EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

 

 

HeartCore Reports Second Quarter 2023 Financial Results

 

NEW YORK and TOKYO, August 14, 2023 (GLOBE NEWSWIRE) — HeartCore Enterprises, Inc. (Nasdaq: HTCR) (“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 second quarter ended June 30, 2023.

 

Second Quarter 2023 and Recent Operational Highlights

 

● Partnered with INTRIX, Inc. to license HeartCore’s Content Management System (CMS).
● Executed a deal with Honda Trading Corporation for HeartCore’s task mining software solution, CONTROLIO, a web-based cloud system for employee monitoring and productivity enhancement.
● Presented virtually and held one-on-one meetings at the Sidoti & Co.’s June Virtual Small-Cap Conference.
● Hosted a U.S. Exchange Listing seminar in Tokyo, Japan on June 9, 2023 to a myriad of Japanese companies on the realities of going public on U.S. Exchanges in addition to an overview of its very successful Go IPO consulting service.
● Partnered with Toppan Inc. to strengthen and expand Toppan’s digital marketing business utilizing HeartCore’s Contents Management System, in addition to both companies collaborating on joint business ventures.
● Signed tenth Go IPO consulting service agreement with rYojbaba Inc.
● Second quarter revenue grew 91% compared to same period 2022.
● Year-to-Date revenue grew 180% compared to same period 2022.
● Q2 2023 EPS loss of $0.04 was primarily due to lower consulting services revenue as none of HeartCore’s clients’ pending IPOs were completed in the second quarter.
● YTD 2023 Company remained profitable and expects significant growth in second half 2022.

 

Management Commentary

 

“This past quarter reflected a period of growth from our enterprise software division, in addition to a time of important back-end movement within our Go IPO segment as our two-pronged growth strategy continues to manifest into full effect,” said CEO Sumitaka Yamamoto. “As evidenced by growth of 102% and successfully hitting profitability within our enterprise software vertical, we continue to garner new customers and capitalize on synergistic opportunities with Sigmaways. Though we didn’t have any Go IPO clients go public in Q2, we have a significant amount of progress being made behind the scenes and expect to see a robust second half of the year and beyond. I am very encouraged by the results we’ve generated year to date and expect an even stronger end to the calendar year.”

 

Second Quarter 2023 Financial Results

 

Revenues increased 91% to $5.1 million compared to $2.7 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaway and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023.

 

Gross profit increased 13% to $1.5 million (gross margin of 30%) from $1.3 million (gross margin of 50%) in the same period last year. The increase was primarily from increased maintenance and support services and customized software development and services, offset by decrease in sales of on-premise software.

 

   

 

 

 

Operating expenses remained consistent at $3.0 million from the same period last year. The increase in general and administrative expenses was offset by decreases in selling and research and development expenses. 

Net loss was $1.0 million or $(0.04) per diluted share, compared to a net loss of $1.7 million or $(0.09) per diluted share, in the same period last year.

 

As of June 30, 2023, the Company had cash and cash equivalents of $4.2 million compared to $7.2 million in December 31, 2022.

 

Six Months 2023 Financial Results

 

Revenues increased 180% to $13.8 million compared to $4.9 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaways and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023 and received warrants from its customers.

 

Gross profit increased 180% to $7.1 million (gross margin of 52%) from $2.6 million (gross margin of 52%) in the same period last year. The increase was primarily due to an increase from GO IPO consulting services and customized software development and services.

 

Operating expenses increased to $6.3 million from $5.8 million in the same period last year. The increase was primarily due to increases in selling and general and administrative expenses, offset by a decrease in research and development expenses.

 

Net income was about $785,000 or $0.05 per diluted share compared to a net loss of $3.3 million or $(0.18) per diluted share, 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. 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 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@gateway-grp.com

(949) 574-3860

 

   

 

 

 

 

HEARTCORE ENTERPRISES, INC.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 

 

   For the six months ended June 30, 
   2023   2022 
         
Revenues  $13,829,523   $4,946,298 
Cost of revenues   6,688,004    2,392,652 
Gross profit   7,141,519    2,553,646 
           
Operating expenses:          
Selling expenses   1,056,704    934,754 
General and administrative expenses   5,133,094    4,319,248 
Research and development expenses   119,232    525,487 
Total operating expenses   6,309,030    5,779,489 
           
Income (loss) from operations   832,489    (3,225,843)
           
Other income (expenses):          
Changes in fair value of investments in marketable securities   (229,022)   - 
Changes in fair value of investments in warrants   166,107    - 
Interest income   50,270    10,549 
Interest expenses   (82,454)   (28,861)
Other income   124,001    25,450 
Other expenses   (36,754)   (55,224)
Total other expenses   (7,852)   (48,086)
           
Income (loss) before income tax provision   824,637    (3,273,929)
           
Income tax expense (benefit)   39,446    8,163 
           
Net income (loss)   785,191    (3,282,092)
Less: net loss attributable to non-controlling interest   (185,298)   - 
Net income (loss) attributable to HeartCore Enterprises, Inc.  $970,489   $(3,282,092)
           
Other comprehensive income:          
Foreign currency translation adjustment   5,499    299,413 
           
Total comprehensive income (loss)   790,690    (2,982,679)
Less: comprehensive loss attributable to non-controlling interest   (187,258)   - 
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.  $977,948   $(2,982,679)
           
Net income (loss) per common share attributable to HeartCore Enterprises, Inc.          
    Basic  $0.05   $(0.18)
    Diluted  $0.05   $(0.18)
           
Weighted average common shares outstanding          
    Basic   19,959,333    18,105,698 
    Diluted   19,959,333    18,105,698 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

   

 

 

 

 

HEARTCORE ENTERPRISES, INC.

