HTCR - HeartCore Reports First Quarter 2022 Results
NEW YORK and TOKYO, May 16, 2022 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc., (“HeartCore” or “the Company”), a leading software development company, today reported financial results for the first quarter ended March 31, 2022.
First Quarter 2022 and Recent Operational Highlights
- Grew total number of global enterprise customers to 858.
- Signed agreements with two private companies looking to go public on the Nasdaq Stock Market for the recently announced Go IPO consulting service.
- Released a practical guide to the open source process mining tool Apromore titled "Starting with Open Source Process Mining. The Complete Guide to Apromore”.
- Launched a revamped corporate digital marketing solution, Content Management System (“CMS”), a platform that streamlines website operations, allowing users to easily create, manage and modify content on websites without the need for specialized technical knowledge.
- Announced the launch of Go IPO, an initial public offering consulting service for Japanese companies interested in listing on the Nasdaq Stock Market.
- Closed initial public offering, for aggregate gross proceeds of $15.0 million.
Management Commentary
“The first quarter was an encouraging period for our company, as we closed a successful IPO, increased revenues year-over-year, and launched our newest ‘Go IPO’ offering,” said CEO Sumitaka Yamamoto. “Although we weren’t able to recognize the revenues from the two recent Go IPO consulting agreements, we expect that revenues generated from those deals, along with potentially several more in the pipeline, will be accounted for in the second quarter of 2022. Our Go IPO consulting service is gaining traction with private Japanese companies, and we anticipate that this segment of our business will continue to grow. Additionally, we expect to continue to deliver our highly reputable CMS and Digital Transformation solutions to our enterprise customers worldwide.”
First Quarter 2022 Financial Results
Revenues increased 8% to $2.3 million compared to $2.1 million in the same period last year. The increase was due to the increase in sales of on-premises software, offset by a decrease in software development revenues and a decrease from maintenance and support services revenues.
Gross profit increased 74% to $1.2 million (gross margin of 54%) from $703,000 (gross margin of 33%) in the same period last year.
Operating expenses increased to $2.8 million from $861,000 in the same period last year. The year-over-year increase was due to an increase in selling, general & administrative, and research & development expenses. Furthermore, the Company spent additional costs associated with its initial public offering and recognized the costs for its annual marketing fees in the first quarter.
Net loss was $1.6 million, or $(0.09) loss per share, compared to a net loss of $188,000, or $(0.01) loss per share, in the same period last year. The year-over-year increase in net loss was primarily due to an increase in operating expenses.
As of March 31, 2022, the Company had a cash balance of $13.9 million compared to $1.7 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-usa.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
(Unaudited)
| For the three months ended March 31, |
| For the three months ended March 31, |
| 2022 |
| 2021 |
| Revenues |
| $ |
| 2,276,001 |
| $ |
| 2,110,309 |
| Cost of revenues |
| 1,055,356 |
| 1,407,632 |
| Gross profit |
| 1,220,645 |
| 702,677 |
| Operating expenses: |
| Selling expenses |
| 205,918 |
| 46,341 |
| General and administrative expenses |
| 2,468,933 |
| 762,748 |
| Research and development expenses |
| 108,259 |
| 52,146 |
