• HeartCore Reports Fourth Quarter and Full Year 2022 Financial Results

    Source: Nasdaq GlobeNewswire / 30 Mar 2023 16:05:01   America/New_York

    NEW YORK and TOKYO, March 30, 2023 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc. (“HeartCore” or “the Company”), a leading software development company offering Customer Experience Management Platform (“CXM Platform”) and Digital Transformation (“DX”), reported financial results for the fourth quarter and full year ended December 31, 2022.

    Fourth Quarter 2022 and Recent Operational Highlights

    • Grew total number of global enterprise customers to 903 as of December 31, 2022.
    • Established HeartCore Capital Advisors, Inc., a subsidiary that will execute Go IPO and provide professional consulting services to Japanese companies seeking to list on a major U.S. exchange.
    • Partnered with Works Applications and AIM Consulting to improve their respective digital auditing solutions through its DX suite of offerings.
    • Signed eighth and ninth Go IPO clients by engaging Libera Gaming Operations and ICheck Co.
    • Acquired a 51% majority stake in Sigmaways Inc., a software engineering service provider delivering IT solutions.
    • Signed sixth and seventh Go IPO consulting service agreement by engaging Genesis Healthcare Co., and kk.BloomZ.
    • Announced that HeartCore’s Content Management System (“CMS”) was introduced by Subaru Group to its centralized management platform for approximately 100 Subaru websites.
    • Partnered with Spirit Advisors, a boutique advisory firm that bridges Japanese companies with U.S. capital markets, to augment HeartCore’s Go IPO Service.
    • Signed fifth Go IPO consulting service agreement by engaging SBC Medical Group.
    • Signed fourth Go IPO consulting service agreement by engaging Metros Development.
    • Entered into a licensing agreement with Transcosmos Digital Technology Inc. to license its advanced process mining tool, Apromore.
    • Hosted HeartCoreDAY2022, a special event focused on solutions that promote digital transformation through two business lines within HeartCore’s CMS product offering, which help businesses create, manage, and modify web content and Digital Transformation.

    Management Commentary
    “This past year was a period of preparation, as we strategically planted the seeds through milestone events that have poised our organization towards a successful trajectory,” said CEO Sumitaka Yamamoto. “In addition to running our core enterprise software business, we launched Go IPO at the start of 2022 and have already garnered nine clients, completed the acquisition of Sigmaways which strengthens our software capabilities and expands our operations into the U.S., and built up a robust pipeline across all segments of our business. With one of our Go IPO clients, SBC Medical Group Holdings, recently being valued at $1.2 billion, we expect to receive warrants with an approximate value of $32.4 million. This case study serves as a prime example of our team reaping the fruits of our labor from the strategic decisions and investments we’ve made; we are hopeful this segment of our business will continue to be a key growth driver.

    “Despite the optically lower financials of our top line, which primarily result from the depreciation of the yen-dollar conversion, I am encouraged by our team’s ability to sustain operations in this pivotal period of strategic investments and preparation. We’ve entered our first full year as a publicly traded company on the Nasdaq on a high note and expect 2023 to be an inflection point for HeartCore.”

    Fourth Quarter 2022 Financial Results
    Revenues were $2.0 million compared to $2.4 million in the same period last year. The decrease in revenues was due to lower sales of on-premise software and the effects of turbulence within the broader Japanese economy.

    Operating expenses increased to $1.9 million from $1.6 million last year. The increase was due to a rise in general and administrative expense, specifically from an increase of hiring for the Go IPO consulting service in addition to advertising.

    Net loss was $1.4 million, or $0.08 per diluted share, compared to net loss of approximately $742,000 or $0.05 per diluted share last year. The increase in net loss was primarily due to an increase in operating expenses and a decrease in revenues.

    Full Year 2022 Financial Results
    Revenues were $8.8 million compared to $10.8 million last year. The decrease in revenues was primarily due to a large, five-year CXM contract being renewed in 2021 and the ongoing depreciation of the Japanese Yen, which were offset by revenues of $1.4 million from the newly established consulting services in 2022.

    Operating expenses increased to $10.0 million from $5.1 million last year. The increase was primarily due to an increase in selling and general & administrative expenses, which stem from the Company’s public offering in February 2022, costs associated with the Go IPO consulting service, in addition to the incremental costs from the acquisition of Sigmaways.