Condenssed Consolidated Balance Sheets

 

   June 30,   December 31, 
   2023   2022 
    (Unaudited)      
ASSETS          
           
Current assets:          
Cash and cash equivalents  $4,238,741   $7,177,326 
Accounts receivable   2,812,337    551,064 
Investments in marketable securities   1,028,846    — 
Prepaid expenses   878,539    538,230 
Note receivable   300,000    — 
Due from related party   43,782    48,447 
Other current assets   79,339    220,070 
Total current assets   9,381,584    8,535,137 
           
Non-current assets:          
Property and equipment, net   331,389    203,627 
Operating lease right-of-use assets   2,275,506    2,644,957 
Intangible asset, net   4,834,375    — 
Goodwill   3,276,441    — 
Long-term investment in warrants   2,917,574    — 
Deferred tax assets   238,783    263,339 
Security deposits   339,052    244,395 
Long-term loan receivable from related party   200,849    246,472 
Other non-current assets   69    661 
Total non-current assets   14,414,038    3,603,451 
           
Total assets  $23,795,622   $12,138,588 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
Current liabilities:          
Accounts payable and accrued expenses  $1,194,222   $497,742 
Accrued payroll and other employee costs   561,698    360,222 
Due to related party   4,250    402 
Current portion of long-term debts   548,297    697,877 
Insurance premium financing   239,785    — 
Factoring liability   328,967    — 
Operating lease liabilities, current   262,063    291,863 
Finance lease liabilities, current   7,386    19,294 
Income tax payables   109,625    2,747 
Deferred revenue   2,375,063    1,724,519 
Other current liabilities   262,267    53,027 
Total current liabilities   5,893,623    3,647,693 
           
Non-current liabilities:          
Long term debts   1,324,383    1,123,735 
Operating lease liabilities, non-current   2,066,343    2,421,054 
Finance lease liabilities, non-current   —    459 
Deferred tax liabilities   1,353,625    — 
Other non-current liabilities   124,936    138,018 
Total non-current liabilities   4,869,287    3,683,266 
           
Total liabilities   10,762,910    7,330,959 
           
Shareholders' equity:          
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)   —    — 
Common shares ($0.0001 par value, 200,000,000 shares authorized; 20,842,690 and 17,649,886 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)   2,083    1,764 
Additional paid-in capital   19,258,681    15,014,607 
Accumulated deficit   (9,603,090)   (10,573,579)
Accumulated other comprehensive income   372,296    364,837 
Total HeartCore Enterprises, Inc. shareholders' equity   10,029,970    4,807,629 
Non-controlling interest   3,002,742    — 
Total shareholders' equity   13,032,712    4,807,629 
           
Total liabilities and shareholders' equity  $23,795,622   $12,138,588 

 

   

 

 

 

 

HEARTCORE ENTERPRISES, INC.

Unaudited Condensed Consolidated Statements of Cash Flows 

 

   For the six months ended June 30, 
   2023   2022 
         
Cash flows from operating activities          
Net income (loss)  $785,191   $(3,282,092)
Adjustments to reconcile net income (loss) to net cash          
used in operating activities:          
Depreciation and amortization expenses   306,097    46,688 
Amortization of debt issuance costs   1,316    2,768 
Non-cash lease expense   155,301    143,845 
Deferred income taxes   (75,240)   14,167 
Stock-based compensation   1,094,393    888,826 
Warrants received as noncash consideration   (4,009,335)   - 
Changes in fair value of investments in marketable securities   229,022    - 
Changes in fair value of investments in warrants   (166,107)   - 
Changes in assets and liabilities:          
Accounts receivable   (596,312)   (344,779)
Prepaid expenses   1,245    (266,030)
Other assets   23,277    (5,516)
Accounts payable and accrued expenses   (8,359)   281,567 
Accrued payroll and other employee costs   124    175,246 
Due to related party   4,214    5,448 
Operating lease liabilities   (147,035)   (148,125)
Finance lease liabilities   -    (288)
Income tax payables   106,625    (8,756)
Deferred revenue   810,639    596,762 
Other liabilities   116,382    (193,598)
Net cash flows used in operating activities   (1,368,562)   (2,093,867)
           
Cash flows from investing activities          
Purchases of property and equipment   (180,451)   (30,963)
Advance on note receivable   (300,000)   - 
Repayment of loan provided to related party   23,715    21,508 
Payment for acquisition of subsidiary, net of cash acquired   (724,910)   - 
Net cash flows used in investing activities   (1,181,646)   (9,455)
           
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   (11,243)   (24,189)
Proceeds from long-term debt   -    258,087 
Repayment of long-term debts   (411,923)   (469,166)
Repayment of insurance premium financing   (149,250)   (167,955)
Net proceeds from factoring arrangement   328,967    - 
Payments for debt issuance costs   (448)   (1,030)
Payment for mandatorily redeemable financial interest   -    (430,489)
Net cash flows provided by (used in) financing activities   (243,897)   11,651,622 
           
Effect of exchange rate changes   (144,480)   (221,960)
           
Net change in cash and cash equivalents   (2,938,585)   9,326,340 
           
Cash and cash equivalents - beginning of the period   7,177,326    3,136,839 
           
Cash and cash equivalents - end of the period  $4,238,741   $12,463,179 
           
Supplemental cash flow disclosures:          
Interest paid  $40,083   $28,025 
Income taxes paid  $-   $3,013 
           
Non-cash investing and financing transactions          
Payroll withheld as repayment of loan receivable from employees  $-   $12,034 
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  $389,035   $388,538 
Liabilities assumed in connection with purchase of property and equipment  $2,199   $9,676 
Common shares issued for acquisition of subsidiary  $3,150,000   $- 
Investments in warrants converted to marketable securities  $1,257,868   $-