NEW YORK and TOKYO, May 14, 2024 (GLOBE NEWSWIRE) — HeartCore Enterprises, Inc. (Nasdaq: HTCR) (“HeartCore” or “the Company”), a leading enterprise software and consulting services company based in Tokyo, reported financial results for the first quarter ended March 31, 2024.
First Quarter 2024 and Recent Operational Highlights
Sold a Go IPO Client Warrant for $9 million. During the first quarter ended March 31, 2024, the Company received $5 million, with the remaining $4 million received in April 2024. Due to specific accounting treatments and stipulations in the warrant agreement, HeartCore will not recognize the $9 million as revenue on the balance sheet until the client becomes a publicly listed company, which is expected to occur in Fall 2024.Disbursed first dividend payment of $0.02 per share on May 3, 2024Expanded partnership with Heart-Tech HealthEngaged with Onside Content to develop AI-based content marketing evaluation and reporting index solutionFormed an Artificial Intelligence Software Development DivisionSigned 12th, 13th, and 14th Go IPO ContractEstablished HeartCore Luvina Vietnam Co., Ltd., a joint venture with Luvina Software Joint Stock CompanySigned with Toshiba Elevator and Building Systems Corporation to implement its CMS platform
Management Commentary
“The first quarter brought promising developments for our software business, marking a pivotal shift as this division turned profitable for the quarter,” said HeartCore CEO Sumitaka Kanno Yamamoto. “This success stems from our proactive cost reduction initiatives without having taken our foot off the gas pedal from a sales & marketing standpoint, which have significantly improved our margins in this division. Moreover, the establishment of two new divisions within HeartCore has bolstered this momentum, demonstrating encouraging traction since its inception and contributing to the profitability of our software arm. We believe that our strategic joint venture and partnership with Luvina Software Joint Stock Company offers a dependable and cost-effective IT outsourcing and software development partner, with forecasts projecting roughly $1 million in sales within its first year, which is all attributable to HeartCore’s P&L. Additionally, our recently formed AI software development division has already secured two deals within its first month, signaling promising opportunities for further expansion of our enterprise software capabilities and customer portfolio.”
“Additionally, though the optics of our quarterly results reflect a decline, it’s crucial to note that these figures do not encompass the significant sale of a Go IPO client warrant in March that totaled $9 million. As we explained in a previous press release yesterday, a total of $9 million was received by our team following the sale of a Go IPO’s client’s warrants in Q1 2024, but due to specific accounting treatments and stipulations, we cannot record this amount as revenue unless and until the client goes public. Despite this accounting nuance, we’ve already put the capital to work by allocating it to various strategic initiatives, including our dividend payment which was disbursed on May 3rd.”
First Quarter 2024 Financial Results
Revenues were $5.0 million compared to $8.7 million in the same period last year. The decrease was primarily due to lower revenues from GO IPO consulting services as the Company’s two IPO consulting customers successfully listed on the Nasdaq in the same quarter last year, offset by increases in revenue from the sale of on-premises software, and customized software development and services.
Gross profit decreased to $2.0 million compared to $5.6 million in the same period last year. The decrease was primarily due to the aforementioned reason above.
Operating expenses decreased to $2.7 million compared to $3.3 million in the same period last year. The decrease was primarily due to lower selling expenses and general and administrative expenses.
Net loss was about $1.5 million or $(0.06) per diluted share compared to a net income of $1.8 million or $0.10 per diluted share, in the same period last year.
As of March 31, 2024, the Company had cash and cash equivalents of $1.2 million compared to $1.0 million on December 31, 2023.
2024 Strategic Outlook
HeartCore CEO Sumitaka Kanno Yamamoto added: “Looking forward to the remainder of the year, our focus remains on expanding our enterprise software business through ongoing cost reduction strategies and identifying synergistic opportunities with our subsidiaries and divisions to optimize operational efficiencies and capabilities. Building on the momentum of a profitable quarter within this arm, we remain committed to sustaining this trajectory throughout 2024 as we strive towards overall profitability. Additionally, our dedicated Go IPO team continues to uphold its white-glove approach, guiding our expanding pipeline of clients through the comprehensive IPO process. With an optimistic outlook on the IPO market, we anticipate announcing the completion of several IPOs this year and reaping the benefits of additional Go IPO warrants.”
