Item 1A. Risk Factors 11
Item 1B. Unresolved Staff Comments 23
Item 1C Cybersecurity 23
Item 2. Properties 24
Item 3. Legal Proceedings 25
Item 4. Mine Safety Disclosures 25
Part II
Item 6. Reserved 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38
Item 8. Financial Statements and Supplementary Data 38
Item 9A. Controls and Procedures 39
Item 9B. Other Information 39
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 39
Part III
Item 10. Directors, Executive Officers and Corporate Governance 40
Item 11. Executive Compensation 47
Item 14. Principal Accountant Fees and Services 68
Part IV
Item 15. Exhibit and Financial Statement Schedules 69
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements contained in this annual report may constitute “forward-looking statements” for purposes of the federal
securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The
words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify forward-looking statements, but
the absence of these words does not mean that a statement is not forward-looking.
The
forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
● the level of demand for our services;
● competition in our markets;
● our ability to grow and manage growth profitably;
● our ability to access additional capital;
● changes in applicable laws or regulations;
● our ability to attract and retain qualified personnel;
Should
one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities
laws.
PART
I
ITEM
1. BUSINESS
This
Business section, along with other sections of this annual report on Form 10-K, includes statistical and other industry and market
data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications
and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to
be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these industry
publications and third-party research, surveys and studies are reliable, we have not independently verified such data and we do not
make any representation as to the accuracy of the information. Unless the context otherwise requires, references herein to
“we,” “us” or the “Company” refer to HeartCore Enterprises, Inc. (“HeartCore USA”)
and its consolidated subsidiaries, including HeartCore Financial, Inc. (“HeartCore Financial”) and its branch
office in Japan, Higgs Field Co., Ltd. (“Higgs Field”), HeartCore Luvina Vietnam Company Limited (“HeartCore
Luvina”), and Sigmaways, Inc. (“Sigmaways”) and its subsidiaries.
Overview
We
were incorporated in the State of Delaware on May 18, 2021. In 2022, HeartCore USA started the GO IPO business, which supports Japanese
companies listing on The Nasdaq Stock Market (“Nasdaq”) and the New York Stock Exchange (“NYSE”) in the United
States. As of March 31, 2026, we have entered into consulting agreements with 16 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.
Prior
to November 2025, we were also a software development company based in Tokyo, Japan. We provided software through two business units.
The first business unit, our CX division, included a customer experience management business (the “CXM Platform”). The second
business unit, our DX division, was a digital transformation business which provided customers with robotics process automation, process
mining and task mining to accelerate the digital transformation of enterprises. In 2025, we made the strategic decision to sell our software
business assets in Japan and to concentrate our efforts on our GO IPO consulting business. On October 31, 2025, the Company entered into
a Purchase Agreement (the “HeartCore Japan Agreement”) with Smith Japan Holdings KK (“Smith Japan”), pursuant
to which the Company agreed to sell to Smith Japan, and Smith Japan agreed to purchase (the “HeartCore Japan Sale”), all
of the outstanding equity interests of HeartCore Co., Ltd., a then-wholly owned subsidiary of the Company (“HeartCore Japan”).
The HeartCore Japan Sale closed on October 31, 2025.
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 with their initial public offerings (“IPOs”) in the United States
as well as their simultaneous listings onto the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American. More specifically,
these consulting services (collectively, “Services”) include the following:
● Translation of requested documents into English;
● Assist in the preparation of S-1 or F-1 filings;
● Creation of English web page; and
In
providing the Services, we do not provide investment advice regarding the value of securities, nor do we engage in the solicitation of
investors or the negotiation of securities transactions. We do not provide accounting or legal advice, and we do not act as an investment
advisor or broker-dealer.
Pursuant
to the terms of the consulting agreements with the issuers, the parties agree that we will not provide the following services, among
others: negotiation of the sale of the issuers’ securities; participation in discussions between the issuers and potential investors;
assisting in structuring any transactions involving the sale of the issuers’ securities; pre-screening of potential investors;
due diligence activities; and providing advice relating to valuation of or financial advisability of any investments in the issuers.
