HTCR - HeartCore Reports Second Quarter 2022 Financial Results
NEW YORK and TOKYO, Aug. 15, 2022 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc. (“HeartCore” or “the Company”), a leading software development company, today reported financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 and Recent Operational Highlights
- Grew total number of global enterprise customers to 877 as of June 30, 2022.
- Launched “ truRes-12K ”, the world’s first 12k-compatible real-time 360° virtual reality camera.
- Released Robot Store, an e-commerce website that provides Robotic Automation Process (“RPA”) services to its Japanese enterprise-level customers.
- Launched the Human Resources Digital Transformation Development Service, to help implement and advance HR related digital transformation initiatives for its enterprise-level customers.
- Authorized a $3.5 million share repurchase program.
- Signed Go IPO consulting agreement with SYLA, marking the Company’s third Go IPO client.
- Selected by BestStartup.Asia as one of the 101 top Tokyo software companies and startups.
Management Commentary
“We’ve begun generating momentum across all fronts of new and existing lines of business, as we look to expand through organic and inorganic methods,” said CEO Sumitaka Yamamoto. “Although the depreciation of the Yen against the U.S. dollar has been stark, I am encouraged by the 6% increase on Yen-based sales as we’re starting to recognize revenues from Go IPO and continuing to grow our core enterprise software business. The continued inbound interest we’ve received for Go IPO is promising and we expect to capitalize on that growing demand as the only company in Japan to provide this type of service. Additionally, we remain laser focused on looking to expand through M&A and are keen on finding the right company to help augment our growth efforts. I am truly encouraged by all the progress that is being made and look forward to finishing off what we expect will be a strong calendar year for HeartCore.”
Second Quarter 2022 Financial Results
Revenues were $2.7 million compared to $2.9 million in the same period last year. The decrease in revenues was primarily due to a 14% depreciation of the Yen against the U.S. dollar, which was offset by revenue from the Company’s recently launched Go IPO program. On Yen-based sales, revenues increased by 6% year-over-year.
Gross profit decreased to $1.3 million (gross margin of 50%) from $1.7 million (gross margin of 59%) in the same period last year.
Operating expenses increased to $3.0 million from $1.2 million in the same period last year. The increase was due to an increase in selling, general and administrative, and research and development expenses. In particular, the Company experienced a one-time expense in developing the truRes-12K camera, in addition to an increase in employee salary expenses as it ramped up hiring efforts.
Net loss attributable to HeartCore Enterprises, Inc. was $1.7 million, or $(0.09) per share, compared to a net income attributable to HeartCore Enterprises, Inc. of approximately $401,000, or $0.03 per share, in the same period last year. The net loss was primarily due to an increase in operating expenses.
As of June 30, 2022, the Company had a cash balance of $12.5 million compared to $2.6 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-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, 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
| For the three months ended June 30, |
| 2022 |
| 2021 |
| (Unaudited) |
| (Unaudited) |
| Revenues |
| $ |
| 2,670,297 |
| $ |
| 2,865,192 |
| Cost of revenues |
| 1,337,296 |
| 1,175,387 |
| Gross profit |
| 1,333,001 |
| 1,689,805 |
| Operating expenses: |
| Selling expenses |
| 728,836 |
| 101,124 |
| General and administrative expenses |
| 1,850,315 |
| 1,020,842 |
| Research and development expenses |
| 417,228 |
| 80,025 |
| Total operating expenses |
| 2,996,379 |
| 1,201,991 |
| Income (loss) from operations |
| (1,663,378 |
| ) |
| 487,814 |
| Other income (expenses): |
| Interest income |
| 9,091 |
| 3,726 |
| Interest expenses |
| (17,590 |
| ) |
| (12,404 |
| ) |
| Other income |
| 8,777 |
| 14,207 |
| Other expenses |
| (31,562 |
| ) |
| (5,403 |
| ) |
| Total other income (expenses) |
| (31,284 |
| ) |
| 126 |
| Income (loss) before income tax provision |
| (1,694,662 |
| ) |
| 487,940 |
| Income tax expense |
| 8,979 |
| 76,226 |
| Net income (loss) |
| (1,703,641 |
| ) |
| 411,714 |
| Less: net income attributable to non-controlling interest |
| - |
| 10,924 |
| Net income (loss) attributable to HeartCore Enterprises, Inc. |
| $ |
| (1,703,641 |
| ) |
| $ |
| 400,790 |
| Other comprehensive income (loss): |
| Foreign currency translation adjustment |
| 219,360 |
| (13,848 |
| ) |
| Total comprehensive income (loss) |
| (1,484,281 |
| ) |
| 397,866 |
| Less: comprehensive income attributable to non-controlling interest |
| - |
| 10,557 |
| Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. |
| $ |
| (1,484,281 |
| ) |
| $ |
| 387,309 |
| Net earnings (loss) per common share attributable to HeartCore Enterprises, Inc.* |
| Basic |
| $ |
| (0.09 |
| ) |
| $ |
| 0.03 |
| Diluted |
| $ |
| (0.09 |
| ) |
| $ |
| 0.03 |
| Weighted average common shares outstanding* |
| Basic |
| 18,936,829 |
| 15,242,454 |
| Diluted |
| 18,936,829 |
| 15,515,943 |
| *Retrospectively restated for effect of share issuances on July 16, 2021 |
HeartCore Enterprises, Inc.