About HeartCore Enterprises, Inc.
Headquartered in Tokyo, Japan, HeartCore Enterprises is a leading enterprise software and consulting services company. HeartCore offers Software as a Service (SaaS) solutions to enterprise customers in Japan and worldwide. The Company also provides data analytics services that allow enterprise businesses to create tailored web experiences for their clients through best-in-class design. HeartCore’s customer experience management platform (CXM Platform) includes marketing, sales, service and content management systems, as well as other tools and integrations, which enable companies to enhance the customer experience and drive engagement. HeartCore also operates a digital transformation business that provides customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises. HeartCore’s GO IPOSM consulting services helps Japanese-based companies go public in the U.S. Additional information about the Company’s products and services is available at and https://heartcore-enterprises.com/.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, or the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believed,” “intend,” “expect,” “anticipate,” “plan,” “potential,” “continue,” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks, and uncertainties are discussed in HeartCore’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond HeartCore’s control which could, and likely will materially affect actual results, and levels of activity, performance, or achievements. Any forward-looking statement reflects HeartCore’s current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to operations, results of operations, growth strategy, and liquidity. HeartCore assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The contents of any website referenced in this press release are not incorporated by reference herein.
HeartCore Investor Relations Contact:
Gateway Group, Inc.
Matt Glover and John Yi
HTCR@gateway-grp.com
(949) 574-3860
HEARTCORE ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2024 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents$1,219,251 $1,012,479 Accounts receivable 3,086,203 2,623,682 Investments in marketable securities 408,266 642,348 Investment in equity securities – 300,000 Prepaid expenses 3,942,371 536,865 Current portion of long-term note receivable 100,000 100,000 Due from related party 41,948 44,758 Other current assets 223,222 234,761 Total current assets 9,021,261 5,494,893 Non-current assets: Property and equipment, net 688,826 763,730 Operating lease right-of-use assets 2,271,955 2,467,889 Intangible asset, net 4,356,250 4,515,625 Goodwill 3,276,441 3,276,441 Long-term investment in equity securities 300,000 – Long-term investment in warrants 1,325,421 2,004,308 Long-term note receivable 200,000 200,000 Deferred tax assets 381,307 369,436 Security deposits 325,267 348,428 Long-term loan receivable from related party 160,974 182,946 Other non-current assets 22,566 71 Total non-current assets 13,309,007 14,128,874 Total assets$22,330,268 $19,623,767 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses$2,015,959 $1,757,038 Accrued payroll and other employee costs 550,916 723,305 Due to related party 256 1,476 Short-term debt 66,081 135,937 Current portion of long-term debts 446,601 371,783 Insurance premium financing 157,917 – Factoring liability 179,414 562,767 Operating lease liabilities, current 374,671 396,535 Finance lease liabilities, current 16,512 17,445 Income tax payables 150,174 162,689 Deferred revenue 1,791,697 2,166,175 Other current liabilities 5,268,130 216,405 Total current liabilities 11,018,328 6,511,555 Non-current liabilities: Long-term debts 1,524,485 1,770,352 Operating lease liabilities, non-current 1,959,671 2,135,160 Finance lease liabilities, non-current 58,087 66,779 Deferred tax liabilities 1,219,750 1,264,375 Other non-current liabilities 191,933 208,732 Total non-current liabilities 4,953,926 5,445,398 Total liabilities 15,972,254 11,956,953 Shareholders’ equity: Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023) – – Common shares ($0.0001 par value, 200,000,000 shares authorized; 20,864,144 and 20,842,690 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively) 2,085 2,083 Additional paid-in capital 19,686,511 19,594,801 Accumulated deficit (16,096,819) (14,763,469)Accumulated other comprehensive income 347,087 331,881 Total HeartCore Enterprises, Inc. shareholders’ equity 3,938,864 5,165,296 Non-controlling interests 2,419,150 2,501,518 Total shareholders’ equity 6,358,014 7,666,814 Total liabilities and shareholders’ equity$22,330,268 $19,623,767