Additionally, we do not take part in the selection of, or negotiation of terms with, law firms, underwriters or audit firms. Such selection
and negotiation is the sole responsibility of the client.
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
Sales
and Marketing
Our
sales and marketing strategy is focused on supporting growth-stage Japanese enterprises seeking access to U.S. capital markets through
our Go IPO service offering. We specialize in providing end-to-end advisory and execution support to companies navigating the transition
from Japanese domestic standards to the regulatory, financial reporting, and governance requirements applicable to U.S. public companies.
Unlike
traditional software-driven sales models, our go-to-market approach is relationship-driven and highly targeted. We primarily source potential
clients through our established network of strategic partners, including securities firms, legal advisors, accounting firms, and financial
consultants, as well as through referrals from existing clients and industry participants. We also engage directly with prospective clients
through industry seminars, educational workshops, and targeted outreach to companies that we believe are suitable candidates for U.S.
listings.
Our sales process typically begins
with an initial assessment of a prospective client’s readiness for a U.S. public listing, including an evaluation of financial reporting
capabilities, internal controls, and corporate governance structures. Based on this assessment, we provide tailored advisory proposals
that outline the scope of services required to achieve compliance with U.S. regulatory standards. Engagements are generally structured
as long-term advisory relationships, reflecting the complexity and duration of the IPO preparation process.
We further expand our client base
by cultivating long-term relationships with key stakeholders in the capital markets ecosystem. Our partnerships enable us to maintain
a steady pipeline of potential clients and enhance our ability to deliver integrated solutions across legal, financial, and operational
domains.
Our marketing efforts are focused
on establishing thought leadership and building credibility within our target market. We conduct and participate in industry events, publish
educational content related to U.S. capital markets and regulatory requirements, and leverage our professional network to increase awareness
of our services. These efforts are designed to position us as a trusted partner for Japanese companies seeking cross-border capital market
opportunities.
In addition, we support client retention and expansion through ongoing advisory services following initial engagements.
As clients progress through their IPO journey and beyond, we provide continuous support in areas such as financial reporting, compliance,
and investor relations, which may lead to additional service opportunities.
Competition
The
market for providing consulting services to private Japanese companies seeking to list on United States securities exchanges is highly
competitive and fragmented. We compete with a wide range of firms, from large global consultancies to specialized boutique firms and
financial services providers.
Competitive
Landscape
Our
primary competitors generally fall into the following categories:
Our
Competitive Advantages
We
believe our ability to compete effectively depends on several factors, including but not limited to, our specific expertise in the Japan-to-U.S.
listing pipeline, our unique fee structure, and the quality of our bilingual execution. Our competitive strengths include:
Competitive
Risks
Many
of our current and potential competitors have significantly greater financial, technical, and marketing resources than we do. They may
have longer operating histories, larger client bases, and more established relationships with U.S. exchanges and regulators. Increased
competition could result in price reductions, reduced operating margins, or a loss of market share. To remain competitive, we must continue
to enhance our service offerings and maintain our reputation for successfully navigating the complexities of the U.S. IPO process for
Japanese issuers.
Recent
Developments
Establishment of Higgs Field Co., Ltd.
In October 2025, the Company established
Higgs Field Co., Ltd. as a new subsidiary in Japan as part of its strategic transition toward financial services-related business opportunities.
Higgs Field Co., Ltd. is currently engaged in providing consulting services related to digital securities, including
self-offered corporate bonds and similar instruments. Over the longer term, the Company intends to expand this business by pursuing registration
as a licensed securities firm in Japan, which would enable it to broaden the scope of its services, subject to obtaining the necessary
regulatory approvals.
Sale
of 51% Interest in Sigmaways, Inc.
In 2025, the Company made the strategic decision to sell its software business assets in Japan and to concentrate
its efforts on the GO IPO consulting business. In connection therewith, in addition to the HeartCore Japan Sale, which closed on October
31, 2025, the Company is assessing all strategic alternatives to divest its 51% equity interest in Sigmaways, Inc. to a third party.
As of the date of this report, the Company has not entered into a definitive agreement with respect to a sale of its equity interest in Sigmaways.
