HeartCore Enterprises, Inc. (“HeartCore” or “the
Company”), a leading software development company offering
Customer Experience Management Platform (“CXM Platform”) and
Digital Transformation (“DX”), reported financial results for the
fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022 and Recent Operational
Highlights
- Grew total number of global enterprise customers to 903 as of
December 31, 2022.
- Established HeartCore Capital Advisors, Inc., a subsidiary that
will execute Go IPO and provide professional consulting services to
Japanese companies seeking to list on a major U.S. exchange.
- Partnered with Works Applications and AIM Consulting to improve
their respective digital auditing solutions through its DX suite of
offerings.
- Signed eighth and ninth Go IPO clients by engaging Libera
Gaming Operations and ICheck Co.
- Acquired a 51% majority stake in Sigmaways Inc., a software
engineering service provider delivering IT solutions.
- Signed sixth and seventh Go IPO consulting service agreement by
engaging Genesis Healthcare Co., and kk.BloomZ.
- Announced that HeartCore’s Content Management System (“CMS”)
was introduced by Subaru Group to its centralized management
platform for approximately 100 Subaru websites.
- Partnered with Spirit Advisors, a boutique advisory firm that
bridges Japanese companies with U.S. capital markets, to augment
HeartCore’s Go IPO Service.
- Signed fifth Go IPO consulting service agreement by engaging
SBC Medical Group.
- Signed fourth Go IPO consulting service agreement by engaging
Metros Development.
- Entered into a licensing agreement with Transcosmos Digital
Technology Inc. to license its advanced process mining tool,
Apromore.
- Hosted HeartCoreDAY2022, a special event focused on solutions
that promote digital transformation through two business lines
within HeartCore’s CMS product offering, which help businesses
create, manage, and modify web content and Digital
Transformation.
Management Commentary“This past year was a
period of preparation, as we strategically planted the seeds
through milestone events that have poised our organization towards
a successful trajectory,” said CEO Sumitaka Yamamoto. “In addition
to running our core enterprise software business, we launched Go
IPO at the start of 2022 and have already garnered nine clients,
completed the acquisition of Sigmaways which strengthens our
software capabilities and expands our operations into the U.S., and
built up a robust pipeline across all segments of our business.
With one of our Go IPO clients, SBC Medical Group Holdings,
recently being valued at $1.2 billion, we expect to receive
warrants with an approximate value of $32.4 million. This case
study serves as a prime example of our team reaping the fruits of
our labor from the strategic decisions and investments we’ve made;
we are hopeful this segment of our business will continue to be a
key growth driver.
“Despite the optically lower financials of our top line, which
primarily result from the depreciation of the yen-dollar
conversion, I am encouraged by our team’s ability to sustain
operations in this pivotal period of strategic investments and
preparation. We’ve entered our first full year as a publicly traded
company on the Nasdaq on a high note and expect 2023 to be an
inflection point for HeartCore.”
Fourth Quarter 2022 Financial ResultsRevenues
were $2.0 million compared to $2.4 million in the same period last
year. The decrease in revenues was due to lower sales of
on-premise software and the effects of turbulence within the
broader Japanese economy.
Operating expenses increased to $1.9 million from $1.6 million
last year. The increase was due to a rise in general and
administrative expense, specifically from an increase of hiring for
the Go IPO consulting service in addition to advertising.
Net loss was $1.4 million, or $0.08 per diluted share, compared
to net loss of approximately $742,000 or $0.05 per diluted share
last year. The increase in net loss was primarily due to an
increase in operating expenses and a decrease in revenues.
Full Year 2022 Financial ResultsRevenues were
$8.8 million compared to $10.8 million last year. The decrease
in revenues was primarily due to a large, five-year CXM contract
being renewed in 2021 and the ongoing depreciation of the Japanese
Yen, which were offset by revenues of $1.4 million from the newly
established consulting services in 2022.
Operating expenses increased to $10.0 million from $5.1 million
last year. The increase was primarily due to an increase in selling
and general & administrative expenses, which stem from the
Company’s public offering in February 2022, costs associated with
the Go IPO consulting service, in addition to the incremental costs
from the acquisition of Sigmaways.
Net loss was $6.7 million, or $0.37 per diluted share, compared
to net loss of approximately $327,000 or $0.02 per diluted share
last year. The increase in net loss was primarily due to the
increase in operating expenses.
As of December 31, 2022, the Company had cash and cash
equivalents of $7.2 million compared to $3.1 million as of December
31, 2021.
