• HeartCore Reports First Quarter 2024 Financial Results

    Source: Nasdaq GlobeNewswire / 14 May 2024 17:10:00   America/New_York

    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, 2024
    • Expanded partnership with Heart-Tech Health
    • Engaged with Onside Content to develop AI-based content marketing evaluation and reporting index solution
    • Formed an Artificial Intelligence Software Development Division
    • Signed 12th, 13th, and 14th Go IPO Contract
    • Established HeartCore Luvina Vietnam Co., Ltd., a joint venture with Luvina Software Joint Stock Company
    • Signed 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 
          

     

     

     


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