires a truly remarkable team. We are passionate about building a company culture where people can do their best work. Our company culture and our people are not just human resources priorities but critical business priorities.
Terms of the office lease provide for a quarterly base rent payment of $2,516. 28 Employees and Human Capital Management Helping millions of organizations grow better requires a truly remarkable team. We are passionate about building a company culture where people can do their best work.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

100 edited+22 added−40 removed332 unchanged
Biggest changeYou do not have the same protections afforded to stockholders of other companies that are subject to such requirements; ● If the voting power of our capital stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest; ● The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain; ● Our common stock may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditor given that they are relying upon support from their China-based offices, and the delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment; ● We are dependent upon customer renewals, the addition of new customers, increased revenue from existing customers and the continued growth of the market for content management, customer experience management, task and process mining, and robotic process automation; ● Our subscription renewal rates may decrease, and any decrease could harm our future revenue and operating results; ● If we do not accurately predict subscription renewal rates or otherwise fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected; ● Because we generally recognize revenue from subscriptions ratably over the term of the agreement, near term changes in sales may not be reflected immediately in our operating results; ● We face significant competition from both established and new companies offering digital marketing, task and process mining, content management, customer experience management, and robotic process automation, and other related applications, as well as internally developed software, which may harm our ability to add new customers, retain existing customers and grow our business; ● We have experienced rapid growth and organizational change in recent periods and expect continued future growth.
Biggest changeBelow is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations: ● Our industry and the markets in which we operate are highly competitive and increased competitive pressures could reduce our share of the markets we serve and adversely affect our business, financial position, results of operations and cash flows; ● We are a holding company and depend upon our subsidiary for our cash flows; ● We may require additional funding for our growth plans, and such funding may result in a dilution of your investment; ● As a controlled company during 2024, we were not subject to all of the corporate governance rules of Nasdaq Capital Market, and we continue to take advantage of Nasdaq’s phase-in rules for compliance with the majority independent board requirement; ● The Company’s payment of cash dividends from additional paid-in capital may expose the Company to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements. ● If the voting power of our capital stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest; ● Our common stock may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditor given that they are relying upon support from their China-based offices, and the delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment; ● We are dependent upon customer renewals, the addition of new customers, increased revenue from existing customers and the continued growth of the market for content management, customer experience management, task and process mining, and robotic process automation; ● Our subscription renewal rates may decrease, and any decrease could harm our future revenue and operating results; ● If we do not accurately predict subscription renewal rates or otherwise fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected; ● Because we generally recognize revenue from subscriptions ratably over the term of the agreement, near term changes in sales may not be reflected immediately in our operating results; ● We face significant competition from both established and new companies offering digital marketing, task and process mining, content management, customer experience management, and robotic process automation, and other related applications, as well as internally developed software, which may harm our ability to add new customers, retain existing customers and grow our business; ● We have experienced rapid growth and organizational change in recent periods and expect continued future growth.
If we do not adequately fund our research and development efforts, we may not be able to compete effectively and our business and operating results may be harmed; ● Changes in the sizes or types of businesses that purchase our software or in the applications within our software purchased or used by our customers could negatively affect our operating results; ● We have in the past completed acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or harm our operating results; ● Because our long-term growth strategy involves further expansion of our sales to customers outside Japan, our business will be susceptible to risks associated with international operations; ● If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success and our business may be harmed; ● We rely on our management team and other key employees, and the loss of one or more key employees could harm our business; ● The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy; ● Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our software to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue; ● If our software has outages or fails due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs; ● We are dependent on the continued availability of third-party data hosting and transmission services; ● If we do not or cannot maintain the compatibility of our software with third-party applications that our customers use in their businesses, our revenue will decline; ● We rely on data provided by third parties, the loss of which could limit the functionality of our software and disrupt our business; ● Privacy concerns and end users’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our software; ● If our or our customers’ security measures are compromised or unauthorized access to data of our customers or their customers is otherwise obtained, our software may be perceived as not being secure, our customers may be harmed and may curtail or cease their use of our software, our reputation may be damaged and we may incur significant liabilities; ● Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others; ● If we fail to adequately protect our proprietary rights, in Japan and abroad, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights; ● Our use of “open-source” software could negatively affect our ability to offer our software and subject us to possible litigation; ● We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business.
If we do not adequately fund our research and development efforts, we may not be able to compete effectively and our business and operating results may be harmed; ● Changes in the sizes or types of businesses that purchase our software or in the applications within our software purchased or used by our customers could negatively affect our operating results; ● We have in the past completed acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or harm our operating results; ● Because our long-term growth strategy involves further expansion of our sales to customers outside Japan, our business will be susceptible to risks associated with international operations; ● If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success and our business may be harmed; ● We rely on our management team and other key employees, and the loss of one or more key employees could harm our business; ● The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy; ● Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our software to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue; ● If our software has outages or fails due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs; ● We are dependent on the continued availability of third-party data hosting and transmission services; ● If we do not or cannot maintain the compatibility of our software with third-party applications that our customers use in their businesses, our revenue will decline; ● We rely on data provided by third parties, the loss of which could limit the functionality of our software and disrupt our business; ● Privacy concerns and end users’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our software; 31 ● If our or our customers’ security measures are compromised or unauthorized access to data of our customers or their customers is otherwise obtained, our software may be perceived as not being secure, our customers may be harmed and may curtail or cease their use of our software, our reputation may be damaged and we may incur significant liabilities; ● Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others; ● If we fail to adequately protect our proprietary rights, in Japan and abroad, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights; ● Our use of “open-source” software could negatively affect our ability to offer our software and subject us to possible litigation; ● We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business.
In addition to the other risks described in this Annual Report on Form 10-K, factors that may affect our quarterly operating results include the following: ● changes in spending on marketing, task and process mining, content management, customer experience management, and robotic process automation software by our current or prospective customers; ● pricing our software subscriptions effectively so that we are able to attract and retain customers without compromising our profitability; ● attracting new customers for our marketing, sales, customer service, and content management software, increasing our existing customers’ use of our software and providing our customers with excellent customer support; ● customer renewal rates and the amounts for which agreements are renewed; ● global awareness of our thought leadership and brand; ● changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new products or product enhancements; 43 ● changes to the commission plans, quotas and other compensation-related metrics for our sales representatives; ● the amount and timing of payment for operating expenses, particularly research and development, sales and marketing expenses and employee benefit expenses; ● the amount and timing of costs associated with recruiting, training and integrating new employees while maintaining our company culture; ● our ability to manage our existing business and future growth, including increases in the number of customers on our software and the introduction and adoption of our software in new markets outside of the United States; ● unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security; ● foreign currency exchange rate fluctuations; and ● general economic and political conditions in our domestic and international markets.
In addition to the other risks described in this Annual Report on Form 10-K, factors that may affect our quarterly operating results include the following: ● changes in spending on marketing, task and process mining, content management, customer experience management, and robotic process automation software by our current or prospective customers; ● pricing our software subscriptions effectively so that we are able to attract and retain customers without compromising our profitability; ● attracting new customers for our marketing, sales, customer service, and content management software, increasing our existing customers’ use of our software and providing our customers with excellent customer support; ● customer renewal rates and the amounts for which agreements are renewed; ● global awareness of our thought leadership and brand; ● changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new products or product enhancements; ● changes to the commission plans, quotas and other compensation-related metrics for our sales representatives; ● the amount and timing of payment for operating expenses, particularly research and development, sales and marketing expenses and employee benefit expenses; ● the amount and timing of costs associated with recruiting, training and integrating new employees while maintaining our company culture; ● our ability to manage our existing business and future growth, including increases in the number of customers on our software and the introduction and adoption of our software in new markets outside of the United States; ● unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security; ● foreign currency exchange rate fluctuations; and ● general economic and political conditions in our domestic and international markets.
These provisions include: ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ● limiting the liability of, and providing indemnification to, our directors and officers; 68 ● providing that a special meeting of the stockholders may only be called by a majority of the board of directors; ● providing that directors may be removed prior to the expiration of their terms by the affirmative vote of the holders of not less than 2/3 of the voting power of the issued and outstanding stock entitled to vote; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions include: ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ● limiting the liability of, and providing indemnification to, our directors and officers; ● providing that a special meeting of the stockholders may only be called by a majority of the board of directors; ● providing that directors may be removed prior to the expiration of their terms by the affirmative vote of the holders of not less than 2/3 of the voting power of the issued and outstanding stock entitled to vote; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Section 7.4 of our bylaws provides that “[i]f any action is brought by any party against another party, relating to or arising out of these Bylaws, or the enforcement hereof, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action.” Our bylaws provide that for this section, the term “attorneys’ fees” or “attorneys’ fees and costs” means the fees and expenses of counsel to the Company and any other parties asserting a claim subject to Section 7.4 of the bylaws, which may include printing, photocopying, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney, and the costs and fees incurred in connection with the enforcement or collection of any judgment obtained in any such proceeding.
Section 7.4 of our bylaws provides that “[i]f any action is brought by any party against another party, relating to or arising out of these Bylaws, or the enforcement hereof, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action.” 44 Our bylaws provide that for this section, the term “attorneys’ fees” or “attorneys’ fees and costs” means the fees and expenses of counsel to the Company and any other parties asserting a claim subject to Section 7.4 of the bylaws, which may include printing, photocopying, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney, and the costs and fees incurred in connection with the enforcement or collection of any judgment obtained in any such proceeding.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately; ● Failure to effectively develop and expand our digital marketing, task and process mining, content management, customer experience management, and robotic process automation capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our software; ● The rate of growth of our business depends on the continued participation and level of service of our third-party partners; ● We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations or our guidance; ● If we fail to maintain our inbound thought leadership position, our business may suffer; ● If we fail to further enhance our brand and maintain our existing strong brand awareness, our ability to expand our customer base will be impaired and our financial condition may suffer; ● If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our software may become less competitive; ● If we fail to offer high-quality customer support, our business and reputation may suffer; ● We may not be able to scale our business quickly enough to meet our customers’ growing needs and if we are not able to grow efficiently, our operating results could be harmed; 36 ● Our ability to introduce new products and features is dependent on adequate research and development resources.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately; 30 ● Failure to effectively develop and expand our digital marketing, task and process mining, content management, customer experience management, and robotic process automation capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our software; ● The rate of growth of our business depends on the continued participation and level of service of our third-party partners; ● We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations or our guidance; ● If we fail to maintain our inbound thought leadership position, our business may suffer; ● If we fail to further enhance our brand and maintain our existing strong brand awareness, our ability to expand our customer base will be impaired and our financial condition may suffer; ● If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our software may become less competitive; ● If we fail to offer high-quality customer support, our business and reputation may suffer; ● We may not be able to scale our business quickly enough to meet our customers’ growing needs and if we are not able to grow efficiently, our operating results could be harmed; ● Our ability to introduce new products and features is dependent on adequate research and development resources.
Factors that could cause fluctuations in the market price of our common stock include, but are not limited to, the following: ● actual or anticipated changes or fluctuations in our results of operations; ● the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; ● announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships, or capital commitments; ● industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; ● rumors and market speculation involving us or other companies in our industry; ● price and volume fluctuations in the overall stock market from time to time; ● changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; ● the expiration of market stand-off or contractual lock-up agreements and sales of shares of our common stock by us or our stockholders; ● failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● actual or anticipated developments in our business, or our competitors’ businesses, or the competitive landscape generally; ● litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; 63 ● developments or disputes concerning our intellectual property rights, our products, or third-party proprietary rights; ● announced or completed acquisitions of businesses or technologies by us or our competitors; ● new laws or regulations or new interpretations of existing laws or regulations applicable to our business; ● any major changes in our management or our board of directors, particularly with respect to Mr.