Accordingly, there can be no assurance that any transaction will be consummated. Any potential transaction remains subject to, among
other things, the negotiation and execution of definitive agreements and the satisfaction of customary closing conditions.
Sale
of HeartCore Japan
On
October 31, 2025, the Company entered into the HeartCore Japan Agreement with Smith Japan in relation to the HeartCore Japan Sale. Pursuant
to the terms of the HeartCore Japan Agreement, the purchase price of the HeartCore Japan Sale was ¥1,800,418,650 (equivalent to approximately
$12 million, based on the October 31, 2025 Federal Reserve conversion rate of ¥154.10 = USD $1) (the “Purchase Price”),
subject to adjustment as set forth in the HeartCore Japan Agreement, to be paid as follows:
Pursuant
to the terms of the HeartCore Japan Agreement, for a period of six months following the closing date, (i) the Company agreed to provide
Smith Japan with certain accounting and reporting transition services, and (ii) Smith Japan agreed to provide the Company with certain
human resources transition services.
The
HeartCore Japan Agreement contains customary representations, warranties, conditions, covenants, and indemnification obligations for
a transaction of this type.
The
HeartCore Japan Sale closed on October 31, 2025.
One-Time
Distribution to Stockholders
HeartCore
USA and its Board of Directors deemed it in the best interests of HeartCore USA and its stockholders to authorize a one-time payment
to its stockholders in the amount of $0.13 per share of common stock. For U.S. federal tax purposes, this payment to stockholders will
be deemed to be a distribution. The record date for holders of HeartCore USA’s common stock to participate in the distribution
was November 10, 2025, and the payment date was November 17, 2025.
Nasdaq
Notice Regarding Minimum Bid Price Requirement
On
May 6, 2025, we received written notice (the “Bid Price Notice”) from the Nasdaq Listing Qualification Department (the “Nasdaq
Staff”) indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule
5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market. The notification of
noncompliance has no immediate effect on the listing or trading of our common stock on the Nasdaq Capital Market under the symbol “HTCR,”
and we are currently monitoring the closing bid price of our common stock and evaluating our alternatives, if appropriate, to resolve
the deficiency and regain compliance with this rule.
The
Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price
for the last 30 consecutive business days, we no longer meet this requirement. The Bid Price Notice indicated that we will be provided
180 calendar days, or until November 3, 2025, in which to regain compliance. If we failed to regain compliance with Rule 5550(a)(2) prior
to the expiration of the 180 calendar day period, but meet the continued listing requirement for market value of publicly held shares
and all of the other applicable standards for initial listing on the Nasdaq Capital Market, with the exception of the Minimum Bid Price
Requirement, and provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse
stock split, if necessary, then we may be granted an additional 180 calendar days to regain compliance with Rule 5550(a)(2).
On
November 4, 2025, the Nasdaq Staff notified us of its determination that HeartCore USA is eligible for an additional 180-day period,
or until May 1, 2026, to regain compliance with the Minimum Bid Price Requirement. If at any time during this additional time period
the closing bid price of HeartCore USA’s security is at least $1 per share for a minimum of 10 consecutive business days, Nasdaq
will close the matter.
If
compliance cannot be timely demonstrated, the Nasdaq Staff will provide notify us that our common stock will be delisted. At that time,
we may appeal the Nasdaq Staff’s determination to a Hearings Panel. There can be no assurance that we will be able to regain compliance
with the Minimum Bid Price Requirement, even if we maintain compliance with the other listing requirements. We are considering actions
that we may take in response to the Bid Price Notice in order to regain compliance with the continued listing requirements, including
a reverse stock split, if necessary, but no decisions regarding a response have been made at this time.