| Total operating expenses |
| 2,783,110 |
| 861,235 |
| Loss from operations |
| (1,562,465 |
| ) |
| (158,558 |
| ) |
| Other income (expenses): |
| Interest income |
| 1,458 |
| 122 |
| Interest expenses |
| (11,271 |
| ) |
| (10,828 |
| ) |
| Other income |
| 16,673 |
| 988 |
| Other expenses |
| (23,662 |
| ) |
| (12,272 |
| ) |
| Total other expenses |
| (16,802 |
| ) |
| (21,990 |
| ) |
| Loss before income tax provision |
| (1,579,267 |
| ) |
| (180,548 |
| ) |
| Income tax expense (benefit) |
| (816 |
| ) |
| 7,689 |
| Net loss |
| (1,578,451 |
| ) |
| (188,237 |
| ) |
| Less: net loss attributable to non-controlling interest |
| - |
| (4,988 |
| ) |
| Net loss attributable to HeartCore Enterprises, Inc. |
| $ |
| (1,578,451 |
| ) |
| $ |
| (183,249 |
| ) |
| Other comprehensive income: |
| Foreign currency translation adjustment |
| 80,053 |
| 97,522 |
| Total comprehensive loss |
| (1,498,398 |
| ) |
| (90,715 |
| ) |
| Less: comprehensive loss attributable to non-controlling interest |
| - |
| (2,404 |
| ) |
| Comprehensive loss attributable to HeartCore Enterprises, Inc. |
| $ |
| (1,498,398 |
| ) |
| $ |
| (88,311 |
| ) |
| Net loss per common share attributable to HeartCore Enterprises, Inc.* |
| Basic |
| $ |
| (0.09 |
| ) |
| $ |
| (0.01 |
| ) |
| Diluted |
| $ |
| (0.09 |
| ) |
| $ |
| (0.01 |
| ) |
| Weighted average common shares outstanding* |
| Basic |
| 17,265,332 |
| 15,242,454 |
| Diluted |
| 17,265,332 |
| 15,242,454 |
| *Retrospectively restated for effect of share issuances on July 16, 2021 |
HeartCore Enterprises, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, |
| December 31, |
| 2022 |
| 2021 |
| ASSETS |
| Current assets: |
| Cash and cash equivalents |
| $ |
| 13,913,886 |
| $ |
| 3,136,839 |
| Accounts receivable, net |
| 1,116,254 |
| 960,964 |
| Prepaid expenses |
| 1,123,050 |
| 444,405 |
| Due from related party |
| 52,105 |
| 50,559 |
| Loan receivable from employee |
| 7,880 |
| 8,341 |
| Other current assets |
| 50,135 |
| 15,654 |
| Total current assets |
| 16,263,310 |
| 4,616,762 |
| Non-current assets: |
| Property and equipment, net |
| 238,787 |
| 261,414 |
| Operating lease right-of-use assets |
| 3,063,672 |
| 3,319,749 |
| Deferred tax assets |
| 275,490 |
| 297,990 |
| Security deposits |
| 262,851 |
| 278,237 |
| Long-term loan receivable from related party |
| 304,163 |
| 335,756 |
| Loan receivable from employee, non-current |
| 2,298 |
| 4,518 |
| Other non-current assets |
| 6,368 |
| 8,737 |
| Total non-current assets |
| 4,153,629 |
| 4,506,401 |
| Total assets |
| $ |
| 20,416,939 |
| $ |
| 9,123,163 |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) |
| Current liabilities: |
| Accounts payable and accrued expenses |
| $ |
| 485,138 |
| $ |
| 646,425 |
| Accrued payroll and other employee costs |
| 239,710 |
| 255,082 |
| Due to related party |
| 185 |
| 1,110 |
| Current portion of long-term debts |
| 847,316 |
| 849,995 |
| Insurance premium financing |
| 347,258 |
| - |
| Operating lease liabilities, current |
| 313,737 |
| 332,277 |
| Finance lease liabilities, current |
| 29,272 |
| 37,459 |
| Income tax payables |
| 739 |
| 10,919 |
| Deferred revenue |
| 1,315,780 |
| 1,690,917 |
| Mandatorily redeemable financial interest |
| - |
| 447,986 |
| Other current liabilities |
| 157,725 |
| 281,673 |
| Total current liabilities |
| 3,736,860 |
| 4,553,843 |
| Non-current liabilities: |
| Long term debts |
| 1,676,848 |
| 1,871,580 |
| Operating lease liabilities, non-current |
| 2,831,624 |
| 3,076,204 |
| Finance lease liabilities, non-current |
| 14,425 |
| 23,861 |
| Other non-current liabilities |
| 148,073 |
| 156,627 |
| Total non-current liabilities |
| 4,670,970 |
| 5,128,272 |
| Total liabilities |