Factors that could cause fluctuations in the market price of our common stock include, but are not limited to, the following: ● actual or anticipated changes or fluctuations in our results of operations; ● the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; ● announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships, or capital commitments; ● industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; ● rumors and market speculation involving us or other companies in our industry; ● price and volume fluctuations in the overall stock market from time to time; 57 ● changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; ● the expiration of market stand-off or contractual lock-up agreements and sales of shares of our common stock by us or our stockholders; ● failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● actual or anticipated developments in our business, or our competitors’ businesses, or the competitive landscape generally; ● litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; ● developments or disputes concerning our intellectual property rights, our products, or third-party proprietary rights; ● announced or completed acquisitions of businesses or technologies by us or our competitors; ● new laws or regulations or new interpretations of existing laws or regulations applicable to our business; ● any major changes in our management or our board of directors, particularly with respect to Mr.
As a result, our customers may bring claims against us for lost profits and other damages. Our internal computer systems and those of our current and any future strategic collaborators, vendors, and other contractors or consultants are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, cybersecurity threats, terrorism, war and telecommunication and electrical failures.
As a result, our customers may bring claims against us for lost profits and other damages. 48 Our internal computer systems and those of our current and any future strategic collaborators, vendors, and other contractors or consultants are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, cybersecurity threats, terrorism, war and telecommunication and electrical failures.
Technical mistakes in complying with the detailed DMCA take-down procedures could subject us to liability for copyright infringement. 59 ● The Communications Decency Act of 1996 (the “CDA”) generally protects online service providers, such as us, from liability for certain activities of their customers, such as the posting of defamatory or obscene content, unless the online service provider is participating in the unlawful conduct.
Technical mistakes in complying with the detailed DMCA take-down procedures could subject us to liability for copyright infringement. ● The Communications Decency Act of 1996 (the “CDA”) generally protects online service providers, such as us, from liability for certain activities of their customers, such as the posting of defamatory or obscene content, unless the online service provider is participating in the unlawful conduct.
Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report. We believe we will be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report. 60 We believe we will be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. 48 We are exposed to fluctuations in currency exchange rates.
In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. We are exposed to fluctuations in currency exchange rates.
The Company held approximately $4.7 million cash deposits at Signature Bridge Bank, N.A. as of March 12, 2023. Normal banking activities resumed on Monday, March 13, 2023. 37 Risks Related to Our Business and Strategy We are a holding company and depend upon our subsidiary for our cash flows. We are a holding company.
The Company held approximately $4.7 million cash deposits at Signature Bridge Bank, N.A. as of March 12, 2023. Normal banking activities resumed on Monday, March 13, 2023. Risks Related to Our Business and Strategy We are a holding company and depend upon our subsidiary for our cash flows. We are a holding company.
We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business, operating results and financial condition. We expect continued future growth and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.
We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business, operating results and financial condition. 36 We expect continued future growth and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.
We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future. 65 If the benefits of any proposed acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our common stock may decline.
We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future. If the benefits of any proposed acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our common stock may decline.
We are not an Investment Company under the Investment Company Act of 1940 (the “1940 Act”). The 1940 Act has restrictions that could make it impractical for us to continue our business as contemplated. Our GO IPO services providing consulting services and are not in the business of investing, reinvesting or trading in securities.
We are not an Investment Company under the Investment Company Act of 1940, as amended (the “1940 Act”). The 1940 Act has restrictions that could make it impractical for us to continue our business as contemplated. Our GO IPO services providing consulting services and are not in the business of investing, reinvesting or trading in securities.
We also rely on the availability and accuracy of this data, and any changes in the availability or accuracy of such data could adversely impact our business and results of operations and harm our reputation and brand. . 53 Privacy concerns and end users’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our software.
We also rely on the availability and accuracy of this data, and any changes in the availability or accuracy of such data could adversely impact our business and results of operations and harm our reputation and brand. Privacy concerns and end users’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our software.
Our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors could materially adversely affect our business. Changes in the sizes or types of businesses that purchase our software or in the applications within our software purchased or used by our customers could negatively affect our operating results.
Our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors could materially adversely affect our business. 39 Changes in the sizes or types of businesses that purchase our software or in the applications within our software purchased or used by our customers could negatively affect our operating results.
If we fail to successfully grow and maintain our thought leadership position, we may not attract enough new customers or retain our existing customers, and our business could suffer. If we fail to further enhance our brand and maintain our existing strong brand awareness, our ability to expand our customer base will be impaired and our financial condition may suffer.
If we fail to successfully grow and maintain our thought leadership position, we may not attract enough new customers or retain our existing customers, and our business could suffer. 38 If we fail to further enhance our brand and maintain our existing strong brand awareness, our ability to expand our customer base will be impaired and our financial condition may suffer.
We may not be able to detect and correct defects or errors before customers begin to use our software or its applications. Consequently, we or our customers may discover defects or errors after our software has been implemented. In the past, we have experienced software outages caused by power supply failures.
We may not be able to detect and correct defects or errors before customers begin to use our software or its applications. Consequently, we or our customers may discover defects or errors after our software has been implemented. 46 In the past, we have experienced software outages caused by power supply failures.
The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares of common stock from being traded on a national securities exchange or in the over the counter trading market in the United States. 39 On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act.
The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares of common stock from being traded on a national securities exchange or in the over the counter trading market in the United States. 33 On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act.
If we fail to maintain our company culture, our business may be adversely impacted. We rely on our management team and other key employees, and the loss of one or more key employees could harm our business.
If we fail to maintain our company culture, our business may be adversely impacted. 45 We rely on our management team and other key employees, and the loss of one or more key employees could harm our business.
If our acquisitions do not ultimately yield expected returns, we may be required to make charges to our operating results based on our impairment assessment process, which could harm our results of operations. 46 Because our long-term growth strategy involves further expansion of our sales to customers outside Japan, our business will be susceptible to risks associated with international operations.
If our acquisitions do not ultimately yield expected returns, we may be required to make charges to our operating results based on our impairment assessment process, which could harm our results of operations. 40 Because our long-term growth strategy involves further expansion of our sales to customers outside Japan, our business will be susceptible to risks associated with international operations.
If our cross-selling efforts are unsuccessful or if our existing customers do not expand their use of our software or adopt additional offerings and features, our operating results may suffer. 40 Our subscription renewal rates may decrease, and any decrease could harm our future revenue and operating results.
If our cross-selling efforts are unsuccessful or if our existing customers do not expand their use of our software or adopt additional offerings and features, our operating results may suffer. 34 Our subscription renewal rates may decrease, and any decrease could harm our future revenue and operating results.
An entity will generally be deemed an “investment company” under Section 3(a)(1) of the Investment Company Act of 1940, as amended (the “1940 Act”) if: (a) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (b) absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
An entity will generally be deemed an “investment company” under Section 3(a)(1) of the 1940 Act if: (a) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (b) absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible asset, which must be assessed for impairment at least annually.
As a “controlled company” within the meaning of the corporate governance rules of Nasdaq Capital Market, we are exempt from Nasdaq Capital Market’s corporate governance rules requiring that listed companies have (i) a majority of the board of directors consist of “independent” directors under the listing standards of Nasdaq Capital Market, (ii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting the requirements of Nasdaq Capital Market, and (iii) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of Nasdaq Capital Market.
As a “controlled company” within the meaning of the corporate governance rules of Nasdaq Capital Market, during 2024, we were exempt from Nasdaq Capital Market’s corporate governance rules requiring that listed companies have (i) a majority of the board of directors consist of “independent” directors under the listing standards of Nasdaq Capital Market, (ii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting the requirements of Nasdaq Capital Market, and (iii) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of Nasdaq Capital Market.
Among other factors the following occurrences, which is not an exhaustive list, could reduce the value of our equity rights or even cause our equity rights to become worthless: ● If a client company changes management or strategies; ● If a client company is engaged in material litigation; ● If a client company cannot develop a liquid market for their shares underlying our equity rights; ● If a client company cannot satisfy a listing requirement to be listed on an exchange; ● If the market value of the equity rights is too low; ● If the client company cannot secure market makers; ● If the client company cannot meet the rules and requirements mandated by the exchanges and markets; ● If the client company suffers a business downturn, through their fault or caused by a material partner or events that affect the market in general; and/or ● If the market conditions do not provide an opportunity to capitalize on the equity rights.
Among other factors the following occurrences, which is not an exhaustive list, could reduce the value of our equity rights or even cause our equity rights to become worthless: ● If a client company changes management or strategies; ● If a client company is engaged in material litigation; ● If a client company cannot develop a liquid market for their shares underlying our equity rights; ● If a client company cannot satisfy a listing requirement to be listed on an exchange; ● If the market value of the equity rights is too low; ● If the client company cannot secure market makers; ● If the client company cannot meet the rules and requirements mandated by the exchanges and markets; ● If the client company suffers a business downturn, through their fault or caused by a material partner or events that affect the market in general; and/or ● If the market conditions do not provide an opportunity to capitalize on the equity rights. 42 Our GO IPO business assists companies in navigating the initial public offering process in the US markets.
Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could seriously harm our business and operating results.
If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could seriously harm our business and operating results.
If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the value of our securities could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the value of our securities could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. 61 Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements.
Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights in our products and services. However, the steps we take to protect our intellectual property may be inadequate.
We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights in our products and services. However, the steps we take to protect our intellectual property may be inadequate.
If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully if at all.
We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully if at all.
If we fail to integrate our software with new third-party applications and software that our customers use for marketing, content management, customer experience management, or robotic process automation purposes, or fail to renew existing relationships pursuant to which we currently provide such integration, we may not be able to offer the functionality that our customers need, which would negatively impact our ability to generate new revenue or maintain existing revenue and adversely impact our business.
If we fail to integrate our software with new third-party applications and software that our customers use for marketing, content management, customer experience management, or robotic process automation purposes, or fail to renew existing relationships pursuant to which we currently provide such integration, we may not be able to offer the functionality that our customers need, which would negatively impact our ability to generate new revenue or maintain existing revenue and adversely impact our business. 47 We rely on data provided by third parties, the loss of which could limit the functionality of our software and disrupt our business.
Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam.
Our customers rely on email to communicate with their existing or prospective customers. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam.
For so long as we are an emerging growth company, we will not be required to: ● have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; ● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors’ report providing additional information about the audit and the consolidated financial statements (i.e., an auditor discussion and analysis); ● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency”; and ● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
For so long as we are an emerging growth company, we will not be required to: ● have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; ● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors’ report providing additional information about the audit and the consolidated financial statements (i.e., an auditor discussion and analysis); ● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency”; and ● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. 59 In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our software and offerings, impair the functionality of our software and offerings, delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our software and offerings, or injure our reputation.
Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our software and offerings, impair the functionality of our software and offerings, delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our software and offerings, or injure our reputation. 50 Our use of “open-source” software could negatively affect our ability to offer our software and subject us to possible litigation.
If the costs of implementing such plans should exceed these estimates significantly or if we come across opportunities to grow through expansion plans which cannot be predicted at this time, and our funds generated from our operations prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements.
If the costs of implementing such plans should exceed these estimates significantly or if we come across opportunities to grow through expansion plans which cannot be predicted at this time, and our funds generated from our operations prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements. 32 These additional funds may be raised by issuing equity or debt securities or by borrowing from banks or other resources.
The costs associated with product outages, any material defects or errors in our software or other performance problems may be substantial and could materially adversely affect our operating results. 52 In addition, third-party apps and features on our software may not meet the same quality standards that we apply to our own development efforts and, to the extent they contain bugs, vulnerabilities or defects, they may create disruptions in our customers’ use of our products, lead to data loss, unauthorized access to customer data, damage our brand and reputation and affect the continued use of our products, any of which could harm our business, results of operations and financial condition.
In addition, third-party apps and features on our software may not meet the same quality standards that we apply to our own development efforts and, to the extent they contain bugs, vulnerabilities or defects, they may create disruptions in our customers’ use of our products, lead to data loss, unauthorized access to customer data, damage our brand and reputation and affect the continued use of our products, any of which could harm our business, results of operations and financial condition.
In our subscription agreements with our customers, we generally do not agree to indemnify our customers against any losses or costs incurred in connection with claims by a third party alleging that a customer’s use of our services or software infringes the intellectual property rights of the third party.
