HeartCore Reports Second Quarter 2024 Financial Results

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
[email protected]
(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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