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HeartCore Reports First Quarter 2024 Financial Results

Bay Street

NEW YORK and TOKYO, May 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 first quarter ended March 31, 2024.

First Quarter 2024 and Recent Operational Highlights

Management Commentary
“The first quarter brought promising developments for our software business, marking a pivotal shift as this division turned profitable for the quarter,” said HeartCore CEO Sumitaka Kanno Yamamoto. “This success stems from our proactive cost reduction initiatives without having taken our foot off the gas pedal from a sales & marketing standpoint, which have significantly improved our margins in this division. Moreover, the establishment of two new divisions within HeartCore has bolstered this momentum, demonstrating encouraging traction since its inception and contributing to the profitability of our software arm. We believe that our strategic joint venture and partnership with Luvina Software Joint Stock Company offers a dependable and cost-effective IT outsourcing and software development partner, with forecasts projecting roughly $1 million in sales within its first year, which is all attributable to HeartCore’s P&L. Additionally, our recently formed AI software development division has already secured two deals within its first month, signaling promising opportunities for further expansion of our enterprise software capabilities and customer portfolio.”

“Additionally, though the optics of our quarterly results reflect a decline, it’s crucial to note that these figures do not encompass the significant sale of a Go IPO client warrant in March that totaled $9 million. As we explained in a previous press release yesterday, a total of $9 million was received by our team following the sale of a Go IPO’s client’s warrants in Q1 2024, but due to specific accounting treatments and stipulations, we cannot record this amount as revenue unless and until the client goes public. Despite this accounting nuance, we’ve already put the capital to work by allocating it to various strategic initiatives, including our dividend payment which was disbursed on May 3rd.”

First Quarter 2024 Financial Results
Revenues were $5.0 million compared to $8.7 million in the same period last year. The decrease was primarily due to lower revenues from GO IPO consulting services as the Company’s two IPO consulting customers successfully listed on the Nasdaq in the same quarter last year, offset by increases in revenue from the sale of on-premises software, and customized software development and services.

Gross profit decreased to $2.0 million compared to $5.6 million in the same period last year. The decrease was primarily due to the aforementioned reason above.

Operating expenses decreased to $2.7 million compared to $3.3 million in the same period last year. The decrease was primarily due to lower selling expenses and general and administrative expenses.

Net loss was about $1.5 million or $(0.06) per diluted share compared to a net income of $1.8 million or $0.10 per diluted share, in the same period last year.

As of March 31, 2024, the Company had cash and cash equivalents of $1.2 million compared to $1.0 million on December 31, 2023.

2024 Strategic Outlook
HeartCore CEO Sumitaka Kanno Yamamoto added: “Looking forward to the remainder of the year, our focus remains on expanding our enterprise software business through ongoing cost reduction strategies and identifying synergistic opportunities with our subsidiaries and divisions to optimize operational efficiencies and capabilities. Building on the momentum of a profitable quarter within this arm, we remain committed to sustaining this trajectory throughout 2024 as we strive towards overall profitability. Additionally, our dedicated Go IPO team continues to uphold its white-glove approach, guiding our expanding pipeline of clients through the comprehensive IPO process. With an optimistic outlook on the IPO market, we anticipate announcing the completion of several IPOs this year and reaping the benefits of additional Go IPO warrants.”

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

    March 31,     December 31,
    2024     2023
    (Unaudited)      
ASSETS
           
Current assets:          
Cash and cash equivalents $ 1,219,251     $ 1,012,479  
Accounts receivable   3,086,203       2,623,682  
Investments in marketable securities   408,266       642,348  
Investment in equity securities   –       300,000  
Prepaid expenses   3,942,371       536,865  
Current portion of long-term note receivable   100,000       100,000  
Due from related party   41,948       44,758  
Other current assets   223,222       234,761  
Total current assets   9,021,261       5,494,893  
           
Non-current assets:          
Property and equipment, net   688,826       763,730  
Operating lease right-of-use assets   2,271,955       2,467,889  
Intangible asset, net   4,356,250       4,515,625  
Goodwill   3,276,441       3,276,441  
Long-term investment in equity securities   300,000       –  
Long-term investment in warrants   1,325,421       2,004,308  
Long-term note receivable   200,000       200,000  
Deferred tax assets   381,307       369,436  
Security deposits   325,267       348,428  
Long-term loan receivable from related party   160,974       182,946  
Other non-current assets   22,566       71  
Total non-current assets   13,309,007       14,128,874  
           
Total assets $ 22,330,268     $ 19,623,767  
           
LIABILITIES AND SHAREHOLDERS’ EQUITY
           
Current liabilities:          
Accounts payable and accrued expenses $ 2,015,959     $ 1,757,038  
Accrued payroll and other employee costs   550,916       723,305  
Due to related party   256       1,476  
Short-term debt   66,081       135,937  
Current portion of long-term debts   446,601       371,783  
Insurance premium financing   157,917       –  
Factoring liability   179,414       562,767  
Operating lease liabilities, current   374,671       396,535  
Finance lease liabilities, current   16,512       17,445  
Income tax payables   150,174       162,689  
Deferred revenue   1,791,697       2,166,175  
Other current liabilities   5,268,130       216,405  
Total current liabilities   11,018,328       6,511,555  
           
Non-current liabilities:          
Long-term debts   1,524,485       1,770,352  
Operating lease liabilities, non-current   1,959,671       2,135,160  
Finance lease liabilities, non-current   58,087       66,779  
Deferred tax liabilities   1,219,750       1,264,375  
Other non-current liabilities   191,933       208,732  
Total non-current liabilities   4,953,926       5,445,398  
           