The occurrence of any of these events may have a material adverse effect on our business. 49 In our subscription agreements with our customers, we generally do not agree to indemnify our customers against any losses or costs incurred in connection with claims by a third party alleging that a customer’s use of our services or software infringes the intellectual property rights of the third party.
This includes investments in facilities, information technology investments, sales, marketing and administrative personnel and facilities. Often we must make these investments when it is still unclear whether future sales in the new market will justify the costs of these investments. In addition, these investments may be more expensive than we initially anticipate.
Often we must make these investments when it is still unclear whether future sales in the new market will justify the costs of these investments. In addition, these investments may be more expensive than we initially anticipate.
We rely on data provided by third parties, the loss of which could limit the functionality of our software and disrupt our business. Select functionality of our software depends on our ability to deliver data, including search engine results and social media updates, provided by unaffiliated third parties, such as Facebook, Google, LinkedIn and Twitter.
Select functionality of our software depends on our ability to deliver data, including search engine results and social media updates, provided by unaffiliated third parties, such as Facebook, Google, LinkedIn and Twitter.
If economic conditions in Europe and other key markets for our software continue to remain uncertain or deteriorate further, it could adversely affect our customers’ ability or willingness to subscribe to our software, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions or affect renewal rates, all of which could harm our operating results.
If economic conditions in Europe and other key markets for our software continue to remain uncertain or deteriorate further, it could adversely affect our customers’ ability or willingness to subscribe to our software, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions or affect renewal rates, all of which could harm our operating results. 43 Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.
If we are unable to develop new applications that address our customers’ needs, or to enhance and improve our software in a timely manner, we may not be able to maintain or increase market acceptance of our software.
If we are unable to develop new applications that address our customers’ needs, or to enhance and improve our software in a timely manner, we may not be able to maintain or increase market acceptance of our software. Our ability to grow is also subject to the risk of future disruptive technologies.
Our ability to grow is also subject to the risk of future disruptive technologies. 44 If we fail to offer high-quality customer support, our business and reputation may suffer. High-quality education, training and customer support are important for the successful marketing, sale and use of our software and for the renewal of existing customers.
If we fail to offer high-quality customer support, our business and reputation may suffer. High-quality education, training and customer support are important for the successful marketing, sale and use of our software and for the renewal of existing customers.
Our GO IPO business assists companies in navigating the initial public offering process in the US markets. We do not provide investment, accounting, or legal advice. If state or federal regulatory agency determined our Company provided legal or investment advice in violation of existing law, there could be a material adverse effect on our business operations and stock value.
We do not provide investment, accounting, or legal advice. If state or federal regulatory agency determined our Company provided legal or investment advice in violation of existing law, there could be a material adverse effect on our business operations and stock value.
If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed. 51 Risks Related to Our Technical Operations Infrastructure and Dependence on Third Parties Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our software to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.
Risks Related to Our Technical Operations Infrastructure and Dependence on Third Parties Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our software to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.
If we were found to be in violation of any of these laws or regulations as a result of government enforcement or private litigation, we could be subjected to civil and criminal sanctions, including both monetary fines and injunctive action that could force us to change our business practices, all of which could adversely affect our financial performance and significantly harm our reputation and our business. 61 We are subject to governmental export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
If we were found to be in violation of any of these laws or regulations as a result of government enforcement or private litigation, we could be subjected to civil and criminal sanctions, including both monetary fines and injunctive action that could force us to change our business practices, all of which could adversely affect our financial performance and significantly harm our reputation and our business.
Our use of “open-source” software could negatively affect our ability to offer our software and subject us to possible litigation. A substantial portion of our cloud-based software incorporates so-called “open source” software, and we may incorporate additional open-source software in the future. Open-source software is generally freely accessible, usable and modifiable.
A substantial portion of our cloud-based software incorporates so-called “open source” software, and we may incorporate additional open-source software in the future. Open-source software is generally freely accessible, usable and modifiable.
As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest. 49 The certificate of incorporation and bylaws provides that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially all disputes between us and our shareholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
The certificate of incorporation and bylaws provides that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially all disputes between us and our shareholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Federal Trade Commission (the “FTC”), and various state, local and foreign agencies. We collect personally identifiable information and other data from our customers and leads. We also handle personally identifiable information about our customers’ customers. We use this information to provide services to our customers, to support, expand and improve our business.
We collect personally identifiable information and other data from our customers and leads. We also handle personally identifiable information about our customers’ customers. We use this information to provide services to our customers, to support, expand and improve our business.
Furthermore, as our employees continue to work remotely from geographic locations across the United States and internationally due to the pandemic and other reasons, we may become subject to additional taxes and our compliance burdens with respect to the tax laws of additional jurisdictions may be increased.
Furthermore, as our employees continue to work remotely from geographic locations across the United States and internationally due to the pandemic and other reasons, we may become subject to additional taxes and our compliance burdens with respect to the tax laws of additional jurisdictions may be increased. 56 We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.
If we experience any of these effects in connection with future growth, if our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating these new employees, or retaining these or our existing employees, it could materially impair our ability to attract new customers, retain existing customers and expand their use of our software, all of which would materially and adversely affect our business, financial condition and results of operations. 42 In addition, to manage the expected continued growth of our head count, operations and geographic expansion, we will need to continue to improve our information technology infrastructure, operational, financial and management systems and procedures.
If we experience any of these effects in connection with future growth, if our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating these new employees, or retaining these or our existing employees, it could materially impair our ability to attract new customers, retain existing customers and expand their use of our software, all of which would materially and adversely affect our business, financial condition and results of operations.
Our current and potential competitors may develop and market new technologies that render our existing or future products less competitive, or obsolete. In addition, if these competitors develop software with similar or superior functionality to our software, we may need to decrease the prices or accept less favorable terms for our software subscriptions in order to remain competitive.
In addition, if these competitors develop software with similar or superior functionality to our software, we may need to decrease the prices or accept less favorable terms for our software subscriptions in order to remain competitive.
We believe our success depends on continuing to invest in the growth of our worldwide operations by entering new geographic markets. If our investments in these markets are greater than anticipated, or if our customer growth or sales in these markets do not meet our expectations, our results of operations and financial condition may be adversely affected.
If our investments in these markets are greater than anticipated, or if our customer growth or sales in these markets do not meet our expectations, our results of operations and financial condition may be adversely affected. We believe our success depends on expanding our business into new geographic markets and attracting customers in countries other than the United States.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions. As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
The CDPA regulates how businesses (which the CDPA refers to as “controllers”) collect and share personal information. While the CDPA incorporates many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of controllers.
While the CDPA incorporates many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of controllers.
Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. 57 In addition, on March 2, 2021, Virginia enacted the Consumer Data Protection Act (the “CDPA”), which become effective on January 1, 2023.
Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
If a company’s internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any internet domain or internet address that subscribes to the blacklisting entity’s service or purchases its blacklist. 60 From time to time, some of our internet protocol addresses may become listed with one or more blacklisting entities due to the messaging practices of our customers.
If a company’s internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any internet domain or internet address that subscribes to the blacklisting entity’s service or purchases its blacklist.
Additionally, during the ongoing pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks. 54 If we were to experience a cyberattack and suffer interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions.
Additionally, during the ongoing pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk that we may experience cybersecurity-related events such as phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks.
This could result in negative consequences to us, including government investigations, penalties and reputational harm. Risks Related to Taxation We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past sales, which could harm our business.
Risks Related to Taxation We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past sales, which could harm our business.
There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us.
There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.
Finally, other existing bodies of law, including the criminal laws of various states, may be deemed to apply or new statutes or regulations may be adopted in the future, any of which could expose us to further liability and increase our costs of doing business.
Finally, other existing bodies of law, including the criminal laws of various states, may be deemed to apply or new statutes or regulations may be adopted in the future, any of which could expose us to further liability and increase our costs of doing business. 54 The standards that private entities use to regulate the use of email have in the past interfered with, and may in the future interfere with, the effectiveness of our software and our ability to conduct business.
Furthermore, some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our results of operations, financial condition and cash flow.
Furthermore, some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our results of operations, financial condition and cash flow. 41 We believe our success depends on continuing to invest in the growth of our worldwide operations by entering new geographic markets.
While these laws and regulations generally govern our customers’ use of our software, we may be subject to certain laws as a data processor on behalf of, or as a business associate of, our customers.
A requirement that recipients opt into, or the ability of recipients to opt out of, receiving commercial emails may minimize the effectiveness of our software. 55 While these laws and regulations generally govern our customers’ use of our software, we may be subject to certain laws as a data processor on behalf of, or as a business associate of, our customers.
In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiary or assert that benefits of tax treaties are not available to us or our subsidiary, any of which could have a material impact on us and the results of our operations. 62 Related to Ownership of Our Common Stock There can be no assurance that we will be able to comply with Nasdaq Capital Market’s continued listing standards.
In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiary or assert that benefits of tax treaties are not available to us or our subsidiary, any of which could have a material impact on us and the results of our operations.
If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities may be more volatile. 66 If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and have an adverse effect on the value of our securities.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and have an adverse effect on the value of our securities.
For example, some foreign laws prohibit sending unsolicited email unless the recipient has provided the sender advance consent to receipt of such email, or in other words has “opted-in” to receiving it. A requirement that recipients opt into, or the ability of recipients to opt out of, receiving commercial emails may minimize the effectiveness of our software.
For example, some foreign laws prohibit sending unsolicited email unless the recipient has provided the sender advance consent to receipt of such email, or in other words has “opted-in” to receiving it.
On July 12, 2016, the European Commission adopted the EU-US Privacy Shield, a framework for the transfer of personal data from the European Union to the United States, as a successor to the Safe Harbor framework that was invalidated by the European Court of Justice in October 2015.
Like the GDPR, the UK GDPR restricts personal data transfers outside the United Kingdom to countries not regarded by the United Kingdom as providing adequate protection (this means that personal data transfers from the United Kingdom to the European Economic Area remain free flowing). 52 On July 12, 2016, the European Commission adopted the EU-US Privacy Shield, a framework for the transfer of personal data from the European Union to the United States, as a successor to the Safe Harbor framework that was invalidated by the European Court of Justice in October 2015.
Moreover, if future laws and regulations limit our subscribers’ ability to use and share personal information or our ability to store, process and share personal information, demand for our solutions could decrease, our costs could increase, and our business, results of operations and financial condition could be harmed.
Moreover, if future laws and regulations limit our subscribers’ ability to use and share personal information or our ability to store, process and share personal information, demand for our solutions could decrease, our costs could increase, and our business, results of operations and financial condition could be harmed. 53 We could face liability, or our reputation might be harmed, as a result of the activities of our customers, the content of their websites or the data they store on our servers.
We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares. 67 We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.
We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
Additionally, a new California ballot initiative, the California Privacy Rights Act (the “CPRA”) was passed in November 2020 and became effective starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.
We cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. 51 Additionally, a new California ballot initiative, the California Privacy Rights Act (the “CPRA”) was passed in November 2020 and became effective starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.
Securities litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business. This could materially adversely affect our business, financial condition, results of operations, and prospects. As a controlled company, we are not subject to all of the corporate governance rules of Nasdaq Capital Market.
Securities litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business. This could materially adversely affect our business, financial condition, results of operations, and prospects. Our common stock may be subject to the “penny stock” rules in the future.
Compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the Ministry of Internal Affairs and Communications, Personal Information Protection Commission Japan (the “PPCJ”), the U.S.
Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the Ministry of Internal Affairs and Communications, Personal Information Protection Commission Japan (the “PPCJ”), the U.S. Federal Trade Commission (the “FTC”), and various state, local and foreign agencies.
In addition, if our partners do not continue to provide services to our customers, we would be required to provide such services ourselves either by expanding our internal team or engaging other third-party providers, which would increase our operating costs.
In addition, if our partners do not continue to provide services to our customers, we would be required to provide such services ourselves either by expanding our internal team or engaging other third-party providers, which would increase our operating costs. 37 We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations or our guidance.
