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
HTCR@gateway-grp.com
(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 | |||