Condensed Consolidated Balance Sheets
| June 30, |
| December 31, |
| 2022 |
| 2021 |
| (Unaudited) |
| ASSETS |
| Current assets: |
| Cash and cash equivalents |
| $ |
| 12,463,179 |
| $ |
| 3,136,839 |
| Accounts receivable, net |
| 1,119,990 |
| 960,964 |
| Prepaid expenses |
| 852,270 |
| 444,405 |
| Due from related party |
| 46,639 |
| 50,559 |
| Loan receivable from employee |
| - |
| 8,341 |
| Other current assets |
| 23,304 |
| 15,654 |
| Total current assets |
| 14,505,382 |
| 4,616,762 |
| Non-current assets: |
| Property and equipment, net |
| 211,180 |
| 261,414 |
| Operating lease right-of-use assets |
| 2,677,171 |
| 3,319,749 |
| Deferred tax assets |
| 239,176 |
| 297,990 |
| Security deposits |
| 235,274 |
| 278,237 |
| Long-term loan receivable from related party |
| 260,592 |
| 335,756 |
| Loan receivable from employee, non-current |
| - |
| 4,518 |
| Other non-current assets |
| 4,012 |
| 8,737 |
| Total non-current assets |
| 3,627,405 |
| 4,506,401 |
| Total assets |
| $ |
| 18,132,787 |
| $ |
| 9,123,163 |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) |
| Current liabilities: |
| Accounts payable and accrued expenses |
| $ |
| 818,222 |
| $ |
| 646,425 |
| Accrued payroll and other exmployee costs |
| 364,123 |
| 255,082 |
| Due to related party |
| 5,857 |
| 1,110 |
| Current portion of long-term debts |
| 733,235 |
| 849,995 |
| Insurance premium financing |
| 220,583 |
| - |
| Operating lease liabilities, current |
| 280,789 |
| 332,277 |
| Finance lease liabilities, current |
| 20,717 |
| 37,459 |
| Income tax payables |
| 1,322 |
| 10,919 |
| Deferred revenue |
| 1,991,090 |
| 1,690,917 |
| Mandatorily redeemable financial interest |
| - |
| 447,986 |
| Other current liabilities |
| 65,547 |
| 281,673 |
| Total current liabilities |
| 4,501,485 |
| 4,553,843 |
| Non-current liabilities: |
| Long term debts |
| 1,367,101 |
| 1,871,580 |
| Operating lease liabilities, non-current |
| 2,467,546 |
| 3,076,204 |
| Finance lease liabilities, non-current |
| 9,279 |
| 23,861 |
| Other non-current liabilities |
| 132,648 |
| 156,627 |
| Total non-current liabilities |
| 3,976,574 |
| 5,128,272 |
| Total liabilities |
| 8,478,059 |
| 9,682,115 |
| Shareholders' equity (deficit): |
| Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021) |
| - |
| - |
| Common shares ($0.0001 par value, 200,000,000 shares authorized; 18,999,276 and 15,819,943 shares issued; 18,440,467 and 15,546,454 shares outstanding as of June 30, 2022 and December 31, 2021, respectively) |
| 1,899 |
| 1,554 |
| Additional paid-in capital |
| 17,883,555 |
| 3,350,779 |
| Treasury shares, at cost |
| (1,336,762 |
| ) |
| - |
| Accumulated deficit |
| (7,178,205 |
| ) |
| (3,896,113 |
| ) |
| Accumulated other comprehensive income (loss) |
| 284,241 |
| (15,172 |
| ) |
| Total shareholders' equity (deficit) |
| 9,654,728 |
| (558,952 |
| ) |
| Total liabilities and shareholders' equity (deficit) |
| $ |
| 18,132,787 |
| $ |
| 9,123,163 |
HeartCore Enterprises, Inc.