If such claims are successful, or if we are required to indemnify or defend our customers from these or other claims, these matters could be disruptive to our business and management and have a material adverse effect on our business, operating results and financial condition. 55 If we fail to adequately protect our proprietary rights, in Japan and abroad, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.
If such claims are successful, or if we are required to indemnify or defend our customers from these or other claims, these matters could be disruptive to our business and management and have a material adverse effect on our business, operating results and financial condition.
If our investments are greater than we initially anticipate or if our customer growth or sales in these markets do not meet our expectations or justify the cost of the initial investments, our results of operations and financial condition may be adverse affected. 47 Risks Related to Our GO IPO Consulting Services We provide consulting services and ultimately do not control our client’s abilities to go public in the United States or secure a listing on American stock exchanges.
If our investments are greater than we initially anticipate or if our customer growth or sales in these markets do not meet our expectations or justify the cost of the initial investments, our results of operations and financial condition may be adverse affected.
Additionally, any party who brings an action, and the party against whom such action is brought under Section 7.4 of our bylaws, which could include, but is not limited to former and current shareholders, Company directors, officers, affiliates, legal counsel, expert witnesses and other parties, would be able to recover fees under this provision. 50 In the event you initiate or assert a claim against us, in accordance with the dispute resolution provisions contained in our Bylaws, and you do not, in a judgment prevail, you will be obligated to reimburse us for all reasonable costs and expenses incurred in connection with such claim, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal, if any.
Additionally, any party who brings an action, and the party against whom such action is brought under Section 7.4 of our bylaws, which could include, but is not limited to former and current shareholders, Company directors, officers, affiliates, legal counsel, expert witnesses and other parties, would be able to recover fees under this provision.
If we are unable to maintain our pricing due to competitive pressures, our margins will be reduced and our operating results will be negatively affected. 41 Our competitors include: ● task and process mining vendors; ● email marketing software vendors; ● content management system providers; ● customer experience management system\ providers; ● robotic process automation vendors; ● cloud-based marketing automation providers; ● large-scale enterprise suites; ● customer service software providers; and ● Customer experience management systems.
Our competitors include: ● task and process mining vendors; ● email marketing software vendors; ● content management system providers; ● customer experience management system\ providers; ● robotic process automation vendors; ● cloud-based marketing automation providers; ● large-scale enterprise suites; ● customer service software providers; and ● Customer experience management systems.
For example, some of our customers or potential customers who do business in the European Union may require their vendors to host all personal data within the European Union and may decide to do business with one of our competitors who hosts personal data within the European Union instead of doing business with us. 58 The regulatory framework governing the collection, processing, storage, use and sharing of certain information, particularly financial and other personal information, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations.
For example, some of our customers or potential customers who do business in the European Union may require their vendors to host all personal data within the European Union and may decide to do business with one of our competitors who hosts personal data within the European Union instead of doing business with us.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively.
We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Board shall also receive period reports from management on our cybersecurity risks and cybersecurity risk management program.
Biggest changeOur Board shall also receive period reports from management on our cybersecurity risks and cybersecurity risk management program. 63

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeTerms of the office lease provide for a base rent payment of $23,475 per month and a share of sales taxes of $2,348 per month. We also have an office at 2-4-35, Mekaru, Naha-city, Okinawa, Japan, where we lease approximately 890 rentable square feet of office space from an unaffiliated third party.
Biggest changeTerms of the office lease provide for a base rent payment of $21,769 per month and a share of sales taxes of $2,177 per month. In February 2024, we terminated the lease of our previous Okinawa branch office located at 2-4-35, Mekaru, Naha-city, Okinawa, Japan.
The office of Sigmaways, Inc. are located at 39737 Paseo Padre PKWY, Suite C1 Fremont, CA, the United States, where we lease approximately 765 square feet of office space from an unaffiliated third party with lease term ending in December 2024. Terms of the office lease provide for a base rent payment of $1,810 per month.
The office of Sigmaways, Inc. are located at 39737 Paseo Padre PKWY, Suite C1 Fremont, CA, the United States, where we lease approximately 765 square feet of office space from an unaffiliated third party with lease term ending in December 2025. Terms of the office lease provide for a base rent payment of $1,868 per month.
The office of HeartCore Capital Advisors, Inc. are located at 3-2-5 Kasumigaseki, Chiyoda-ku, Tokyo, Japan, where we lease approximately 1,379 rentable square feet of office space from an unaffiliated third party. This lease has lease term ending in June 2026.
The Japan branch office of HeartCore Financial, Inc. are located at 3-2-5 Kasumigaseki, Chiyoda-ku, Tokyo, Japan, where we lease approximately 1,379 rentable square feet of office space from an unaffiliated third party. This lease has lease term ending in June 2026.
Terms of the office lease provide for a base rent payment of $9,428 per month and a share of sales taxes of $943 per month.
Terms of the office lease provide for a base rent payment of $8,743 per month and a share of sales taxes of $874 per month.
This lease has an original term ending in August 2024 with automatic annual renewal option. Terms of the Okinawa office lease provide for a base rent payment of $1,270 per month and a share of sales taxes of $127 per month. We believe that these facilities are adequate for our current and near-term future needs.
Terms of the Okinawa office lease provide for a base rent payment of $915 per month and a share of sales taxes of $92 per month. We believe that these facilities are adequate for our current and near-term future needs.
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We subsequently entered into a new lease agreement for our current Okinawa branch office at 381-1, Asato, Naha-city, Okinawa, Japan, which we lease from an unaffiliated third party. This lease has an original term ending in August 2024, with automatic three-month renewals thereafter.
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The office of HeartCore Luvina Vietnam Company Limited is located at Software Park Building , No.2 Quang Trung, Hai Chau district, Da Nang City, Vietnam, where we lease approximately 915 square feet of office space from an unaffiliated third party with lease term ending in January 2026.
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Terms of the office lease provide for a quarterly base rent payment of $2,516 per month.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 69 PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 64 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common stock, subject to the terms and conditions of the 2021 Plan and the option award agreements pursuant to which the options were awarded. 70 On February 3, 2023, the Company granted stock options to an employee to purchase 100,000 common shares at an exercise price of $1.17 per share throughout a period of ten years from the grant date.
Biggest changeThe options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common stock, subject to the terms and conditions of the 2021 Plan and the option award agreements pursuant to which the options were awarded.
The options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common stock, subject to the terms and conditions of the 2021 Plan and the option award agreements pursuant to which the options were awarded.
The options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common stock, subject to the terms and conditions of the 2021 Plan and the option award agreements pursuant to which the options were awarded.
As of December 31, 2023, the Company has not granted any stock-based compensation awards to employees, including officers, or non-employee directors pursuant to the 2023 Plan. On August 25, 2023, the Company awarded options to purchase 2,000 shares of common stock pursuant to our 2021 Plan at an exercise price of $1.10 per share to an employee.
As of December 31, 2024, the Company has not granted any stock-based compensation awards to employees, including officers, or non-employee directors pursuant to the 2023 Plan. On August 25, 2023, the Company awarded options to purchase 2,000 shares of common stock pursuant to our 2021 Plan at an exercise price of $1.10 per share to an employee.
On October 18, 2022, the Board of Directors approved to retire all the repurchased shares. As of December 31, 2022, all of the 1,349,390 treasury shares have been retired. Transfer Agent and Registrar The Company’s transfer agent is Transhare Corporation.
On October 18, 2022, the Board of Directors approved to retire all the repurchased shares. As of December 31, 2022, all of the 1,349,390 treasury shares have been retired. 66 Transfer Agent and Registrar The Company’s transfer agent is Transhare Corporation.
The 2021 Plan authorizes equity-based and cash-based incentives for participants. As of December 31, 2023, there were 4,330 shares authorized for issuance under the 2021 Plan.
The 2021 Plan authorizes equity-based and cash-based incentives for participants. As of December 31, 2024, there were 4,330 shares authorized for issuance under the 2021 Plan.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed The Nasdaq Capital Market and its stock symbol is “HTCR.” The closing price of our common stock on Nasdaq on April 5, 2024 was $0.96.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed the Nasdaq Capital Market and its stock symbol is “HTCR.” The closing price of our common stock on Nasdaq on March 28, 2025 was $0.8573.
Holders As of December 31, 2023, there were 20,842,690 shares of common stock issued and outstanding, and we had approximately 38 holders of record of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Holders As of December 31, 2024, there were 21,937,987 shares of common stock issued and outstanding, and we had approximately 32 holders of record of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
The shareholders approved the 2023 Plan at the Annual Shareholder’s meeting on September 29, 2023. The 2023 Plan provides for various stock-based incentive awards, including incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), and other equity-based or cash-based awards.
The 2023 Plan provides for various stock-based incentive awards, including incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), and other equity-based or cash-based awards.
The stock options will vest 50% on the grant date and February 1, 2024, respectively. On March 22, 2023, the Company granted 671,350 shares of common shares to the employees and service providers of Sigmaways. On August 1, 2023, the Board approved, and proposed for stockholder approval, the 2023 Equity Incentive Plan (the “2023 Plan”).
On March 22, 2023, the Company granted 671,350 shares of common shares to the employees and service providers of Sigmaways. On August 1, 2023, the Board approved, and proposed for stockholder approval, the 2023 Equity Incentive Plan (the “2023 Plan”). The shareholders approved the 2023 Plan at the Annual Shareholder’s meeting on September 29, 2023.
Dividends We have not paid any cash dividends on our common stock and we planned to pay dividends on May 3, 2024. Securities Authorized for Issuance Under Equity Compensation Plans Our Board of Directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) on August 6, 2021.
Future dividends, if any, may be less than, equal to or greater than recent dividends. 65 Securities Authorized for Issuance Under Equity Compensation Plans Our Board of Directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) on August 6, 2021.
Added
Dividends On March 29, 2024, the Board of Directors declared a cash dividend of $0.02 per share of the Company’s common stock. The dividend was paid on May 3, 2024 to stockholders of record as of April 26, 2024, resulting in an aggregate of $417,283 in total dividends paid by the Company.
Added
On July 22, 2024, the Board of Directors declared a cash dividend of $0.02 per share of the Company’s common stock. The dividend was paid on August 26, 2024 to stockholders of record as of August 19, 2024, resulting in an aggregate of $417,283 in total dividends paid by the Company.
Added
The Company may continue to issue quarterly dividends going forward, contingent upon the Board of Directors’ approval, following review of the Company’s then-current financial results.
Added
On February 3, 2023, the Company granted stock options to an employee to purchase 100,000 common shares at an exercise price of $1.17 per share throughout a period of ten years from the grant date. The stock options vested 50% on the grant date and February 1, 2024, respectively.
