HTCR - HeartCore Reports First Quarter 2024 Financial Results
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
- Sold a Go IPO Client Warrant for $9 million. During the first quarter ended March 31, 2024, the Company received $5 million, with the remaining $4 million received in April 2024. Due to specific accounting treatments and stipulations in the warrant agreement, HeartCore will not recognize the $9 million as revenue on the balance sheet until 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
- Formed an Artificial Intelligence Software Development Division
- Signed 12 th , 13 th , and 14 th Go IPO Contract
- Established HeartCore Luvina Vietnam Co., Ltd., a joint venture with Luvina Software Joint Stock Company
- Signed with Toshiba Elevator and Building Systems Corporation to implement its CMS platform
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 3 rd .”
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 IPO SM 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 |