Consolidated Statements of Cash Flows
| For the six months ended June 30, |
| For the six months ended June 30, |
| 2022 |
| 2021 |
| (Unaudited) |
| (Unaudited) |
| Cash flows from operating activities: |
| Net income (loss) |
| $ |
| (3,282,092 |
| ) |
| $ |
| 223,477 |
| Adjustments to reconcile net income (loss) to net cash |
| provided by (used in) operating activities: |
| Depreciation expenses |
| 46,688 |
| 55,458 |
| Amortization of debt issuance costs |
| 2,768 |
| 3,923 |
| Non-cash lease expense |
| 143,845 |
| 171,935 |
| Deferred income taxes |
| 14,167 |
| 96,517 |
| Share-based compensation |
| 888,826 |
| - |
| Changes in assets and liabilities: |
| Accounts receivable, net |
| (344,779 |
| ) |
| (570,886 |
| ) |
| Prepaid expenses |
| (266,030 |
| ) |
| (282,508 |
| ) |
| Other assets |
| (5,516 |
| ) |
| (46,074 |
| ) |
| Accounts payable and accrued expenses |
| 281,567 |
| 128,308 |
| Accrued payroll and other exmployee costs |
| 175,246 |
| 105,120 |
| Due to related party |
| 5,448 |
| - |
| Operating lease liabilities |
| (148,125 |
| ) |
| (176,913 |
| ) |
| Finance lease liabilities |
| (288 |
| ) |
| (689 |
| ) |
| Income tax payables |
| (8,756 |
| ) |
| 5,487 |
| Deferred revenue |
| 596,762 |
| 621,707 |
| Other liabilities |
| (193,598 |
| ) |
| 13,049 |
| Net cash flows provided by (used in) operating activities |
| (2,093,867 |
| ) |
| 347,911 |
| Cash flows from investing activities: |
| Purchases of property and equipment |
| (30,963 |
| ) |
| (19,894 |
| ) |
| Advance and loan provided to related parties |
| - |
| (83,798 |
| ) |
| Repayment of loan provided to related party |
| 21,508 |
| - |
| Net cash flows used in investing activities |
| (9,455 |
| ) |
| (103,692 |
| ) |
| 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 |
| (24,189 |
| ) |
| (29,561 |
| ) |
| Proceeds from long-term debt |
| 258,087 |
| - |
| Repayment of long-term debts |
| (469,166 |
| ) |
| (503,230 |
| ) |
| Repayment of insurance premium financing |
| (167,955 |
| ) |
| - |
| 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 |
| 11,651,622 |
| (534,211 |
| ) |
| Effects of exchange rate changes |
| (221,960 |
| ) |
| (149,784 |
| ) |
| Net change in cash and cash equivalents |
| 9,326,340 |
| (439,776 |
| ) |
| Cash and cash equivalents - beginning of the period |
| 3,136,839 |
| 3,058,175 |
| Cash and cash equivalents - end of the period |
| $ |
| 12,463,179 |
| $ |
| 2,618,399 |
| - |
| - |
| Supplemental cash flow disclosures: |
| Interest paid |
| $ |
| 28,025 |
| $ |
| 20,635 |
| Income taxes paid |
| $ |
| 3,013 |
| $ |
| 9,047 |
| Non-cash investing and financing transactions |
| Payroll withheld as repayment of loan receivable from employees |
| $ |
| 12,034 |
| $ |
| 7,240 |
| Expense paid by related parties on behalf of the Company |
| $ |
| - |
| $ |
| 39,679 |
| Liabilities assumed in connection with purchase of property and equipment |
| $ |
| 9,676 |
| $ |
| - |
| 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 |
| $ |
| - |