Added
On October 1, 2024, the Company issued an aggregate 69,653 shares of common stock pursuant to the 2023 Plan. The common stock was fully vested upon issuance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

42 edited+31 added−34 removed21 unchanged
Biggest changeFor the Years Ended December 31, 2023 2022 Variance % of % of Amount Revenues Amount Revenues Amount % Revenues $ 21,845,830 100.0 % $ 8,818,312 100.0 % $ 13,027,518 147.7 % Cost of revenues 13,778,416 63.1 % 5,467,017 62.0 % 8,311,399 152.0 % Gross profit 8,067,414 36.9 % 3,351,295 38.0 % 4,716,119 140.7 % Operating expenses: Selling expenses 1,516,247 6.9 % 2,826,615 32.0 % (1,310,368 ) -46.4 % General and administrative expenses 9,651,381 44.2 % 6,579,734 74.6 % 3,071,647 46.7 % Research and development expenses 1,019,141 4.7 % 641,025 7.3 % 378,116 59.0 % Total operating expenses 12,186,769 55.8 % 10,047,374 113.9 % 2,139,395 21.3 % Loss from operations (4,119,355 ) -18.9 % (6,696,079 ) -75.9 % 2,576,724 -38.5 % Other income (expenses) (891,009 ) -4.0 % 12,695 0.1 % (903,704 ) -7,118.6 % Loss before income tax benefit (5,010,364 ) -22.9 % (6,683,384 ) -75.8 % 1,673,020 -25.0 % Income tax benefit (133,664 ) -0.6 % (5,918 ) -0.1 % (127,746 ) 2,158.6 % Net loss (4,876,700 ) -22.3 % (6,677,466 ) -75.7 % 1,800,766 -27.0 % Less: net loss attributable to non-controlling interest (686,810 ) -3.1 % - - (686,810 ) - 100.0 % Net loss attributable to HeartCore Enterprises, Inc. $ (4,189,890 ) -19.2 % $ (6,677,466 ) -75.7 % $ 2,487,576 -37.3 % For the Years Ended December 31, 2023 2022 Variance Amount % Amount % Amount % Revenues Revenues from on-premise software $ 1,586,218 7.3 % $ 1,860,573 21.1 % $ (274,355 ) -14.7 % Revenues from maintenance and support services 2,646,148 12.1 % 2,962,325 33.6 % (316,177 ) -10.7 % Revenues from software as a service (“SaaS”) 635,927 2.9 % 500,461 5.7 % 135,466 27.1 % Revenues from software development and other miscellaneous services 1,980,979 9.1 % 2,046,588 23.2 % (65,609 ) -3.2 % Revenues from customized software development and services 8,784,239 40.2 % - - 8,784,239 100.0 % Revenues from consulting services 6,212,319 28.4 % 1,448,365 16.4 % 4,763,954 328.9 % Total revenues 21,845,830 100.0 % 8,818,312 100.0 % 13,027,518 147.7 % Cost of revenues Costs of on-premise software 1,485,769 10.8 % 1,138,533 20.9 % 347,236 30.5 % Costs of maintenance and support services 1,024,059 7.4 % 1,159,418 21.2 % (135,359 ) -11.7 % Costs of software as a service (“SaaS”) 366,277 2.7 % 241,756 4.4 % 124,521 51.5 % Costs of software development and other miscellaneous services 1,655,461 12.0 % 2,003,127 36.6 % (347,666 ) -17.4 % Costs of customized software development and services 7,219,892 52.4 % - - 7,219,892 100.0 % Costs of consulting services 2,026,958 14.7 % 924,183 16.9 % 1,102,775 119.3 % Total cost of revenues 13,778,416 100 % 5,467,017 100.0 % 8,311,399 152.0 % Gross profit On-premise software 100,449 1 .3 % 722,040 21.5 % (621,591 ) -86.1 % Maintenance and support services 1,622,089 20.2 % 1,802,907 53.8 % (180,818 ) -10.0 % Software as a service (“SaaS”) 269,650 3.3 % 258,705 7.7 % 10,945 4.2 % Software development and other miscellaneous services 325,518 4.0 % 43,461 1.3 % 282,057 649.0 % Customized software development and services 1,564,347 19.4 % - - 1,564,347 100.0 % Consulting services 4,185,361 51.8 % 524,182 15.7 % 3,661,179 698.5 % Total gross profit $ 8,067,414 100.0 % $ 3,351,295 100.0 % $ 4,716,119 140.7 % 74 Revenues Our total revenues increased by $13,027,518, or 147.7%, to $21,845,830 for the year ended December 31, 2023 from $8,818,312 for the year ended December 31, 2022, mainly attributable to (i) the increased revenue of $4,763,954 from GO IPO consulting services as the Company obtained more IPO consulting customers in 2023 and received warrants from its customers as noncash consideration from consulting services; (ii) the increased revenue of $8,784,239 from customized software development and services as a result of acquisition of Sigmaways and its subsidiaries on February 1, 2023; offset by (iii) the decrease of $274,355 in revenue from sales of on-premise software, primarily due to the weak performance of a significant distributor and approximately 8% depreciation of Yen in the current period; and (iv) the decrease of $316,177 in revenue from maintenance and support services, as some clients canceled their maintenance service contracts, and approximately 8% depreciation of Yen.
Biggest changeFor the Years Ended December 31, 2024 2023 Variance % of % of Amount Revenues Amount Revenues Amount % Revenues $ 30,407,229 100.0 % $ 21,845,830 100.0 % $ 8,561,399 39.2 % Cost of revenues 12,579,359 41.4 % 13,778,416 63.1 % (1,199,057 ) -8.7 % Gross profit 17,827,870 58.6 % 8,067,414 36.9 % 9,760,456 121.0 % Operating expenses: Selling expenses 1,255,368 4.1 % 1,516,247 6.9 % (260,879 ) -17.2 % General and administrative expenses 8,623,587 28.4 % 9,651,381 44.2 % (1,027,794 ) -10.6 % Research and development expenses 729,584 2.4 % 1,019,141 4.7 % (289,557 ) -28.4 % Impairment of intangible asset 3,878,125 12.8 % - - 3,878,125 100.0 % Impairment of goodwill 3,276,441 10.7 % - - 3,276,441 100.0 % Total operating expenses 17,763,105 58.4 % 12,186,769 55.8 % 5,576,336 45.8 % Income (loss) from operations 64,765 0.2 % (4,119,355 ) -18.9 % 4,184,120 -101.6 % Other expenses (5,414,487 ) -17.8 % (891,009 ) -4.0 % (4,523,478 ) 507.7 % Loss before income tax benefit (5,349,722 ) -17.6 % (5,010,364 ) -22.9 % (339,358 ) 6.8 % Income tax benefit (136,822 ) -0.5 % (133,664 ) -0.6 % (3,158 ) 2.4 % Net loss (5,212,900 ) -17.1 % (4,876,700 ) -22.3 % (336,200 ) 6.9 % Less: net loss attributable to non-controlling interests (3,731,526 ) -12.2 % (686,810 ) -3.1 % (3,044,716 ) 443.3 % Net loss attributable to HeartCore Enterprises, Inc. $ (1,481,374 ) -4.9 % $ (4,189,890 ) -19.2 % $ 2,708,516 -64.6 % 70 For the Years Ended December 31, 2024 2023 Variance Amount % Amount % Amount % Revenues Revenues from on-premise software $ 2,700,769 8.9 % $ 1,586,218 7.3 % $ 1,114,551 70.3 % Revenues from maintenance and support services 2,625,992 8.6 % 2,646,148 12.1 % (20,156 ) -0.8 % Revenues from software as a service (“SaaS”) 564,292 1.9 % 635,927 2.9 % (71,635 ) -11.3 % Revenues from software development and other miscellaneous services 1,925,117 6.3 % 1,980,979 9.1 % (55,862 ) -2.8 % Revenues from customized software development and services 7,854,285 25.8 % 8,784,239 40.2 % (929,954 ) -10.6 % Revenues from consulting services 14,736,774 48.5 % 6,212,319 28.4 % 8,524,455 137.2 % Total revenues 30,407,229 100.0 % 21,845,830 100.0 % 8,561,399 39.2 % Cost of revenues Costs of on-premise software 1,608,105 12.8 % 1,485,769 10.8 % 122,336 8.2 % Costs of maintenance and support services 692,026 5.5 % 1,024,059 7.4 % (332,033 ) -32.4 % Costs of software as a service (“SaaS”) 415,835 3.3 % 366,277 2.7 % 49,558 13.5 % Costs of software development and other miscellaneous services 1,635,953 13.0 % 1,655,461 12.0 % (19,508 ) -1.2 % Costs of customized software development and services 7,285,674 57.9 % 7,219,892 52.4 % 65,782 0.9 % Costs of consulting services 941,766 7.5 % 2,026,958 14.7 % (1,085,192 ) -53.5 % Total cost of revenues 12,579,359 100.0 % 13,778,416 100.0 % (1,199,057 ) -8.7 % Gross profit On-premise software 1,092,664 6.2 % 100,449 1.3 % 992,215 987.8 % Maintenance and support services 1,933,966 10.8 % 1,622,089 20.2 % 311,877 19.2 % Software as a service (“SaaS”) 148,457 0.8 % 269,650 3.3 % (121,193 ) -44.9 % Software development and other miscellaneous services 289,164 1.6 % 325,518 4.0 % (36,354 ) -11.2 % Customized software development and services 568,611 3.2 % 1,564,347 19.4 % (995,736 ) -63.7 % Consulting services 13,795,008 77.4 % 4,185,361 51.8 % 9,609,647 229.6 % Total gross profit $ 17,827,870 100.0 % $ 8,067,414 100.0 % $ 9,760,456 121.0 % 71 Revenues Our total revenues increased by $8,561,399, or 39.2%, to $30,407,229 for the year ended December 31, 2024 from $21,845,830 for the year ended December 31, 2023, mainly attributable to (i) the increased revenue of $8,524,455 from GO IPO consulting services as two of the Company’s GO IPO consulting customers successfully listed on the Nasdaq in the fiscal year 2024 and the Company recognized revenues from noncash consideration in the form of warrants and ordinary shares from the consulting services customers of $13.5 million, while only $3.8 million of revenue recognized from noncash consideration in the form of warrants in the fiscal year 2023; and (ii) an increase of $1,114,551 in on-premise software revenue as we entered into multiple long-term license contracts with relatively large contract price and revenue amount in the fiscal year 2024; and offset by (iii) a decrease of $929,954 in revenue from customized software development and services due to intense market competition and we obtained fewer customer orders in the fiscal year 2024.
Investing Activities Net cash used in investing activities amounted to $1,780,952 for the year ended December 31, 2023, primarily consisted of (i) payment for acquisition of Sigmaways and its subsidiaries, net of cash acquired, of $724,910; (ii) advances on notes receivable of $600,000; and (iii) purchases of property and equipment of $ 526,260 .
Net cash used in investing activities amounted to $1,780,952 for the year ended December 31, 2023, primarily consisted of (i) payment for acquisition of Sigmaways and its subsidiaries, net of cash acquired, of $724,910; (ii) advances on notes receivable of $600,000; and (iii) purchases of property and equipment of $526,260 .
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“U.S.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“U.S.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform. Our net retention rate for our paying customers of our customer experience management business unit (CMS business) was 88%, 92%, and 95% as of December 31, 2023, 2022, and 2021, respectively.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform. Our net retention rate for our paying customers of our customer experience management business unit (CMS business) was 95%, 88%, and 92% as of December 31, 2024, 2023, and 2022, respectively.
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. In the first quarter of 2023, we formed HeartCore Financial in the U.S. and HeartCore Capital Advisors in Japan, as a part of our Go IPO consulting business.
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. In the first quarter of 2023, we formed HeartCore Financial in the U.S. and HeartCore Capital Advisors as part of our Go IPO consulting business.
Our ability to drive the productivity of our staff and enhance our operating efficiency affects our profitability. 72 Our Ability to Manage and Retain Customer Renewals Our ability to manage and retain customer renewals is vital to our expansion of renewals in our customer base and continuous and growing revenue.
Our ability to drive the productivity of our staff and enhance our operating efficiency affects our profitability. 68 Our Ability to Manage and Retain Customer Renewals Our ability to manage and retain customer renewals is vital to our expansion of renewals in our customer base and continuous and growing revenue.
In addition, an increase in the number of competitors may have an impact on the business. 73 Results of Operations Comparison of Results of Operations for the Fiscal Years Ended December 31, 2023 and 2022 The following table summarizes our operating results as reflected in our statements of operations during the fiscal years ended December 31, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
In addition, an increase in the number of competitors may have an impact on the business. 69 Results of Operations Comparison of Results of Operations for the Fiscal Years Ended December 31, 2024 and 2023 The following table summarizes our operating results as reflected in our statements of operations for the fiscal years ended December 31, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. References herein to “we,” “us” or the “Company” refers to HeartCore Enterprises, Inc. and its consolidated subsidiaries, including, but not limited to, HeartCore Co., Ltd. (“HeartCore Co.”) and its subsidiary, HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”), HeartCore Financial, Inc.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. References herein to “we,” “us” or the “Company” refers to HeartCore Enterprises, Inc. and its consolidated subsidiaries, including HeartCore Co., Ltd. (“HeartCore Co.”), HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”), HeartCore Financial, Inc.
The current administration of Prime Minster Fumio Kishida and the former administration of Prime Minister Yoshihide Suga have introduced policies to combat deflation and promote economic growth. In addition, the Bank of Japan introduced a plan for quantitative and qualitative monetary easing in April 2013 and announced a negative interest rate policy in January 2016.