HEARTCORE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the three months
ended March 31, For the three months
ended March 31, 2024 2023 Revenues$5,046,732 $8,734,150 Cost of revenues 3,014,543 3,101,066 Gross profit 2,032,189 5,633,084 Operating expenses: Selling expenses 219,707 568,642 General and administrative expenses 2,406,303 2,685,207 Research and development expenses 89,134 79,624 Total operating expenses 2,715,144 3,333,473 Income (loss) from operations (682,955) 2,299,611 Other income (expenses): Changes in fair value of investments in marketable securities (234,082) – Changes in fair value of investments in warrants (678,887) 193,365 Interest income 2,594 31,605 Interest expenses (36,661) (39,840)Government grants – – Other income 97,016 14,201 Other expenses (25,194) (29,457)Total other income (expenses) (875,214) 169,874 Income (loss) before income tax provision (1,558,169) 2,469,485 Income tax expense (benefit) (80,167) 661,448 Net income (loss) (1,478,002) 1,808,037 Less: net loss attributable to non-controlling interests (144,652) (74,252)Net income (loss) attributable to HeartCore Enterprises, Inc.$(1,333,350) $1,882,289 Other comprehensive income (loss): Foreign currency translation adjustment 10,295 (25,034) Total comprehensive income (loss) (1,467,707) 1,783,003 Less: comprehensive loss attributable to non-controlling interests (149,563) (76,542)Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.$(1,318,144) $1,859,545 Net income (loss) per common share attributable to HeartCore Enterprises, Inc. Basic$(0.06) $0.10 Diluted$(0.06) $0.10 Weighted average common shares outstanding Basic 20,854,714 19,066,160 Diluted 20,854,714 19,066,160
HEARTCORE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months
ended March 31, For the three months
ended March 31, 2024 2023 Cash flows from operating activities Net income (loss)$(1,478,002) $1,808,037 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization expenses 188,085 123,312 Amortization of debt issuance costs 1,173 758 Non-cash lease expense 93,133 76,017 Deferred income taxes (80,780) (17,284)Stock-based compensation 91,712 915,228 Warrants received as noncash consideration – (4,009,335)Changes in fair value of investments in marketable securities 234,082 – Changes in fair value of investments in warrants 678,887 (193,365)Gain on termination of lease (469) – Changes in assets and liabilities: Accounts receivable (523,110) (66,833)Prepaid expenses (3,257,972) (45)Other assets (18,618) 78,241 Accounts payable and accrued expenses 295,799 (94,363)Accrued payroll and other employee costs (149,603) (178,733)Due to related party (1,161) 2,544 Operating lease liabilities (90,035) (73,147)Income tax payables (2,387) 678,725 Deferred revenue (300,011) (167,873)Other liabilities 5,060,658 70,057 Net cash flows provided by (used in) operating activities 741,381 (1,048,059) Cash flows from investing activities Purchases of property and equipment – (9,409)Repayment of loan provided to related party 10,814 11,955 Payment for acquisition of subsidiary, net of cash acquired – (724,910)Net cash flows provided by (used in) investing activities 10,814 (722,364) Cash flows from financing activities Payments for finance leases (4,474) (5,658)Proceeds from short-term debt 68,138 – Repayment of short-term and long-term debts (207,486) (265,255)Repayment of insurance premium financing (14,772) (36,517)Net proceeds from factoring arrangement – 173,582 Net repayment of factoring arrangement (383,353) – Payments for debt issuance costs – (448)Capital contribution from non-controlling shareholder 67,195 – Net cash flows used in financing activities (474,752) (134,296) Effect of exchange rate changes (70,671) (62,692) Net change in cash and cash equivalents 206,772 (1,967,411) Cash and cash equivalents – beginning of the period 1,012,479 7,177,326 Cash and cash equivalents – end of the period$1,219,251 $5,209,915 Supplemental cash flow disclosures: Interest paid$37,098 $16,968 Income taxes paid$117,524 $– Non-cash investing and financing transactions Operating lease right-of-use assets obtained in exchange for operating lease liabilities$125,735 $– Insurance premium financing$172,689 $389,035 Liabilities assumed in connection with purchase of property and equipment$– $6,288 Common shares issued for acquisition of subsidiary$– $3,150,000