• HeartCore Reports Second Quarter 2022 Financial Results

    Source: Nasdaq GlobeNewswire / 15 Aug 2022 07:30:01   America/Chicago

    NEW YORK and TOKYO, Aug. 15, 2022 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc. (“HeartCore” or “the Company”), a leading software development company, today reported financial results for the second quarter ended June 30, 2022.

    Second Quarter 2022 and Recent Operational Highlights

    • Grew total number of global enterprise customers to 877 as of June 30, 2022.
    • LaunchedtruRes-12K”, the world’s first 12k-compatible real-time 360° virtual reality camera.
    • Released Robot Store, an e-commerce website that provides Robotic Automation Process (“RPA”) services to its Japanese enterprise-level customers.
    • Launched the Human Resources Digital Transformation Development Service, to help implement and advance HR related digital transformation initiatives for its enterprise-level customers.
    • Authorized a $3.5 million share repurchase program.
    • Signed Go IPO consulting agreement with SYLA, marking the Company’s third Go IPO client.
    • Selected by BestStartup.Asia as one of the 101 top Tokyo software companies and startups.

    Management Commentary
    “We’ve begun generating momentum across all fronts of new and existing lines of business, as we look to expand through organic and inorganic methods,” said CEO Sumitaka Yamamoto. “Although the depreciation of the Yen against the U.S. dollar has been stark, I am encouraged by the 6% increase on Yen-based sales as we’re starting to recognize revenues from Go IPO and continuing to grow our core enterprise software business. The continued inbound interest we’ve received for Go IPO is promising and we expect to capitalize on that growing demand as the only company in Japan to provide this type of service. Additionally, we remain laser focused on looking to expand through M&A and are keen on finding the right company to help augment our growth efforts. I am truly encouraged by all the progress that is being made and look forward to finishing off what we expect will be a strong calendar year for HeartCore.”

    Second Quarter 2022 Financial Results
    Revenues were $2.7 million compared to $2.9 million in the same period last year. The decrease in revenues was primarily due to a 14% depreciation of the Yen against the U.S. dollar, which was offset by revenue from the Company’s recently launched Go IPO program. On Yen-based sales, revenues increased by 6% year-over-year.  

    Gross profit decreased to $1.3 million (gross margin of 50%) from $1.7 million (gross margin of 59%) in the same period last year.

    Operating expenses increased to $3.0 million from $1.2 million in the same period last year. The increase was due to an increase in selling, general and administrative, and research and development expenses. In particular, the Company experienced a one-time expense in developing the truRes-12K camera, in addition to an increase in employee salary expenses as it ramped up hiring efforts.

    Net loss attributable to HeartCore Enterprises, Inc. was $1.7 million, or $(0.09) per share, compared to a net income attributable to HeartCore Enterprises, Inc. of approximately $401,000, or $0.03 per share, in the same period last year. The net loss was primarily due to an increase in operating expenses.

    As of June 30, 2022, the Company had a cash balance of $12.5 million compared to $2.6 million in the same period last year.

    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. 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, 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 three months ended June 30,
      2022  2021
      (Unaudited)  (Unaudited)
          
    Revenues$2,670,297  $2,865,192 
    Cost of revenues 1,337,296   1,175,387 
    Gross profit 1,333,001   1,689,805 
          
    Operating expenses:     
    Selling expenses 728,836   101,124 
    General and administrative expenses 1,850,315   1,020,842 
    Research and development expenses 417,228   80,025 
    Total operating expenses 2,996,379   1,201,991 
          
    Income (loss) from operations (1,663,378)  487,814 
          
    Other income (expenses):     
    Interest income 9,091   3,726 
    Interest expenses (17,590)  (12,404)
    Other income 8,777   14,207 
    Other expenses (31,562)  (5,403)
    Total other income (expenses) (31,284)  126 
          
    Income (loss) before income tax provision (1,694,662)  487,940 
          
    Income tax expense 8,979   76,226 
          
    Net income (loss) (1,703,641)  411,714 
    Less: net income attributable to non-controlling interest -   10,924 
    Net income (loss) attributable to HeartCore Enterprises, Inc.$(1,703,641) $400,790 
          
    Other comprehensive income (loss):     
    Foreign currency translation adjustment 219,360   (13,848)
          
    Total comprehensive income (loss) (1,484,281)  397,866 
    Less: comprehensive income attributable to non-controlling interest -   10,557 
    Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.$(1,484,281) $387,309 
          
    Net earnings (loss) per common share attributable to HeartCore Enterprises, Inc.*   
        Basic$(0.09) $0.03 
        Diluted$(0.09) $0.03 
          
    Weighted average common shares outstanding*     
        Basic 18,936,829   15,242,454 
        Diluted 18,936,829   15,515,943 
          
    *Retrospectively restated for effect of share issuances on July 16, 2021     


    HeartCore Enterprises, Inc.
    Condensed Consolidated Balance Sheets

      June 30, December 31,
      2022 2021
      (Unaudited)  
    ASSETS
         
    Current assets:    
    Cash and cash equivalents$12,463,179 $3,136,839 
    Accounts receivable, net 1,119,990  960,964 
    Prepaid expenses 852,270  444,405 
    Due from related party 46,639  50,559 
    Loan receivable from employee -  8,341 
    Other current assets 23,304  15,654 
    Total current assets 14,505,382  4,616,762 
         