Properties
Our corporate headquarters were
previously operated through HeartCore Co., Ltd. On October 31, 2025, we disposed of HeartCore Co., Ltd. and, on the same date, established
Higgs Field Co., Ltd. From November 1, 2025 through January 10, 2026, Higgs Field Co., Ltd. operated from office space within HeartCore
Co., Ltd. On January 11, 2026, we relocated our office to 14F, Shibuya Sakura Stage Central Building, 1-2 Sakuragaoka-cho,
Shibuya-ku, Tokyo, Japan, where we lease approximately 2,005 square feet of office space from an unaffiliated third party. This lease
has a term from January 11, 2026 through January 10, 2028, with an expected renewal period of an additional two years. Terms of the office
lease provide for a base rent payment of $23,268 per month and a share of sales taxes of $2,327 per month.
The Japan branch office of HeartCore Financial, Inc. is located at JP Tower 14F, 2-7-2 Marunouchi, Chiyoda-ku, Tokyo,
Japan, where we lease office space from an unaffiliated third party. This lease has a term ending in March 2026. Terms of the office lease
provide for a base rent payment of $935 per month and a share of sales taxes of $94 per month.
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. Terms of the office lease provide for a quarterly base rent payment of $2,516.
Employees
and Human Capital Management
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. As a result, we consistently focus on how we can continue to help employees
grow, both personally and professionally.
Since
2009, we have expanded beyond our Japanese headquarters to several offices globally and have built a large remote community. Currently,
we are operating primarily from our office in Japan. As of December 31, 2025, we had 44 full-time employees. None of our
employees is represented by a union. We consider our relations with our employees to be good.
Government
Regulation
Investment
Company Act of 1940
Our
GO IPO business assists companies in navigating the IPO process in the U.S. markets. We assist companies in improving their internal
systems, planning, and readiness to take their company through the IPO process. We also assist with introductions to third party professional
advisors such as law firms, investment bankers, and auditors, in order that clients can make their selections, at their sole discretion.
We do not provide investment advice regarding the value of securities, nor do we engage in the solicitation of investors or the negotiation
of securities transactions. We do not provide accounting or legal advice. If state or federal regulatory agencies determined that we
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
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 are consulting
services only, and we are not in the business of investing, reinvesting or trading in securities. 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. We conduct our operations so that we will not be deemed an investment
company.
If
our activities were deemed to be those of an unregistered broker-dealer or investment adviser, we could face significant civil and criminal
penalties and our consulting contracts could be rendered void.
Anti-Money
Laundering (“AML”)
The
Financial Crimes Enforcement Network (“FinCEN”) is a bureau of the U.S. Department of the Treasury that safeguards the financial
system from illicit use, combats money laundering, and counters terrorism financing. Beginning January 1, 2026, new FinCEN rules have
expanded AML compliance program requirements to a broader range of consultants and advisers. We maintain internal protocols designed to monitor for suspicious activity as part of our internal risk management
practices.
Our
operations in Japan are subject to complex and evolving regulatory requirements, and failure to comply with these regulations could have
a material adverse effect on our business.
We
operate, and intend to expand our operations, in Japan in areas that may be subject to regulation under various Japanese laws and regulations,
including, but not limited to, the Financial Instruments and Exchange Act, the Foreign Exchange and Foreign Trade Act, and the Act on
the Protection of Personal Information. These laws impose, or may impose, restrictions, licensing requirements, reporting obligations,
and other compliance obligations on our current and planned business activities.
In
particular, our current consulting services relating to digital securities and our planned expansion into financial services may require
us to obtain registrations or licenses under the Financial Instruments and Exchange Act, including registration as a Type I Financial
Instruments Business Operator. There can be no assurance that we will be able to obtain such licenses in a timely manner, or at all.
If we are required to obtain such licenses and fail to do so, we may be subject to administrative penalties, business restrictions, or
other enforcement actions, which could materially and adversely affect our business.
In
addition, our cross-border activities and transactions may be subject to regulations under the Foreign Exchange and Foreign Trade Act,
including notification or approval requirements. Failure to comply with such requirements could result in penalties or restrictions on
our operations.
We
also collect and process certain personal information in the course of our operations, and are therefore subject to data protection and
privacy regulations in Japan, including the Act on the Protection of Personal Information. Any failure to comply with applicable data
protection laws or to adequately safeguard personal information could result in legal liability, regulatory penalties, and reputational
harm.
