• HeartCore Reports Second Quarter 2024 Financial Results

    Source: Nasdaq GlobeNewswire / 14 Aug 2024 07:30:00   America/Chicago

    NEW YORK and TOKYO, Aug. 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 second quarter ended June 30, 2024.

    Second Quarter 2024 and Recent Operational Highlights

    • Partnered with INCUDATA Corp. to enhance corporate digital marketing strategies
    • Announced Go IPO Client, BloomZ, began trading on the Nasdaq Stock Exchange
    • Authorized second dividend payment of $0.02 per share
    • Partnered with Hitachi Systems, Ltd. to offer combined package of HeartCore CMS and GRED Web Security Assessment Cloud
    • Announced and hosted seminar on U.S. exchange listing strategies for Japanese companies with Akerman LLP and Gateway Group
    • Sold a Go IPO Client Warrant for $9 million that will be recognized as revenue when 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
    • Signed 14th Go IPO Client
    • Formed an Artificial Intelligence Software Development Division

    Management Commentary
    “We achieved significant strides in our Go IPO business, highlighted by the successful listing of one of our clients on the Nasdaq, which is the first Japanese IPO since September 2023 and the third IPO since the inception of this business,” said HeartCore CEO Sumitaka Kanno Yamamoto. “We are hopeful that this milestone marks the genesis of a second wave of Japanese IPOs, as the Go IPO pipeline continues to show promising developments. Currently, we have three to four clients scheduled to go public by the end of the year. These Go IPO deals are expected to be instrumental in our second-half performance, and with an optimistic outlook on the resurgence of Japanese IPOs, we anticipate that our Go IPO business will play a key role in driving profitable returns in the upcoming quarter.”

    “With 20% organic growth this quarter, and 30% organic growth expected for 2024, our software division continues to remain a stable growth engine and reliable source of cash flow, serving as the lifeblood of HeartCore’s business operations. In addition, our strategic partnerships with Hitachi Systems and INCUDATA Corp., two prominent Japanese IT companies, will further enhance and innovate our software offerings, which will play a vital role in maintaining our 90% plus customer retention rate and separating ourselves from competitors. I am very encouraged by every arm within our software umbrella, as each one is projected to be profitable and has proven to deliver immense value to clients. The next few quarters look extremely bright for HeartCore; we look forward to sharing additional positive news around our Go IPO initiatives and other general operational updates.”

    Second Quarter 2024 Financial Results
    Revenues were $4.1 million compared to $5.1 million in the same period last year. The decrease was primarily due to an approximate 10% depreciation on the Japanese yen and a decrease in maintenance and supporting services, as the Company entered into a significant maintenance service contract with an important customer in 2023. Additionally, although the organic software business has grown by more than 20%, the Company's subsidiary, Sigmaways recognized losses within its business, and one of the Company’s GO IPO clients has returned its fees after discovering that it could not go public.

    Gross profit decreased to $0.8 million compared to $1.5 million in the same period last year. The decrease was primarily due to the aforementioned reasons above.

    Operating expenses decreased to $2.3 million compared to $3.0 million in the same period last year. The improvement was primarily due to lower selling and general and administrative expenses.

    Net loss was about $2.2 million or $(0.09) per diluted share compared to a net loss of $1.0 million or $(0.04) per diluted share, in the same period last year.

    As of June 30, 2024, the Company had cash and cash equivalents of $3.8 million compared to $1.0 million on December 31, 2023.

    Six-Months 2024 Financial Results
    Revenues were $9.1 million compared to $13.8 million in the same period last year. The decrease was primarily due to decreased revenues from Go IPO consulting services, as the Company received warrants from two IPO consulting customers who successfully listed on the Nasdaq in the same period last year, and a decrease in maintenance and supporting services, as the Company entered into a significant maintenance service contract with an important customer in 2023. Additionally, although the organic software business has grown by more than 20%, the Company's subsidiary, Sigmaways recognized losses within its business, and one of the Company’s GO IPO clients has returned its fees after discovering that it could not go public.

    Gross profit was $2.8 million compared to $7.1 million in the same period last year. The decrease was primarily due to the aforementioned reasons above.

    Operating expenses decreased to $5.0 million compared to $6.3 million in the same period last year. The decrease was primarily due to lower selling and general and administrative expenses.

