HeartCore Reports Second Quarter 2022 Financial Results
August 15 2022 - 8:30AM
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 ResultsRevenues
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 StatementsAll 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 YiHTCR@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 |
|
$ |
- |
|
|
|
|
|
|
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