Furthermore, applicable laws and regulations
in Japan are subject to change, and regulatory authorities may introduce new interpretations or enforcement practices. As a result, we
may be required to modify our business practices, incur additional compliance costs, or obtain additional approvals, any of which could
have a material adverse effect on our business, financial condition, and results of operations.
Legal
Proceedings
From
time to time, we are involved in various legal proceedings arising from the normal course of business activities. We are not presently
a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have
a material adverse effect on our business, operating results, cash flows or financial condition. Defending such proceedings is costly
and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted
with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion
of management resources, and other factors.
ITEM
1A. RISK FACTORS
An
investment in our securities carries a significant degree of risk. You should carefully consider the following risks, as well as the
other information contained in this annual report on Form 10-K, including our historical financial statements and related notes included
elsewhere in this annual report on Form 10-K, before you decide to purchase our securities. Any one of these risks and uncertainties
has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could
cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value
of our common shares and warrants. Refer to “Cautionary Statement Regarding Forward-Looking Statements.”
We
may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential
risks and uncertainties may not be a complete list of the risks and uncertainties facing 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.
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. All of our operations are conducted, and almost all of our assets are owned, by our subsidiary. Consequently,
our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiary and the payment of funds by this
subsidiary to us in the form of dividends, distributions or otherwise. The ability of our subsidiary to make any payments to us depends
on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure
to receive dividends or distributions from our subsidiary when needed could have a material adverse effect on our business, results of
operations or financial condition.
We
may require additional funding for our growth plans, and such funding may result in a dilution of your investment.
We
attempted to estimate our funding requirements in order to implement our growth plans. 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.
These
additional funds may be raised by issuing equity or debt securities or by borrowing from banks or other resources. 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. Such financing, even if obtained,
may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment of
dividends, or restrict our freedom to operate our business by requiring lender’s consent for certain corporate actions.
Further,
if we raise additional funds by way of a rights offering or through the issuance of new shares, any shareholders who are unable or unwilling
to participate in such an additional round of fund raising may suffer dilution in their investment.
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.
In
the past, the Company has paid cash dividends, and 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. Although the Company
believed that it would be adequately capitalized following payment of each of its cash dividends, the Company’s payment of cash
dividends could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally
defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors
or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the
debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. Any unpaid creditor could claim that any one
or the aggregate of the cash dividends left the Company insolvent or with unreasonably small capital or that the Company intended or
believed the Company would incur debts beyond the Company’s ability to pay such debts as they mature. If a court were to agree
with such a plaintiff, then such court could void the distributions as a fraudulent transfer or impose substantial liabilities on it,
which could adversely affect the Company’s financial condition and the Company’s results of operations.
The
payment of cash dividends is also subject to review under state corporate distribution statutes. Under the Delaware General Corporation
Law, a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there
is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although
the Company’s Board of Directors made the distributions out of its surplus, there can be no assurance that a court will not later
determine that some or all of the distributions were unlawful.
We
may experience significant quarterly fluctuations in our operating results due to our specialized business model and reliance on a limited
number of consulting agreements, which makes our future results difficult to predict.
Our
quarterly operating results have fluctuated in the past and are expected to fluctuate significantly in the future. As a result of the
shift in our business model, our past results may not be indicative of our future performance, and comparing our operating results on
a period-to-period basis may not be meaningful. Unlike companies with recurring subscription revenue, our current business is almost
entirely dependent on providing Go IPO consulting services to a specific niche of private Japanese issuers. As a result, our revenue
in any given period is highly dependent on the number of new consulting agreements we execute and the progress of our existing clients
through the IPO pipeline.
Specific
factors that may cause our quarterly operating results to fluctuate include:
Because
of these and other factors, our past results should not be relied upon as an indication of our future performance. If our revenue or
operating results in a particular quarter fall below the expectations of investors or securities analysts, or below any guidance we may
provide, the price of our common stock could decline.
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.