    Net loss was about $3.7 million or $(0.16) per diluted share compared to a net income of $0.8 million or $0.05 per diluted share, in the same period last year.

    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
      
          
       June 30, December 31,
       2024 2023
       (Unaudited)  
     ASSETS
          
     Current assets:    
     Cash and cash equivalents$3,806,349 $1,012,479 
     Accounts receivable 2,440,872  2,623,682 
     Investments in marketable securities 435,498  642,348 
     Investment in equity securities -  300,000 
     Prepaid expenses 3,877,454  536,865 
     Current portion of long-term note receivable 100,000  100,000 
     Due from related party 40,495  44,758 
     Other current assets 199,221  234,761 
     Total current assets 10,899,889  5,494,893 
          
     Non-current assets:    
     Accounts receivable, non-current 640,197  - 
     Property and equipment, net 640,787  763,730 
     Operating lease right-of-use assets 2,106,466  2,467,889 
     Intangible asset, net 4,196,875  4,515,625 
     Goodwill 3,276,441  3,276,441 
     Long-term investment in SAFE 350,000  - 
     Long-term investment in equity securities 300,000  - 
     Long-term investment in warrants 543,120  2,004,308 
     Long-term note receivable 200,000  200,000 
     Deferred tax assets 395,743  369,436 
     Security deposits 310,833  348,428 
     Long-term loan receivable from related party 145,274  182,946 
     Other non-current assets 70,309  71 
     Total non-current assets 13,176,045  14,128,874 
       -   
     Total assets$24,075,934 $19,623,767 
          
     LIABILITIES AND SHAREHOLDERS' EQUITY
          
     Current liabilities:    
     Accounts payable and accrued expenses$1,757,545 $1,757,038 
     Accounts payable and accrued expenses - related party 21,579  - 
     Accrued payroll and other employee costs 628,136  723,305 
     Due to related party 140  1,476 
     Short-term debt -  135,937 
     Current portion of long-term debts 508,729  371,783 
     Insurance premium financing 112,488  - 
     Factoring liability 320,759  562,767 
     Operating lease liabilities, current 358,377  396,535 
     Finance lease liabilities, current 15,992  17,445 
     Income tax payables 1,142  162,689 
     Deferred revenue 2,207,420  2,166,175 
     Other current liabilities 9,261,012  216,405 
     Total current liabilities 15,193,319  6,511,555 
          
     Non-current liabilities:    
     Long-term debts 1,403,569  1,770,352 
     Operating lease liabilities, non-current 1,804,967  2,135,160 
     Finance lease liabilities, non-current 52,055  66,779 
     Deferred tax liabilities 1,175,125  1,264,375 
     Other non-current liabilities 685,364  208,732 
     Total non-current liabilities 5,121,080  5,445,398 
          
     Total liabilities 20,314,399  11,956,953 
          
     Shareholders' equity:    
     Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 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 June 30, 2024 and December 31, 2023, respectively) 2,085  2,083 
     Additional paid-in capital 19,325,270  19,594,801 
     Accumulated deficit (18,047,919) (14,763,469)
     Accumulated other comprehensive income 325,857  331,881 
     Total HeartCore Enterprises, Inc. shareholders' equity 1,605,293  5,165,296 
     Non-controlling interests 2,156,242  2,501,518 
     Total shareholders' equity 3,761,535  7,666,814 
          
     Total liabilities and shareholders' equity$24,075,934 $19,623,767 
          
          



     
     HeartCore Enterprises, Inc.
    Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
      
          
          
       For the six months ended June 30,
       2024 2023
          
     Revenues$9,113,120 $13,829,523 
     Cost of revenues 6,275,050  6,688,004 
     Gross profit 2,838,070  7,141,519 
          
     Operating expenses:    
     Selling expenses 399,115  1,056,704 
     General and administrative expenses 4,428,712  5,133,094 
     Research and development expenses 200,402  119,232 
     Total operating expenses 5,028,229  6,309,030 
          
     Income (loss) from operations (2,190,159) 832,489 
          
     Other income (expenses):    
     Changes in fair value of investments in marketable securities (430,331) (229,022)
     Changes in fair value of investments in warrants (1,237,707) 166,107 
     Interest income 4,624  50,270 
     Interest expenses (73,701) (82,454)
     Other income 134,874  124,001 
     Other expenses (49,050) (36,754)
     Total other expenses (1,651,291) (7,852)
          