    Non-current assets:    
    Property and equipment, net 211,180  261,414 
    Operating lease right-of-use assets 2,677,171  3,319,749 
    Deferred tax assets 239,176  297,990 
    Security deposits 235,274  278,237 
    Long-term loan receivable from related party 260,592  335,756 
    Loan receivable from employee, non-current -  4,518 
    Other non-current assets 4,012  8,737 
    Total non-current assets 3,627,405  4,506,401 
         
    Total assets$18,132,787 $9,123,163 
         
    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
         
    Current liabilities:    
    Accounts payable and accrued expenses$818,222 $646,425 
    Accrued payroll and other exmployee costs 364,123  255,082 
    Due to related party 5,857  1,110 
    Current portion of long-term debts 733,235  849,995 
    Insurance premium financing 220,583  - 
    Operating lease liabilities, current 280,789  332,277 
    Finance lease liabilities, current 20,717  37,459 
    Income tax payables 1,322  10,919 
    Deferred revenue 1,991,090  1,690,917 
    Mandatorily redeemable financial interest -  447,986 
    Other current liabilities 65,547  281,673 
    Total current liabilities 4,501,485  4,553,843 
         
    Non-current liabilities:    
    Long term debts 1,367,101  1,871,580 
    Operating lease liabilities, non-current 2,467,546  3,076,204 
    Finance lease liabilities, non-current 9,279  23,861 
    Other non-current liabilities 132,648  156,627 
    Total non-current liabilities 3,976,574  5,128,272 
         
    Total liabilities 8,478,059  9,682,115 
         
    Shareholders' equity (deficit):    
    Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021) -  - 
    Common shares ($0.0001 par value, 200,000,000 shares authorized; 18,999,276 and 15,819,943 shares issued; 18,440,467 and 15,546,454 shares outstanding as of June 30, 2022 and December 31, 2021, respectively) 1,899  1,554 
    Additional paid-in capital 17,883,555  3,350,779 
    Treasury shares, at cost (1,336,762) - 
    Accumulated deficit (7,178,205) (3,896,113)
    Accumulated other comprehensive income (loss) 284,241  (15,172)
    Total shareholders' equity (deficit) 9,654,728  (558,952)
    Total liabilities and shareholders' equity (deficit)$18,132,787 $9,123,163 


    HeartCore Enterprises, Inc.
    Consolidated Statements of Cash Flows

      For the six months ended June 30, For the six months ended June 30,
      2022 2021
      (Unaudited) (Unaudited)
         
    Cash flows from operating activities:    
    Net income (loss)$(3,282,092)$223,477 
    Adjustments to reconcile net income (loss) to net cash     
    provided by (used in) operating activities:    
    Depreciation expenses 46,688  55,458 
    Amortization of debt issuance costs 2,768  3,923 
    Non-cash lease expense 143,845  171,935 
    Deferred income taxes 14,167  96,517 
    Share-based compensation 888,826  - 
    Changes in assets and liabilities:    
    Accounts receivable, net (344,779) (570,886)
    Prepaid expenses (266,030) (282,508)
    Other assets (5,516) (46,074)
    Accounts payable and accrued expenses 281,567  128,308 
    Accrued payroll and other exmployee costs 175,246  105,120 
    Due to related party 5,448  - 
    Operating lease liabilities (148,125) (176,913)
    Finance lease liabilities (288) (689)
    Income tax payables (8,756) 5,487 
    Deferred revenue 596,762  621,707 
    Other liabilities (193,598) 13,049 
    Net cash flows provided by (used in) operating activities (2,093,867) 347,911 
         
    Cash flows from investing activities:    
    Purchases of property and equipment (30,963) (19,894)
    Advance and loan provided to related parties -  (83,798)
    Repayment of loan provided to related party 21,508  - 
    Net cash flows used in investing activities (9,455) (103,692)
         
    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  - 
    Repurchase of common shares (1,336,762) - 
    Payments for finance leases (24,189) (29,561)
    Proceeds from long-term debt 258,087  - 
    Repayment of long-term debts (469,166) (503,230)
    Repayment of insurance premium financing (167,955) - 
    Payments for debt issuance costs (1,030) (1,420)
    Payment for mandatorily redeemable financial interest (430,489) - 
    Net cash flows provided by (used in) financing activities 11,651,622  (534,211)
         
    Effects of exchange rate changes (221,960) (149,784)
         
    Net change in cash and cash equivalents 9,326,340  (439,776)
         
    Cash and cash equivalents - beginning of the period 3,136,839  3,058,175 
         
    Cash and cash equivalents - end of the period$12,463,179 $2,618,399 
      -  - 
    Supplemental cash flow disclosures:    
    Interest paid$28,025 $20,635 
    Income taxes paid$3,013 $9,047 
         
    Non-cash investing and financing transactions    
    Payroll withheld as repayment of loan receivable from employees$12,034 $7,240 
    Expense paid by related parties on behalf of the Company$- $39,679 
    Liabilities assumed in connection with purchase of property and equipment$9,676 $- 
    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 $- 
         

     


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