    Net loss was $6.7 million, or $0.37 per diluted share, compared to net loss of approximately $327,000 or $0.02 per diluted share last year. The increase in net loss was primarily due to the increase in operating expenses.

    As of December 31, 2022, the Company had cash and cash equivalents of $7.2 million compared to $3.1 million as of December 31, 2021.

    About HeartCore Enterprises, Inc.
    Headquartered in Tokyo, Japan, HeartCore Enterprises is a leading software development company offering 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. Furthermore, HeartCore offers “Go IPO,” a consulting service where it assists private companies with uplisting onto the Nasdaq Stock Market. Additional information about the Company's products and services is available at www.heartcore.co.jp and https://heartcore-enterprises.com/.

    Forward-Looking Statements
    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 “believe,” “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@gatewayir.com
    (949) 574-3860

    HeartCore Enterprises, Inc.
    Condensed Consolidated Statements of Operations

      For the year ended December 31,  For the year ended December 31,
      2022  2021
          
    Revenues$8,818,312  $10,822,514 
    Cost of revenues 5,467,017   5,634,737 
    Gross profit 3,351,295   5,187,777 
          
    Operating expenses:     
    Selling expenses 2,826,615   296,778 
    General and administrative expenses 6,579,734   4,321,241 
    Research and development expenses 641,025   510,740 
    Total operating expenses 10,047,374   5,128,759 
          
    Income (loss) from operations (6,696,079)  59,018 
          
    Other income (expenses):     
    Interest income 66,963   6,955 
    Interest expense (41,800)  (43,240)
    Other income 57,268   30,614 
    Other expenses (69,736)  (38,446)
    Total other income (expenses) 12,695   (44,117)
          
    Income (loss) before income tax provision (6,683,384)  14,901 
          
    Income tax expense (benefit) (5,918)  341,945 
          
    Net loss (6,677,466)  (327,044)
    Less: net income attributable to non-controlling interest -   11,112 
    Net loss attributable to HeartCore Enterprises, Inc.$(6,677,466) $(338,156)
          
    Other comprehensive income:     
    Foreign currency translation adjustment 380,009   123,529 
          
    Total comprehensive loss (6,297,457)  (203,515)
    Less: comprehensive income attributable to non-controlling interest -   12,923 
    Comprehensive loss attributable to HeartCore Enterprises, Inc.$(6,297,457) $(216,438)
          
    Net loss per common share attributable to HeartCore Enterprises, Inc.     
    Basic$(0.37) $(0.02)
    Diluted$(0.37) $(0.02)
          
    Weighted average common shares outstanding     
    Basic 17,922,585   15,242,454 
    Diluted 17,922,585   15,242,454 
          

    HeartCore Enterprises, Inc.
    Condensed Consolidated Balance Sheets

      December 31,  December 31,
      2022  2021
          
    ASSETS
          
    Current assets:     
    Cash and cash equivalents$7,177,326  $3,136,839 
    Accounts receivable, net 551,064   960,964 
    Prepaid expenses 538,230   444,405 
    Due from related party 48,447   50,559 
    Loan receivable from employee -   8,341 
    Other current assets 220,070   15,654 
    Total current assets 8,535,137   4,616,762 
          
    Non-current assets:     
    Property and equipment, net 203,627   261,414 
    Operating lease right-of-use assets 2,644,957   3,319,749 
    Deferred tax assets 263,339   297,990 
    Security deposits 244,395   278,237 
    Long-term loan receivable from related party 246,472   335,756 
    Loan receivable from employee, non-current -   4,518 
    Other non-current assets 661   8,737 
    Total non-current assets 3,603,451   4,506,401 
          
    Total assets$12,138,588  $9,123,163 
          
    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
          
    Current liabilities:     
    Accounts payable and accrued expenses$497,742  $646,425 
    Accrued payroll and other employee costs 360,222   255,082 
    Due to related party 402   1,110 
    Current portion of long-term debts 697,877   849,995 
    Operating lease liabilities, current 291,863   332,277 
    Finance lease liabilities, current 19,294   37,459 
    Income tax payables 2,747   10,919 
    Deferred revenue 1,724,519   1,690,917 
    Mandatorily redeemable financial interest -   447,986 
    Other current liabilities 53,027   281,673 
    Total current liabilities 3,647,693   4,553,843 
          