The current administration of Prime Minster Shigeru Ishiba and the former administration of Prime Minister Fumio Kishida have introduced policies to combat deflation and promote economic growth. In addition, the Bank of Japan introduced a plan for quantitative and qualitative monetary easing in April 2013 and announced a negative interest rate policy in January 2016.
As of December 31, 2023, we have entered into consulting agreements with eleven 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 one to four percent 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.
As of December 31, 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.
Sumitaka Yamamoto, our CEO, in 2009. On September 6, 2022, HeartCore Enterprises, Inc. 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.
On September 6, 2022, HeartCore Enterprises, Inc. 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.
As a percentage of revenues, our selling expenses accounted for 6.9% and 32.0% of our total revenues for the years ended December 31, 2023 and 2022, respectively. 76 General and Administrative Expenses Our general and administrative expenses primarily consist of employee salaries and welfare expenses, consulting and professional service fees, depreciation and amortization expenses, rent expense, office, utility and other expenses, travel and entertainment expenses, and stock-based compensation.
As a percentage of revenues, our selling expenses accounted for 4.1% and 6.9% of our total revenues for the years ended December 31, 2024 and 2023, respectively. 73 General and Administrative Expenses Our general and administrative expenses primarily consist of employee salaries and welfare expenses, consulting and professional service fees, depreciation and amortization expenses, rent expense, office, utility and other expenses, travel and entertainment expenses, and stock-based compensation.
As a percentage of revenues, general and administrative expenses were 44.2% and 74.6% of our revenues for the fiscal years ended December 31, 2023 and 2022, respectively. Research and Development Expenses Our research and development expenses primarily consist of employee salaries and welfare expenses, outsourcing expenses, and stock-based compensation.
As a percentage of revenues, general and administrative expenses were 28.4% and 44.2% of our revenues for the fiscal years ended December 31, 2024 and 2023, respectively. Research and Development Expenses Our research and development expenses primarily consist of employee salaries and welfare expenses, outsourcing expenses, and stock-based compensation.
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. As of December 31, 2023, our working capital deficit was $1,016,662.
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. 75 As of December 31, 2024, our working capital was $1,995,643.
Net Loss Attributable to Non-controlling Interest We owned 51% equity ownership interest of Sigmaways and its subsidiaries as of December 31, 2023. Accordingly, we recorded net loss attributable to the non-controlling interest of $686,810 in the year ended December 31, 2023 . Net Loss Attributable to HeartCore Enterprises, Inc.
Net Loss Attributable to Non-controlling Interests We owned 51% equity interest of Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina as of December 31, 2024. Accordingly, we recorded net loss attributable to the non-controlling interests of $3,731,526 and $686,810 in the year ended December 31, 2024 and 2023, respectively . Net Loss Attributable to HeartCore Enterprises, Inc.
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application.
As of December 31, 2023, our combined business units (customer experience management business unit and digital transformation business unit) had 949 total customers in Japan, of which 691, or 72.8%, were paying customers, and 24 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers in Japan, of which 724, or 73.7%, were paying customers, and 26 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2023, our combined business units (customer experience management business unit and digital transformation business unit) had 949 total customers in Japan, of which 691, or 72.8%, were paying customers and 24 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers in Japan, of which 724, or 73.7%, were paying customers and 26 total customers outside Japan, of which 1, or 0.1%, was a paying customer.
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $4,189,890 for the fiscal year ended December 31, 2023, representing a $2,487,576 or 37.3% decrease from a net loss of $6,677,466 for the fiscal year ended December 31, 2022.
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $1,481,374 for the fiscal year ended December 31, 2024, representing a $2,708,516 or 64.6% decrease from a net loss attributable to HeartCore Enterprise, Inc. of $4,189,890 for the fiscal year ended December 31, 2023.
The revenue in the GO IPO business helped to offset the decline in sales in the CX and DX divisions in Japan. 71 We were incorporated in the State of Delaware on May 18, 2021. We conduct business activities principally through our wholly owned subsidiary, HeartCore Co., a Japanese corporation, which was established in Japan by Mr.
We were incorporated in the State of Delaware on May 18, 2021. We conduct business activities principally through our wholly owned subsidiary, HeartCore Co., a Japanese corporation, which was established in Japan by Mr. Sumitaka Yamamoto, our CEO, in 2009.
Liquidity and Capital Resources As of December 31, 2023, we had $1,012,479 in cash as compared to $7,177,326 as of December 31, 2022. We also had $2,623,682 in accounts receivable as of December 31, 2023.
Liquidity and Capital Resources As of December 31, 2024, we had $2,121,089 in cash and cash equivalents as compared to $1,012,479 as of December 31, 2023. We also had $1,950,050 in accounts receivable as of December 31, 2024.
There is an insignificant impact (below 10%) on our net retention rate as to former paying customers of our CMS business utilizing the free version of your CXM Platform. COVID-19 Affecting Our Results of Operations On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
There is an insignificant impact (below 10%) on our net retention rate as to former paying customers of our CMS business utilizing the free version of your CXM Platform.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform. There is the potential for non-paying customers to become paying customers again if and when they start utilizing our paid services again.
Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform.
As of December 31, 2023, our sales and marketing organization was comprised of 16 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market. Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.
We have made significant investments in our sales and marketing efforts globally. As of December 31, 2024, our sales and marketing organization was comprised of 12 employees including our field sales organization, which maintains a physical sales presence in the Japanese software market.
Net Loss As a result of the foregoing, we reported a net loss of $4,876,700 for the fiscal year ended December 31, 2023, representing a $1,800,766 or 27.0% decrease from a net loss of $6,677,466 for the fiscal year ended December 31, 2022.
Net Loss As a result of the foregoing, we reported a net loss of $5,212,900 for the fiscal year ended December 31, 2024, representing a $336,200 or 6.9% increase from a net loss of $4,876,700 for the fiscal year ended December 31, 2023.
These estimates are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset and are reviewed by consulting with third-party valuation appraisers. The purchase price allocation for business acquisitions contains uncertainties because it requires management’s judgment.
The valuation of noncash consideration in the form of warrants of the customers are estimates are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses and are reviewed by consulting with third-party valuation appraisers.
We also provide education, services and support to help customers be successful with our CXM Platform. The second business unit, our DX division, is a digital transformation business which provides customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises.
The second business unit, our DX division, is a digital transformation business which provides customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises. We also have an ongoing technology innovation team to develop software that supports the narrow needs of large enterprise customers.
For the reasons discussed above, our overall gross profit margin decreased by 1.1% to 36.9% for the year ended December 31, 2023 from 38.0% in the fiscal year 2022. 75 Operating Expenses The following table sets forth the breakdown of our operating expenses for the fiscal years ended December 31, 2023 and 2022: For the Years Ended December 31, 2023 2022 Variance % of % of Amount Revenues Amount Revenues Amount % of Total revenues $ 21,845,830 100.0 % $ 8,818,312 100.0 % $ 13,027,518 147.7 % Operating expenses: Selling expenses 1,516,247 6.9 % 2,826,615 32.0 % (1,310,368 ) -46.4 % General and administrative expenses 9,651,381 44.2 % 6,579,734 74.6 % 3,071,647 46.7 % Research and development expenses 1,019,141 4.7 % 641,025 7.3 % 378,116 59.0 % Total operating expenses $ 12,186,769 55.8 % $ 10,047,374 113.9 % $ 2,139,395 21.3 % Selling Expenses Our selling expenses primarily include advertising expenses, sales commissions, sales promotion expenses, and stock-based compensation.
For the reasons discussed above, our overall gross profit margin increased by 21.7% to 58.6% for the year ended December 31, 2024 from 36.9% in the fiscal year 2023. 72 Operating Expenses The following table sets forth the breakdown of our operating expenses for the fiscal years ended December 31, 2024 and 2023: For the Years Ended December 31, 2024 2023 Variance % of % of Amount Revenues Amount Revenues Amount % of Total revenues $ 30,407,229 100.0 % $ 21,845,830 100.0 % $ 8,561,399 39.2 % Operating expenses: Selling expenses 1,255,368 4.1 % 1,516,247 6.9 % (260,879 ) -17.2 % General and administrative expenses 8,623,587 28.4 % 9,651,381 44.2 % (1,027,794 ) -10.6 % Research and development expenses 729,584 2.4 % 1,019,141 4.7 % (289,557 ) -28.4 % Impairment of intangible asset 3,878,125 12.8 % - - 3,878,125 100.0 % Impairment of goodwill 3,276,441 10.7 % - - 3,276,441 100.0 % Total operating expenses $ 17,763,105 58.4 % $ 12,186,769 55.8 % $ 5,576,336 45.8 % Selling Expenses Our selling expenses primarily include advertising expenses, sales salaries, commissions, and welfare, sales promotion expenses, referral expense, and stock-based compensation.
The first business unit, our CX division, includes a customer experience management business (the “CXM Platform”) that has been in existence for 14 years. Our CXM Platform includes marketing, sales, service and content management systems, as well as other tools and integrations, that enable companies to attract and engage customers throughout the customer experience.
Our CXM Platform includes marketing, sales, service and content management systems, as well as other tools and integrations, that enable companies to attract and engage customers throughout the customer experience. We also provide education, services and support to help customers be successful with our CXM Platform.
During 2022, we started the GO IPO business, which supports Japanese companies listing on Nasdaq and NYSE in the United States.
There is the potential for non-paying customers to become paying customers again if and when they start utilizing our paid services again. 67 During 2022, we started the GO IPO business, which supports Japanese companies listing on Nasdaq and NYSE in the United States.
These significant assumptions are based on company specific information and projections, which are not observable in the market (except for the discount rate assumption) and, therefore, are considered Level 2 and Level 3 measurements. These significant assumptions are forward-looking and could be affected by future changes in economic and market conditions.
Management applies significant judgement related to these valuation models and approaches, such as future cash flows estimate, discount rate assumption, selection of comparable companies, and etc. These significant assumptions are based on company specific information and projections, which may not be observable in the market, and, therefore, are considered Level 2 and Level 3 measurements.
For the fiscal years ended December 31, 2023 and 2022, we generated revenues of $21,845,830 and $8,818,312, respectively, and reported net loss of $4,876,700 and $6,677,466, respectively, and cash flows used in operating activities of $4,331,209 and $4,808,547, respectively. As noted in our consolidated financial statements, as of December 31, 2023, we had an accumulated deficit of $14,763,469.
In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc. – Japan Branch Office, in Japan. For the fiscal years ended December 31, 2024 and 2023, we generated revenues of $30,407,229 and $21,845,830, respectively, and reported net loss of $5,212,900 and $4,876,700, respectively, and cash flows used in operating activities of $4,774,971 and $4,331,209, respectively.
For the Years Ended December 31, 2023 2022 Variance Amount % of Amount % of Amount % of Research and development expenses Salaries and welfare expenses $ - - $ 29,681 4.6 % $ (29,681 ) -100.0 % Outsourcing expenses 958,830 94.1 % 601,583 93.9 % 357,247 59.4 % Stock-based compensation 60,311 5.9 % 9,761 1.5 % 50,550 517.9 % Total research and development expenses $ 1,019,141 100.0 % $ 641,025 100.0 % $ 378,116 59.0 % Our research and development expenses increased by $378,116 or 59.0%, to $1,019,141 in the fiscal year ended December 31, 2023 from $641,025 in the fiscal year ended December 31, 2022, primarily attributable to an increase of $357,247 in outsourcing expenses relating to the development of new CMS management screen features in the current period and additional R&D expenses incurred by Sigmaways to support its customized software development and services .