In
providing our consulting services, we do not perform accounting services, and do not act as an investment advisor or broker-dealer. Pursuant
to the terms of the consulting agreements with the issuers, the parties agree that we will not provide the following services, among
others: negotiation of the sale of the issuers’ securities; participation in discussions between the issuers and potential investors;
assisting in structuring any transactions involving the sale of the issuers’ securities; pre-screening of potential investors;
due diligence activities; and providing advice relating to valuation of or financial advisability of any investments in the issuers.
Additionally, we do not take part in the selection of, or negotiation of terms with, law firms, underwriters or audit firms. Such selection
and negotiation is the sole responsibility of the client.
Our
GO IPO clients may rely on advice from their third party advisors, including law firms and underwriters. Any of these third party advisors
may advise our GO IPO clients on strategies that could delay or even terminate their ability to go public in the United States or secure
a listing on an American stock exchange. The ability of our client to go public in the United States or secure a listing on an American
stock exchange is subject to our client’s ability to execute their business plan and attract investors. Ultimately, market conditions
could also create delays or terminate our client’s plans.
The
value of the equity rights we receive from our GO IPO clients could be volatile, lose value, and even become worthless.
We
do not control the management or strategies of our GO IPO client companies. The value of our equity rights received from our consulting
services is tied to the market value of the client and will likely be volatile. 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 the market value of the equity rights is too low;
● If the client company cannot secure market makers;
Our
GO IPO business assists companies in navigating the IPO process in the U.S. 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.
Our
GO IPO services assist companies in improving their internal systems, planning, and readiness to take their company through the IPO process.
We also assist with introductions to third party professional advisors such as law firms, investment bankers, and auditors, in order
that clients can make their selections, at their sole discretion. We do not provide investment advice regarding the value of securities,
nor do we engage in the solicitation of investors or the negotiation of securities transactions.
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 are consulting
services only, and we are not in the business of investing, reinvesting or trading in securities. 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. We conduct our operations so that we will not be deemed an investment
company.
If
our activities were deemed to be those of an unregistered broker-dealer or investment adviser, we could face significant civil and criminal
penalties and our consulting contracts could be rendered void.
General
Risks
Failure
to comply with laws and regulations could harm our business.
Our
business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible
for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery
laws, import/export controls, federal securities laws and tax laws and regulations. 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.
We are exposed to fluctuations
in currency exchange rates. Our operations expose us to movements in foreign currency exchange rates, primarily between the U.S. dollar
and Japanese Yen. As a result, our revenue, expenses, and operating results may be affected by changes in exchange rates when transactions
denominated in foreign currencies are translated into our reporting currency.
In addition, as we continue to
develop our business in Japan and may expand our operations internationally in the future, our exposure to foreign currency fluctuations
may increase. Exchange rate volatility may affect our ability to accurately predict our financial results and could result in increased
variability in our reported earnings.
Although we may implement
certain strategies to mitigate foreign currency risks, such strategies may not be effective and may involve additional costs and operational
complexity.
Our
ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.
Our
business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds to invest
in future growth opportunities. 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 we incur debt, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms
of any debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue equity
securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.
Any additional equity or equity-linked financings would be dilutive to our stockholders. 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.
The
Company’s certificate of incorporation, as amended (the “Certificate of Incorporation”), and bylaws provide 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.
Section
21 of our Certificate of Incorporation and Section 7.4 of our bylaws provides that “[u]nless the corporation consents in writing
to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf
of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of
the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any
provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court
located in the county in which the principal office of the corporation in the State of Delaware is established, in all cases subject
to the court’s having personal jurisdiction over the indispensable parties named as defendants. Notwithstanding the foregoing,
the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange of 1934, as amended,
the Securities Act of 1933, as amended, or any claim for which the federal courts have exclusive or concurrent jurisdiction.” Therefore,
the exclusive forum provision in our Certificate of Incorporation and our bylaws will not relieve us of our duty to comply with the federal
securities laws and the rules and regulations thereunder, and shareholders will not be deemed to have waived our compliance with these
laws, rules and regulations.
This
exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with
us or our directors, officers or other employees, which may discourage lawsuits against us or our directors, officers or other employees.