| 8,407,830 |
| 9,682,115 |
| Shareholders' equity (deficit): |
| Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021) |
| - |
| - |
| Common shares ($0.0001 par value, 200,000,000 shares authorized; 18,915,943 and 15,819,943 shares issued; 18,915,943 and 15,546,454 shares outstanding as of March 31, 2022 and December 31, 2021, respectively) |
| 1,891 |
| 1,554 |
| Additional paid-in capital |
| 17,416,901 |
| 3,350,779 |
| Accumulated deficit |
| (5,474,564 |
| ) |
| (3,896,113 |
| ) |
| Accumulated other comprehensive income (loss) |
| 64,881 |
| (15,172 |
| ) |
| Total shareholders' equity (deficit) |
| 12,009,109 |
| (558,952 |
| ) |
| Total liabilities and shareholders' equity (deficit) |
| $ |
| 20,416,939 |
| $ |
| 9,123,163 |
HeartCore Enterprises, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| For the three months ended March 31, |
| For the three months ended March 31, |
| 2022 |
| 2021 |
| Cash flows from operating activities |
| Net loss |
| $ |
| (1,578,451 |
| ) |
| $ |
| (188,237 |
| ) |
| Adjustments to reconcile net loss to net cash |
| used in operating activities: |
| Depreciation expenses |
| 24,889 |
| 28,070 |
| Amortization of debt issuance costs |
| 866 |
| 949 |
| Non-cash lease expense |
| 75,986 |
| 87,247 |
| Deferred income taxes |
| 6,311 |
| 11,650 |
| Share-based compensation |
| 422,164 |
| - |
| Changes in assets and liabilities: |
| Accounts receivable, net |
| (217,638 |
| ) |
| (458,314 |
| ) |
| Prepaid expenses |
| (488,970 |
| ) |
| (186,462 |
| ) |
| Other assets |
| (34,896 |
| ) |
| (29,300 |
| ) |
| Accounts payable and accrued expenses |
| (79,982 |
| ) |
| 319,323 |
| Accrued payroll and other employee costs |
| (27,492 |
| ) |
| (7,235 |
| ) |
| Operating lease liabilities |
| (78,226 |
| ) |
| (89,749 |
| ) |
| Finance lease liabilities |
| (174 |
| ) |
| (375 |
| ) |
| Income tax payables |
| (10,037 |
| ) |
| (159,991 |
| ) |
| Deferred revenue |
| (295,176 |
| ) |
| (233,170 |
| ) |
| Other liabilities |
| (113,027 |
| ) |
| 54,782 |
| Net cash flows used in operating activities |
| (2,393,853 |
| ) |
| (850,812 |
| ) |
| Cash flows from investing activities |
| Purchases of property and equipment |
| (18,903 |
| ) |
| (4,239 |
| ) |
| Advance and loan provided to related parties |
| (25,480 |
| ) |
| (60,271 |
| ) |
| Repayment of loan provided to related party |
| 9,102 |
| - |
| Net cash flows used in investing activities |
| (35,281 |
| ) |
| (64,510 |
| ) |
| 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 |
| - |
| Payments for finance leases |
| (14,916 |
| ) |
| (16,172 |
| ) |
| Proceeds from long-term debt |
| 258,087 |
| - |
| Repayment of long-term debts |
| (308,121 |
| ) |
| (328,799 |
| ) |
| Repayment to related party |
| (903 |
| ) |
| - |
| Repayment of insurance premium financing |
| (41,280 |
| ) |
| - |
| 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 |
| 13,284,474 |
| (346,391 |
| ) |
| Effects of exchange rate changes |
| (78,293 |
| ) |
| (103,801 |
| ) |
| Net change in cash and cash equivalents |
| 10,777,047 |
| (1,365,514 |
| ) |
| Cash and cash equivalents - beginning of the period |
| 3,136,839 |
| 3,058,175 |
| Cash and cash equivalents - end of the period |
| $ |
| 13,913,886 |
| $ |
| 1,692,661 |
| - |
| - |
| Supplemental cash flow disclosures: |
| Interest paid |
| $ |
| 13,262 |
| $ |
| 13,555 |
| Income taxes paid |
| $ |
| 1,489 |
| $ |
| 6,605 |
| Non-cash investing and financing transactions |
| Payroll withheld as repayment of loan receivable from employees |
| $ |
| 2,065 |
| $ |
| 3,679 |
| Expense paid by related parties on behalf of the Company |
| $ |
| 25,480 |
| $ |
| 24,891 |
| 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 |
| $ |
| - |