For the Years Ended December 31, 2024 2023 Variance Amount % Amount % Amount % Research and development expenses Salaries and welfare expenses $ 371,748 51.0 % $ - - $ 371,748 100.0 % Outsourcing expenses 355,463 48.7 % 958,830 94.1 % (603,367 ) -62.9 % Stock-based compensation 2,373 0.3 % 60,311 5.9 % (57,938 ) -96.1 % Total research and development expenses $ 729,584 100.0 % $ 1,019,141 100.0 % $ (289,557 ) -28.4 % Our research and development expenses decreased by $289,557 or 28.4%, to $729,584 in the year ended December 31, 2024 from $1,019,141 in the year ended December 31, 2023, primarily attributable to a decrease of $603,367 in outsourcing expenses relating to the development of new CMS management screen features, which stared in 2023 and about to completed in the current year; and offset by an increase of $371,748 in salaries and welfare expenses for the employees assigned to the development of a new product, Global CMS, started in 2024.
Total other expenses, net, increased by $903,704 or 7,118.6%, from other income, net, of $12,695 for the year ended December 31, 2022 to other expenses, net, of $891,009 for the year ended December 31, 2023, primarily attributable to an increase of $615,520 in loss on fair value changes in investments in marketable securities and an increase of $501,445 in loss on fair value changes in investment in warrants, offset by an increase of $309,015 in other income, primarily due to the penalty payment that we received from certain customers in the current period.
Total other expenses, net, increased by $4,523,478 or 507.7%, from other expenses, net, of $891,009 for the year ended December 31, 2023 to other expenses, net, of $5,414,487 for the year ended December 31, 2024, primarily attributable to an increase of $1,796,865 in loss on fair value changes in investments in marketable securities, an increase of $3,970,628 in loss on sale of warrants, and an increase of $300,000 in impairment of investment in equity securities, offset by an increase of $2,159,144 in gain on fair value changes in investment in warrants.
Income Tax Benefit Income tax benefit was $133,664 for the year ended December 31, 2023, an increase of $127,746, or 2,158.6% from income tax benefit of $5,918 in the fiscal year 2022, primarily due to the increase in deferred income tax benefit brought by the amortization of intangible asset acquired as a result of Sigmaways during the current year.
Income Tax Benefit Income tax benefit was $136,822 for the year ended December 31, 2024, a slight increase of $3,158, or 2.4% from income tax benefit of $133,664 in the fiscal year 2023.
In assessing our liquidity, management monitors and analyzes our cash, our ability to generate sufficient revenues in the future, and our operating and capital expenditure commitments. 78 Cash Flows for the Years Ended December 31, 2023 and 2022 The following table sets forth summary of our cash flows for the periods indicated: For the Years Ended December 31, 2023 2022 Net cash used in operating activities $ (4,331,209 ) $ (4,808,547 ) Net cash used in investing activities (1,780,952 ) (12,200 ) Net cash provided by financing activities 136,194 8,915,341 Effect of exchange rate changes (188,880 ) (54,107 ) Net change in cash and cash equivalents (6,164,847 ) 4,040,487 Cash and cash equivalents, beginning of the year 7,177,326 3,136,839 Cash and cash equivalents, end of the year $ 1,012,479 $ 7,177,326 Operating Activities Net cash used in operating activities was $4,331,209 for the year ended December 31, 2023, primarily consisting of the following: ● Net loss of $4,876,700 for the fiscal year. ● Warrants received as non-cash consideration of $3,763,621 as our IPO consulting customers completed the IPO during the current period. ● An increase in accounts receivable of $338,312.
Cash Flows for the Years Ended December 31, 2024 and 2023 The following table sets forth summary of our cash flows for the periods indicated: For the Years Ended December 31, 2024 2023 Net cash used in operating activities $ (4,774,971 ) $ (4,331,209 ) Net cash provided by (used in) investing activities 6,349,204 (1,780,952 ) Net cash provided by (used in) financing activities (318,646 ) 136,194 Effect of exchange rate changes (146,977 ) (188,880 ) Net change in cash and cash equivalents 1,108,610 (6,164,847 ) Cash and cash equivalents, beginning of the year 1,012,479 7,177,326 Cash and cash equivalents, end of the year $ 2,121,089 $ 1,012,479 Operating Activities Net cash used in operating activities was $4,774,971 for the year ended December 31, 2024, primarily consisting of the following: ● Net loss of $5,212,900 for the fiscal year. ● Marketable securities and warrants received as noncash consideration in total of $13,541,693 as two of our IPO consulting customers completed the IPO during the current year. ● A deferred income tax benefits of $1,076,600 mainly brought by amortization and impairment of intangible asset. ● A gain of $1,657,699 on fair value changes in investment in warrants. ● Offset by loss of $3,970,628 recognized on sale of warrants to a third party. ● Offset by a total of $7,154,566 loss recognized on impairment of goodwill and intangible asset acquired from business acquisition of Sigmaways and its subsidiaries. ● Offset by a loss of $2,412,385 on fair value changes in investments in marketable securities. ● Offset by depreciation and amortization expenses of $749,639. ● Offset by an increase of $669,142 in income tax payable. ● Offset by an increase of $710,001 in other liabilities, mainly because the increase of liability to refund a customer. 76 Net cash used in operating activities was $4,331,209 for the year ended December 31, 2023, primarily consisting of the following: ● Net loss of $4,876,700 for the fiscal year. ● Warrants received as non-cash consideration of $3,763,621 as our IPO consulting customers completed the IPO during the current year. ● An increase in accounts receivable of $338,312.
In the fourth quarter of 2023, we formed HeartCore Luvina Vietnam Company Limited in Vietnam, which is engaged in the business of software development.
In the fourth quarter of 2023, we formed HeartCore Luvina in Vietnam, which is engaged in the business of software development. On November 17, 2023 HeartCore Japan and HeartCore Capital Advisors entered into a merger agreement to merge the two entities into one with HeartCore Japan being the surviving entity.
Financing Activities Net cash provided by financing activities amounted to $136,194 for the fiscal year ended December 31, 2023, primarily consisted of proceeds of $710,107 from short-term and long-term debts, and net proceeds of $562,767 from factoring arrangement, offset by repayment of $711,395 for long-term debts, and repayment of 389,035 for insurance premium financing. 79 Net cash provided by financing activities amounted to $8,915,341 for the fiscal year ended December 31, 2022, primarily consisting of proceeds of $13,823,126 from the initial public offering and issuance of common shares prior to the initial public offering, proceeds of $258,087 from long-term debt, offset by payment for mandatorily redeemable financial interest of $430,489, payment for repurchase of common shares of $3,500,000, repayment of long-term debts of $810,750, and repayment of insurance premium financing of $388,538.
Net cash provided by financing activities amounted to $136,194 for the fiscal year ended December 31, 2023, primarily consisted of proceeds of $710,107 from short-term and long-term debts, and net proceeds of $562,767 from factoring arrangement, offset by repayment of $711,395 for long-term debts, and repayment of 389,035 for insurance premium financing. 77 Contractual Obligations Lease Commitment The Company has entered into operating leases for office space with terms ranging from two to fifteen years, and finance leases for office equipment and vehicle with terms of five years.
As a percentage of revenues, research and development expenses were 4.7% and 7.3% of our revenues for the fiscal years ended December 31, 2023 and 2022, respectively. 77 Other Income (Expenses), Net 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, bonds, and leases, government grants, other income, and other expenses.
As of December 31, 2024, we evaluated the fair value of the reporting unit of Sigmaways and its subsidiaries and estimated the value of goodwill become zero by engaging a third-party valuation appraiser, accordingly, we recorded an impairment of goodwill of $3,276,441 in the year ended December 31, 2024. 74 Other Income (Expenses), Net Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, loss on sale of warrants, interest income generated from bank deposits, interest expenses for bank loans and bonds, government grants, impairment of investment in equity securities, loss on forgiveness of note receivable, other income, and other expenses.
As of December 31, 2023, future minimum lease payments under the non-cancelable lease agreements are as follows: Year Ended December 31, Finance Leases Operating Leases 2024 $ 18,819 $ 427,774 2025 18,555 404,244 2026 18,555 339,188 2027 18,555 292,720 2028 12,370 292,720 Thereafter - 912,521 Total lease payments 86,854 2,669,167 Less: imputed interest (2,630 ) (137,472 ) Total lease liabilities 84,224 2,531,695 Less: current portion (17,445 ) (396,535 ) Non-current lease liabilities $ 66,779 $ 2,135,160 80 Debt s The Company’s debts included short-term debt and long-term debts borrowed from banks and other financial institutions.
As of December 31, 2024, future minimum lease payments under the non-cancelable lease agreements are as follows: Year Ended December 31, Finance Lease Operating Leases 2025 $ 16,640 $ 394,538 2026 16,640 301,182 2027 16,640 259,508 2028 11,093 259,508 2029 - 259,508 Thereafter - 603,091 Total lease payments 61,013 2,077,335 Less: imputed interest (1,464 ) (90,388 ) Total lease liabilities 59,549 1,986,947 Less: current portion (15,956 ) (371,951 ) Non-current lease liabilities $ 43,593 $ 1,614,996 Debt s The Company’s debts included long-term debts borrowed from banks and financial institutions.
(“HeartCore Financial”), and Sigmaways, Inc. (“Sigmaways”) and its subsidiaries. HeartCore Financial was incorporated in January 2023. HeartCore Capital Advisors was incorporated in February 2023. The acquisition of Sigmaways and its subsidiaries was closed in February 2023. Business Overview We are a leading software development company based in Tokyo, Japan. We provide software through two business units.
(“HeartCore Financial”) and its branch office in Japan, HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), and Sigmaways, Inc. (“Sigmaways”) and its subsidiaries. HeartCore Capital Advisors was merged into HeartCore Japan in January 2024. HeartCore Luvina was incorporated in the fourth quarter 2023 and started to operate in February 2024.
For the Years Ended December 31, 2023 2022 Variance Amount % of Amount % of Amount % of Selling expenses Advertising expenses $ 832,491 54.9 % $ 1,902,942 67.3 % $ (1,070,451 ) -56.3 % Sales commissions 119,736 7.9 % 122,797 4.3 % (3,061 ) -2.5 % Sales promotion expenses 2,931 0.2 % 16,017 0.6 % (13,086 ) -81.7 % Stock-based compensation 561,089 37.0 % 784,859 27.8 % (223,770 ) -28.5 % Total selling expenses $ 1,516,247 100.0 % $ 2,826,615 100.0 % $ (1,310,368 ) -46.4 % Our selling expenses decreased by $1,310,368, or 46.4%, to $1,516,247 for the year ended December 31, 2023 from $2,826,615 in the fiscal year 2022, primarily attributable to a decrease of $1,070,451 in advertising expenses, as the Company spent heavily on investor relations and public relations in the U.S. immediately after listing in Nasdaq in early 2022, and a decrease of $223,770 in stock-based compensation, as the Company granted stock options to certain sales staff in 2022, who were promoted to executive management in 2023, therefore the corresponding stock-based compensation was classified to general and administrative expenses.
For the Years Ended December 31, 2024 2023 Variance Amount % Amount % Amount % Selling expenses Advertising expenses $ 473,132 37.7 % $ 832,491 54.9 % $ (359,359 ) -43.2 % Sales salaries, commissions and welfare 584,699 46.6 % 119,736 7.9 % 464,963 388.3 % Sales promotion expenses 2,924 0.2 % 2,931 0.2 % (7 ) -0.2 % Referral expenses 50,000 4.0 % - - 50,000 100.0 % Stock-based compensation 144,613 11.5 % 561,089 37.0 % (416,476 ) -74.2 % Total selling expenses $ 1,255,368 100.0 % $ 1,516,247 100.0 % $ (260,879 ) -17.2 % Our selling expenses decreased by $260,879, or 17.2%, to $1,255,368 for the year ended December 31, 2024 from $1,516,247 in the fiscal year 2023, primarily attributable to (i) a decrease of $359,359 in advertising expenses due to less advertising activities in the current year, (ii) a decrease of $416,476 in stock-based compensation, as the Company granted restricted common stocks which immediately vested upon issuance and stock options to employees of Sigmaways in 2023, and there was no such amount restricted common stocks and stock options granted in the current year, the decrease is also contributed by the graded vesting method of stock options for those issued in previous years, which generally more stock-based compensation will recognize in the early stage, offset by (iii) the increase of $464,963 in sales salaries, commissions and welfare as the Company shifted marketing strategy in the fiscal year 2024.