     Income (loss) before income tax provision (3,841,450) 824,637 
          
     Income tax expense (benefit) (152,330) 39,446 
          
     Net income (loss) (3,689,120) 785,191 
     Less: net loss attributable to non-controlling interests (404,670) (185,298)
     Net income (loss) attributable to HeartCore Enterprises, Inc.$(3,284,450)$970,489 
          
     Other comprehensive income (loss):    
     Foreign currency translation adjustment (13,825) 5,499 
          
     Total comprehensive income (loss) (3,702,945) 790,690 
     Less: comprehensive loss attributable to non-controlling interests (412,471) (187,258)
     Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.$(3,290,474)$977,948 
          
     Net income (loss) per common share attributable to HeartCore Enterprises, Inc.  
     Basic$(0.16)$0.05 
     Diluted$(0.16)$0.05 
          
     Weighted average common shares outstanding    
     Basic 20,859,429  19,959,333 
     Diluted 20,859,429  19,959,333 
          


     HeartCore Enterprises, Inc.
     Unaudited Consolidated Statements of Cash Flows
          
       For the six months ended June 30,
       2024 2023
          
     Cash flows from operating activities    
     Net income (loss)$(3,689,120)$785,191 
     Adjustments to reconcile net income (loss) to net cash flows    
     used in operating activities:    
     Depreciation and amortization expenses 374,946  306,097 
     Amortization of debt issuance costs 2,296  1,316 
     Non-cash lease expense 182,546  155,301 
     Gain on termination of lease (469) - 
     Deferred income taxes (153,531) (75,240)
     Stock-based compensation 147,754  1,094,393 
     Warrants received as noncash consideration -  (4,009,335)
     Changes in fair value of investments in marketable securities 430,331  229,022 
     Changes in fair value of investment in warrants 1,237,707  (166,107)
     Loss on disposal of property and equipment 1,894  - 
     Changes in assets and liabilities:    
     Accounts receivable (548,402) (596,312)
     Prepaid expenses 158,110  1,245 
     Other assets (7,526) 23,277 
     Accounts payable and accrued expenses 272,375  (8,359)
     Accounts payable and accrued expenses - related party 21,956  - 
     Accrued payroll and other employee costs (278,361) 124 
     Due to related party (1,246) 4,214 
     Operating lease liabilities (183,047) (147,035)
     Income tax payables (152,697) 106,625 
     Deferred revenue 165,073  810,639 
     Other liabilities 558,667  116,382 
     Net cash flows used in operating activities (1,460,744) (1,368,562)
          
     Cash flows from investing activities    
     Purchases of property and equipment (4,134) (180,451)
     Prepayment for property and equipment (35,209) - 
     Advance on note receivable -  (300,000)
     Purchase of long-term investment in SAFE (350,000) - 
     Net proceeds from sale of warrants 5,640,000   
     Repayment of loan provided to related party 21,166  23,715 
     Payment for acquisition of subsidiary, net of cash acquired -  (724,910)
     Net cash flows provided by (used in) investing activities 5,271,823  (1,181,646)
          
     Cash flows from financing activities    
     Payments for finance leases (8,526) (11,243)
     Proceeds from short-term debt 68,138  - 
     Repayment of short-term and long-term debts (281,451) (411,923)
     Repayment of insurance premium financing (60,201) (149,250)
     Net proceeds from factoring arrangement -  328,967 
     Net repayment of factoring arrangement (242,008) - 
     Payments for debt issuance costs -  (448)
     Distribution of dividends (417,283)  
     Capital contribution from non-controlling shareholder 67,195  - 
     Net cash flows used in financing activities (874,136) (243,897)
          
     Effect of exchange rate changes (143,073) (144,480)
          
     Net change in cash and cash equivalents 2,793,870  (2,938,585)
          
     Cash and cash equivalents - beginning of the period 1,012,479  7,177,326 
          
     Cash and cash equivalents - end of the period$3,806,349 $4,238,741 
          
     Supplemental cash flow disclosures:    
     Interest paid$74,063 $40,083 
     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 $389,035 
     Liabilities assumed in connection with purchase of property and equipment$- $2,199 
     Common shares issued for acquisition of subsidiary$- $3,150,000 
     Warrants converted to marketable securities$223,481 $1,257,868 
          

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