In addition, shareholders who do bring a claim in the state or federal court in the State of Delaware could face additional litigation
costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The state or federal court of the State of
Delaware may also reach different judgments or results than would other courts, including courts where a shareholder would otherwise
choose to bring the action, and such judgments or results may be more favorable to us than to our shareholders. However, the enforceability
of similar exclusive forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings,
and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or more
of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in our Certificate
of Incorporation and our bylaws to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving
such action in other jurisdictions.
You
are bound by the fee-shifting provision contained in our bylaws, which may discourage you to pursue actions against us and could discourage
shareholder lawsuits that might otherwise benefit the Company and its shareholders.
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.
We
adopted the fee-shifting provision to eliminate or decrease nuisance and frivolous litigation. We intend to apply the fee-shifting provision
broadly to all actions except for claims brought under the Exchange Act and Securities Act.
There
is no set level of recovery required to be met by a plaintiff to avoid payment under this provision. Instead, whoever is the prevailing
party is entitled to recover the reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or
defense of such action. 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, are subject to this provision. 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.
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,
this provision in Section 7.4 of our bylaws could discourage shareholder lawsuits that might otherwise benefit the Company and its shareholders.
THE
FEE SHIFTING PROVISION CONTAINED IN THE BYLAWS IS NOT INTENDED TO BE DEEMED A WAIVER BY ANY HOLDER OF COMMON STOCK OF THE COMPANY’S
COMPLIANCE WITH THE U.S. FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. THE FEE SHIFTING PROVISION CONTAINED
IN THE BYLAWS DO NOT APPLY TO CLAIMS BROUGHT UNDER THE EXCHANGE ACT AND SECURITIES ACT.
Risks
Related to Employee Matters
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
believe that a critical component to our success has been our company culture, which is based on transparency and personal autonomy.
We have invested substantial time and resources in building our team within this company culture. Any failure to preserve our culture
could negatively affect our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.
As we grow, we may find it difficult to maintain these important aspects of our company culture. 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.
Our
success and future growth depend upon the continued services of our management team, including our Chief Executive Officer, Sumitaka
Yamamoto, and other key employees. From time to time, there may be changes in our management team resulting from the hiring or departure
of executives, which could disrupt our business. The loss of one or more of our key employees could harm our business.
The
failure to attract and retain additional qualified personnel could prevent us from executing our business strategy.
To
execute our business strategy, we must attract and retain highly qualified personnel. We have from time to time in the past experienced,
and we expect to continue to experience in the future, difficulty in hiring and difficulty in retaining employees with appropriate qualifications.
In particular, we have experienced a competitive hiring environment in Japan, where we are headquartered, and expect to continue to experience
a competitive hiring environment. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth
prospects could be severely harmed.
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.
Our
common stock is listed on Nasdaq Capital Market under the symbol “HTCR.” There can be no assurance any broker will continue
to be interested in trading our stock. Therefore, it may be difficult to sell your shares of common stock if you desire or need to sell
them. We cannot provide any assurance that an active and liquid trading market in our common stock will develop or, if developed, that
such market will continue.
There
is no guarantee that we will be able to maintain a listing on the Nasdaq Capital Market for any period of time by perpetually satisfying
Nasdaq’s continued listing requirements. Our failure to continue to meet these requirements may result in our common stock being
delisted from Nasdaq Capital Market.
The
market price of our common stock may be volatile, and you could lose all or part of your investment.
We
cannot predict the prices at which our common stock will trade. The market price of our common stock depends on a number of factors,
including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to
our operating performance. In addition, the limited public float of our common stock will tend to increase the volatility of the trading
price of our common stock. These fluctuations could cause you to lose all or part of your investment in our common stock, since you might
not be able to sell your shares at or above the price you paid for them. 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;
● announcements by us of new consulting agreements or capital commitments;
● rumors and market speculation involving us;
● price and volume fluctuations in the overall stock market from time to time;
● announced or completed acquisitions of businesses by us or our competitors;
● general economic conditions and slow or negative growth of our markets; and
In
addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of companies. Broad market and industry factors may seriously affect the market price of our common stock,
regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the
market prices of a particular company’s securities, securities class action litigation has often been instituted against that company.