Removed
We also have an ongoing technology innovation team to develop software that supports the narrow needs of large enterprise customers. We have made significant investments in our sales and marketing efforts globally.
Added
Business Overview We are a leading software development company based in Tokyo, Japan. We provide software through two business units. The first business unit, our CX division, includes a customer experience management business (the “CXM Platform”) that has been in existence for 15 years.
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The pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses.
Added
Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.
Removed
The effects of the COVID-19 pandemic are still impacting the global economy as well as our operations. The duration and extent of this impact depends on future developments that cannot be accurately predicted at this time, such as the extent and effectiveness of containment actions. The lasting effects of the pandemic continue to be unknown.
Added
On January 1, 2024, the merger was completed and HeartCore Capital Advisors transferred all of its assets and liabilities to HeartCore Japan. The merger has been accounted for as a recapitalization between entities under common control since the same controlling shareholders controlled the two entities before and after the transaction.
Removed
As of the filing date of this Annual Report on Form 10-K, the extent of the future impact of COVID-19 is still highly uncertain and cannot be predicted.
Added
As noted in our consolidated financial statements, as of December 31, 2024, we had an accumulated deficit of $16,244,843.
Removed
Cost of Revenues Our total costs of revenues increased by $8,311,399, or 152.0%, to $13,778,416 for the year ended December 31, 2023 from $5,467,017 for the year ended December 31, 2022, in light of the increase in sales in GO IPO consulting services and customized software development and services, offset by the overall decrease in software development and other services, because the Company conducted several complex software development projects to meet customer requirements in 2022, while no such projects in 2023.
Added
Cost of Revenues Our total costs of revenues decreased by $1,199,057, or 8.7%, to $12,579,359 for the year ended December 31, 2024 from $13,778,416 for the year ended December 31, 2023, mainly attributable to (i) a decrease of $1,085,192 in the cost of GO IPO consulting services in line with the decrease in revenues of GO IPO consulting services by excluding the amount recognized from noncash consideration; and (ii) a decrease of $332,033 in cost of maintenance and support services as we gradually used internal resources to provide the services in 2024, which was less costly when compared with using outsourcing resources.
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The decrease was also caused by approximately 8% depreciation of Yen.
Added
Gross Profit Our total gross profit increased by $9,760,456, or 121.0%, to $17,827,870 for the year ended December 31, 2024 from $8,067,414 for the year ended December 31, 2023, mainly attributable to an increase in gross profit of $9,609,647 from GO IPO consulting services, as we recognized greater revenues from noncash consideration from IPO customers upon their IPO effectiveness with no associated costs in the fiscal year 2024 than that recognized in 2023.
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Gross Profit Our total gross profit increased by $4,716,119, or 140.7%, to $8,067,414 for the year ended December 31, 2023 from $3,351,295 for the year ended December 31, 2022, mainly attributable to (i) an increased gross profit of $1,564,347 from customized software development and services as a result of acquisition of Sigmaways and its subsidiaries on February 1, 2023; (ii) an increased gross profit of $3,661,179 from GO IPO consulting services, as we recognized revenue from the warrants of the customers upon customers’ IPO effectiveness in current year, while no corresponding cost for such revenue recognized; offset by (iii) a decrease of $621,591 in sale of on-premises software due to lower volume in sale and higher costs to purchase valuable licenses in the current period.
Added
For the Years Ended December 31, 2024 2023 Variance Amount % Amount % Amount % General and administrative expenses Salaries and welfare expenses $ 3,707,501 43.0 % $ 4,532,749 47.0 % $ (825,248 ) -18.2 % Consulting and professional service fees 1,999,844 23.2 % 1,520,176 15.8 % 479,668 31.6 % Depreciation and amortization expenses 737,541 8.6 % 666,721 6.9 % 70,820 10.6 % Rent expense 252,330 2.9 % 302,844 3.1 % (50,514 ) -16.7 % Office, utility and other expenses 1,434,740 16.6 % 1,505,981 15.6 % (71,241 ) -4.7 % Travel and entertainment expenses 285,867 3.3 % 359,105 3.7 % (73,238 ) -20.4 % Stock-based compensation 205,764 2.4 % 763,805 7.9 % (558,041 ) -73.1 % Total general and administrative expenses $ 8,623,587 100.0 % $ 9,651,381 100.0 % $ (1,027,794 ) -10.6 % Our general and administrative expenses decreased by $1,027,794 or 10.6%, to $8,628,587 for the year ended December 31, 2024 from $9,651,381 in the fiscal year 2023, primarily attributable to (i) a decrease of $825,248 in salaries and welfare expenses due decrease in numbers of directors, change in bonus structures, and dissolution of HeartCore Capital Advisors in the fiscal year 2024; (ii) a decrease of $558,041 in stock-based compensation, as the Company granted restricted common stocks which immediately vested upon issuance and stock options to employees of Sigmaways in 2023, and there was no such amount restricted common stocks and stock options granted in the current year, the decrease is also contributed by the graded vesting method of stock options for those issued in previous years, which generally more stock-based compensation will recognize in the early stage; offset by (iii) an increase of $479,668 in consulting and professional service fees, primarily because the Company newly engaged public relations related activities in 2024 to enhance compliance and regulation information, while no such activities occurred in previous year.
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For the Years Ended December 31, 2023 2022 Variance Amount % of Amount % of Amount % of General and administrative expenses Salaries and welfare expenses $ 4,532,749 47.0 % $ 2,924,547 44.4 % $ 1,608,202 55.0 % Consulting and professional service fees 1,520,176 15.8 % 1,629,622 24.8 % (109,446 ) -6.7 % Depreciation and amortization expenses 666,721 6.9 % 76,924 1.2 % 589,797 766.7 % Rent expense 302,844 3.1 % 184,179 2.8 % 118,665 64.4 % Office, utility and other expenses 1,505,981 15.6 % 836,609 12.7 % 669,372 80.0 % Travel and entertainment expenses 359,105 3.7 % 299,655 4.6 % 59,450 19.8 % Stock-based compensation 763,805 7.9 % 628,198 9.5 % 135,607 21.6 % Total general and administrative expenses $ 9,651,381 100.0 % $ 6,579,734 100.0 % $ 3,071,647 46.7 % Our general and administrative expenses increased by $3,071,647 or 46.7%, to $9,651,381 for the year ended December 31, 2023 from $6,579,734 in the fiscal year 2022, primarily attributable to (i) an increase of $1,608,202 in salaries and welfare expenses due to increased remuneration for executive officers and additional staff employed by Sigmaways and its subsidiaries; (ii) an increase of $589,797 in depreciation and amortization expenses, an increase of 669,372 in office, utility and other expenses, and an increase of $118,665 in rent expense, mostly due to the acquisition of Sigmaways and its subsidiaries as well as the overall business expansion; and (iii) an increase of $135,607 in stock-based compensation, as certain sales staff were promoted to executive management, and their stock-based compensation was reclassified from selling expenses in 2022 to general and administrative expenses in 2023.
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As a percentage of revenues, research and development expenses were 2.4% and 4.7% of our revenues for the fiscal years ended December 31, 2024 and 2023, respectively. Impairment of Intangible Asset Our intangible asset represents the customer relationship acquired from business acquisition of Sigmaways and its subsidiaries.
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Net cash used in operating activities was $4,808,547 for the year ended December 31, 2022, primarily consisting of the following: ● Net loss of $6,677,466 for the fiscal year. ● A decrease of $283,921 in operating lease liabilities, due to the rent payment made . ● Offset by non-cash lease expense of $273,836. ● Offset by stock-based compensation of $1,519,743, as we granted equity rewards to our employees in 2022. ● Offset by a decrease in accounts receivable of $296,835.
Added
As of December 31, 2024, we accessed the value of such intangible asset become zero by engaging a third-party valuation appraiser, accordingly, we recorded an impairment of intangible asset of $3,878,125, excluding an amortization expense of $637,500 in the year ended December 31, 2024.
Removed
The decrease was primarily due to the decrease in our sales in the current fiscal year. The collected accounts receivable is available cash, which can be used as working capital for our business operation, if necessary. ● Offset by an increase in deferred revenue of $239,129. We request upfront payment for service provided over a period of time.
Added
Impairment of Goodwill Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business acquisition of Sigmaways and its subsidiaries.
Removed
The deferred revenue increased as a result of newly established consultant services in 2022 .
Added
In assessing our liquidity, management monitors and analyzes our cash, our ability to generate sufficient revenues in the future, and our operating and capital expenditure commitments.
Removed
Net cash used in investing activities amounted to $12,200 for the year ended December 31, 2022, primarily consisted of the purchases of fixed assets of $57,071, offset by the repayment of $44,871 of loan provided to related party .
Added
Investing Activities Net cash provided by investing activities amounted to $6,349,204 for the year ended December 31, 2024, primarily consisted of (i) net proceeds of $5,640,000 from sale of warrants, and (ii) net proceeds of $749,546 from sale of marketable securities.
Removed
Contractual Obligations Lease Commitment The Company has entered into four leases for its office space, which were classified as operating leases. It has also entered into a lease for office equipment, and two leases for vehicles, one of which was terminated in September 2023, and these leases were classified as finance leases.
Added
Financing Activities Net cash used in financing activities amounted to $318,646 for the year ended December 31, 2024, primarily consisted of (i) dividends distribution of $834,566; (ii) repayment of $554,553 for short-term and long-term debts; (iii) net repayment of $390,373 for factoring arrangement, and (iv) proceeds of $1,423,342 from issuance of common stocks.
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As of December 31, 2023, future minimum payments for long-term debts are as follows: Loan Year Ended December 31, Payment 2024 $ 376,639 2025 442,568 2026 393,011 2027 421,900 2028 189,783 Thereafter 336,472 Total $ 2,1 60 ,3 73 COVID-19 In December 2019, a novel coronavirus disease (“COVID-19”) was reported to have surfaced in Wuhan, China, and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.
Added
As of December 31, 2024, future minimum payments for long-term debts are as follows: Principal Year Ended December 31, Payment 2025 $ 404,827 2026 358,590 2027 384,912 2028 173,900 2029 25,116 Thereafter 304,723 Total $ 1,652,068 Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2024.
Removed
The pandemic, which has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated business closures, have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal operations of many businesses, including ours.
Added
We believe critical accounting policies reflect the more significant judgments and estimates used in preparation of our consolidated financial statements. 78 Revenue Recognition We generate revenues from the following main sources: on-premise software sales, maintenance and support services, software as a service (“SaaS”), software development and other miscellaneous services, customized software development and services and consulting services.
Removed
For example, many cities, counties, states, and even countries have imposed or may impose a wide range of restrictions on the physical movement of our employees, partners and customers to limit the spread of the pandemic, including physical distancing, travel bans and restrictions, closure of non-essential business, quarantines, work-from-home directives, shelter-in-place orders, and limitations on public gatherings.
Added
A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price.
Removed
These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide. In March 2020, we temporarily closed our offices, including our corporate headquarters, suspended all company-related travel, and all HeartCore Co. employees were required to work from home for several months during the height of the pandemic.
Added
Revenue is recognized when control of the goods and services provided are transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when we satisfy the performance obligations.
Removed
We cancelled or shifted our customer and industry events to virtual-only experiences. Although we have begun to slowly re-open our offices on a staggered, region-by-region basis in accordance with local authority guidelines, we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future.
Added
We satisfy our performance obligations for maintenance and support services, software as a service (“SaaS”), customized software development and services and consulting services over time as the related services are provided. We satisfy our performance obligations for on-premise software sales and software development and other miscellaneous services at point in time.
Removed
All of these changes may disrupt the way we operate our business. In addition, our management team has, and will likely continue, to spend significant time, attention and resources monitoring the pandemic and seeking to minimize the risk of the virus and manage its effects on our business and workforce.
Added
We provide public listing related consulting services to customers pursuant to the specific requirements prescribed in the contracts, which primarily include communicating with intermediary parties, preparing required documents related to the initial public offering and supporting the listing process. The consulting service contracts normally include both cash and noncash considerations.

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Other HTCR 10-K year-over-year comparisons