    Non-current liabilities:     
    Long-term debts 1,123,735   1,871,580 
    Operating lease liabilities, non-current 2,421,054   3,076,204 
    Finance lease liabilities, non-current 459   23,861 
    Other non-current liabilities 138,018   156,627 
    Total non-current liabilities 3,683,266   5,128,272 
          
    Total liabilities 7,330,959   9,682,115 
          
    Shareholders' equity (deficit):     
    Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021) -   - 
    Common shares ($0.0001 par value, 200,000,000 shares authorized; 17,649,886 and 15,819,943 shares issued; 17,649,886 and 15,546,454 shares outstanding as of December 31, 2022 and 2021, respectively) 1,764   1,554 
    Additional paid-in capital 15,014,607   3,350,779 
    Accumulated deficit (10,573,579)  (3,896,113)
    Accumulated other comprehensive income (loss) 364,837   (15,172)
    Total shareholders' equity (deficit) 4,807,629   (558,952)
    Total liabilities and shareholders' equity (deficit)$12,138,588  $9,123,163 
          

    HeartCore Enterprises, Inc.
    Consolidated Statements of Cash Flows

      For the year ended December 31,  For the year ended December 31,
      2022  2021
          
    Cash flows from operating activities:     
    Net loss$(6,677,466) $(327,044)
    Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
    Depreciation expenses 83,333   105,394 
    Amortization of debt issuance costs 4,546   6,865 
    Non-cash lease expense 273,836   332,207 
    Deferred income taxes (1,610)  329,829 
    Share-based compensation 1,519,743   18,787 
    Gain on shares redemption -   (27)
    Changes in assets and liabilities:     
    Accounts receivable, net 296,835   (341,112)
    Prepaid expenses 62,195   (81,473)
    Other assets (201,226)  52,005 
    Accounts payable and accrued expenses (70,525)  553,009 
    Accrued payroll and other employee costs 149,617   39,241 
    Due to related party (575)  - 
    Operating lease liabilities (283,921)  (346,136)
    Finance lease liabilities (440)  (1,182)
    Income tax payables (6,915)  1,898 
    Deferred revenue 239,129   304,536 
    Other liabilities (195,103)  119,503 
    Net cash flows provided by (used in) operating activities (4,808,547)  766,300 
          
    Cash flows from investing activities:     
    Purchases of property and equipment (57,071)  (36,153)
    Advance and loan provided to related parties -   (142,876)
    Repayment of loan provided to related party 44,871   - 
    Net cash flows used in investing activities (12,200)  (179,029)
          
    Cash flows from financing activities:     
    Proceeds from initial public offering, net of issuance cost 13,602,554   - 
    Proceeds from issuance of common shares prior to initial public offering 220,572   677,945 
    Repurchase of common shares (3,500,000)  - 
    Payments for finance leases (34,465)  (53,640)
    Proceeds from long-term debt 258,087   - 
    Repayment of long-term debts (810,750)  (878,625)
    Repayment of insurance premium financing (388,538)  - 
    Payments for debt issuance costs (1,630)  (3,033)
    Payment for mandatorily redeemable financial interest (430,489)  - 
    Net cash flows provided by (used in) financing activities 8,915,341   (257,353)
          
    Effect of exchange rate changes (54,107)  (251,254)
          
    Net change in cash and cash equivalents 4,040,487   78,664 
          
    Cash and cash equivalents - beginning of the year 3,136,839   3,058,175 
          
    Cash and cash equivalents - end of the year$7,177,326  $3,136,839 
          
    Supplemental cash flow disclosure:     
    Interest paid$41,848  $25,081 
    Income taxes paid$3,013  $9,623 
          
    Non-cash investing and financing transactions     
    Remeasurement of the lease liability and right-of-use asset due to lease modification$-  $225,983 
    Payroll withheld as repayment of loan receivable from employees$12,034  $10,948 
    Expenses paid by related parties on behalf of the Company$-  $125,054 
    Reclassification of non-controlling interest to mandatorily redeemable financial interest$-  $447,986 
    Share repurchase liability settled by issuance of common shares$16  $- 
    Deferred offering costs recognized against the proceeds from the offering$178,847  $- 
    Insurance premium financing$388,538  $- 
    Retirement of treasury shares$3,500,000  $- 
          

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