Total liabilities   15,972,254       11,956,953  
           
Shareholders’ equity:          
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 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 March 31, 2024 and December 31, 2023, respectively)   2,085       2,083  
Additional paid-in capital   19,686,511       19,594,801  
Accumulated deficit   (16,096,819 )     (14,763,469 )
Accumulated other comprehensive income   347,087       331,881  
Total HeartCore Enterprises, Inc. shareholders’ equity   3,938,864       5,165,296  
Non-controlling interests   2,419,150       2,501,518  
Total shareholders’ equity   6,358,014       7,666,814  
           
Total liabilities and shareholders’ equity $ 22,330,268     $ 19,623,767  
           

HEARTCORE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

    For the three months
ended March 31,		     For the three months
ended March 31,
    2024     2023
           
Revenues $ 5,046,732     $ 8,734,150  
Cost of revenues   3,014,543       3,101,066  
Gross profit   2,032,189       5,633,084  
           
Operating expenses:          
Selling expenses   219,707       568,642  
General and administrative expenses   2,406,303       2,685,207  
Research and development expenses   89,134       79,624  
Total operating expenses   2,715,144       3,333,473  
           
Income (loss) from operations   (682,955 )     2,299,611  
           
Other income (expenses):          
Changes in fair value of investments in marketable securities   (234,082 )     –  
Changes in fair value of investments in warrants   (678,887 )     193,365  
Interest income   2,594       31,605  
Interest expenses   (36,661 )     (39,840 )
Government grants   –       –  
Other income   97,016       14,201  
Other expenses   (25,194 )     (29,457 )
Total other income (expenses)   (875,214 )     169,874  
           
Income (loss) before income tax provision   (1,558,169 )     2,469,485  
           
Income tax expense (benefit)   (80,167 )     661,448  
           
Net income (loss)   (1,478,002 )     1,808,037  
Less: net loss attributable to non-controlling interests   (144,652 )     (74,252 )
Net income (loss) attributable to HeartCore Enterprises, Inc. $ (1,333,350 )   $ 1,882,289  
           
Other comprehensive income (loss):          
Foreign currency translation adjustment   10,295       (25,034 )
           
Total comprehensive income (loss)   (1,467,707 )     1,783,003  
Less: comprehensive loss attributable to non-controlling interests   (149,563 )     (76,542 )
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. $ (1,318,144 )   $ 1,859,545  
           
Net income (loss) per common share attributable to HeartCore Enterprises, Inc.      
    Basic $ (0.06 )   $ 0.10  
    Diluted $ (0.06 )   $ 0.10  
           
Weighted average common shares outstanding          
    Basic   20,854,714       19,066,160  
    Diluted   20,854,714       19,066,160  
           

HEARTCORE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the three months
ended March 31,		     For the three months
ended March 31,
    2024     2023
           
Cash flows from operating activities          
Net income (loss) $ (1,478,002 )   $ 1,808,037  
Adjustments to reconcile net income (loss) to net cash          
used in operating activities:          
Depreciation and amortization expenses   188,085       123,312  
Amortization of debt issuance costs   1,173       758  
Non-cash lease expense   93,133       76,017  
Deferred income taxes   (80,780 )     (17,284 )
Stock-based compensation   91,712       915,228  
Warrants received as noncash consideration   –       (4,009,335 )
Changes in fair value of investments in marketable securities   234,082       –  
Changes in fair value of investments in warrants   678,887       (193,365 )
Gain on termination of lease   (469 )     –  
Changes in assets and liabilities:          
Accounts receivable   (523,110 )     (66,833 )
Prepaid expenses   (3,257,972 )     (45 )
Other assets   (18,618 )     78,241  
Accounts payable and accrued expenses   295,799       (94,363 )
Accrued payroll and other employee costs   (149,603 )     (178,733 )
Due to related party   (1,161 )     2,544  
Operating lease liabilities   (90,035 )     (73,147 )
Income tax payables   (2,387 )     678,725  
Deferred revenue   (300,011 )     (167,873 )
Other liabilities   5,060,658       70,057  
Net cash flows provided by (used in) operating activities   741,381       (1,048,059 )
           
Cash flows from investing activities          
Purchases of property and equipment   –       (9,409 )
Repayment of loan provided to related party   10,814       11,955  
Payment for acquisition of subsidiary, net of cash acquired   –       (724,910 )
Net cash flows provided by (used in) investing activities   10,814       (722,364 )
           
Cash flows from financing activities          
Payments for finance leases   (4,474 )     (5,658 )
Proceeds from short-term debt   68,138       –  
Repayment of short-term and long-term debts   (207,486 )     (265,255 )
Repayment of insurance premium financing   (14,772 )     (36,517 )
Net proceeds from factoring arrangement   –       173,582  
Net repayment of factoring arrangement   (383,353 )     –  
Payments for debt issuance costs   –       (448 )
Capital contribution from non-controlling shareholder   67,195       –  
Net cash flows used in financing activities   (474,752 )     (134,296 )
           
Effect of exchange rate changes   (70,671 )     (62,692 )
           
Net change in cash and cash equivalents   206,772       (1,967,411 )
           
Cash and cash equivalents – beginning of the period   1,012,479       7,177,326  
           
Cash and cash equivalents – end of the period $ 1,219,251     $ 5,209,915  
           
Supplemental cash flow disclosures:          
Interest paid $ 37,098     $ 16,968  
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 $ –     $ 6,288  
Common shares issued for acquisition of subsidiary $ –     $ 3,150,000  
           

 

 

 


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