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. Furthermore, HeartCore
offers “Go IPO,” a consulting service where it assists private
companies with uplisting onto the Nasdaq Stock Market. 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, 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 YiHTCR@gatewayir.com(949)
574-3860
HeartCore Enterprises,
Inc.Condensed Consolidated Statements of
Operations
|
|
For the year ended December 31, |
|
|
For the year ended December 31, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
Revenues |
$ |
8,818,312 |
|
|
$ |
10,822,514 |
|
Cost of revenues |
|
5,467,017 |
|
|
|
5,634,737 |
|
Gross profit |
|
3,351,295 |
|
|
|
5,187,777 |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Selling expenses |
|
2,826,615 |
|
|
|
296,778 |
|
General and administrative expenses |
|
6,579,734 |
|
|
|
4,321,241 |
|
Research and development expenses |
|
641,025 |
|
|
|
510,740 |
|
Total operating expenses |
|
10,047,374 |
|
|
|
5,128,759 |
|
|
|
|
|
|
|
Income (loss) from operations |
|
(6,696,079 |
) |
|
|
59,018 |
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
Interest income |
|
66,963 |
|
|
|
6,955 |
|
Interest expense |
|
(41,800 |
) |
|
|
(43,240 |
) |
Other income |
|
57,268 |
|
|
|
30,614 |
|
Other expenses |
|
(69,736 |
) |
|
|
(38,446 |
) |
Total other income (expenses) |
|
12,695 |
|
|
|
(44,117 |
) |
|
|
|
|
|
|
Income (loss) before income tax provision |
|
(6,683,384 |
) |
|
|
14,901 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
(5,918 |
) |
|
|
341,945 |
|
|
|
|
|
|
|
Net loss |
|
(6,677,466 |
) |
|
|
(327,044 |
) |
Less: net income attributable to non-controlling interest |
|
- |
|
|
|
11,112 |
|
Net loss attributable to HeartCore Enterprises,
Inc. |
$ |
(6,677,466 |
) |
|
$ |
(338,156 |
) |
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
Foreign currency translation adjustment |
|
380,009 |
|
|
|
123,529 |
|
|
|
|
|
|
|
Total comprehensive loss |
|
(6,297,457 |
) |
|
|
(203,515 |
) |
Less: comprehensive income attributable to non-controlling
interest |
|
- |
|
|
|
12,923 |
|
Comprehensive loss attributable to HeartCore Enterprises,
Inc. |
$ |
(6,297,457 |
) |
|
$ |
(216,438 |
) |
|
|
|
|
|
|
Net loss per common share attributable to HeartCore
Enterprises, Inc. |
|
|
|
|
|
Basic |
$ |
(0.37 |
) |
|
$ |
(0.02 |
) |
Diluted |
$ |
(0.37 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
Basic |
|
17,922,585 |
|
|
|
15,242,454 |
|
Diluted |
|
17,922,585 |
|
|
|
15,242,454 |
|
|
|
|
|
|
|
HeartCore Enterprises,
Inc.Condensed Consolidated Balance
Sheets
|
|
December 31, |
|
|
December 31, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
7,177,326 |
|
|
$ |
3,136,839 |
|
Accounts receivable, net |
|
551,064 |
|
|
|
960,964 |
|
Prepaid expenses |
|
538,230 |
|
|
|
444,405 |
|
Due from related party |
|
48,447 |
|
|
|
50,559 |
|
Loan receivable from employee |
|
- |
|
|
|
8,341 |
|
Other current assets |
|
220,070 |
|
|
|
15,654 |
|
Total current assets |
|
8,535,137 |
|
|
|
4,616,762 |
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
Property and equipment, net |
|
203,627 |
|
|
|
261,414 |
|
Operating lease right-of-use assets |
|
2,644,957 |
|
|
|
3,319,749 |
|
Deferred tax assets |
|
263,339 |
|
|
|
297,990 |
|
Security deposits |
|
244,395 |
|
|
|
278,237 |
|
Long-term loan receivable from related party |
|
246,472 |
|
|
|
335,756 |
|
Loan receivable from employee, non-current |
|
- |
|
|
|
4,518 |
|
Other non-current assets |
|
661 |
|
|
|
8,737 |
|
Total non-current assets |
|
3,603,451 |
|
|
|
4,506,401 |
|
|
|
|
|
|
|
Total assets |
$ |
12,138,588 |
|
|
$ |
9,123,163 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT) |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
497,742 |
|
|
$ |
646,425 |
|
Accrued payroll and other employee costs |
|
360,222 |
|
|
|
255,082 |
|
Due to related party |
|
402 |
|
|
|
1,110 |
|
Current portion of long-term debts |
|
697,877 |
|
|
|
849,995 |
|
Operating lease liabilities, current |
|
291,863 |
|
|
|
332,277 |
|
Finance lease liabilities, current |
|
19,294 |
|
|
|
37,459 |
|
Income tax payables |
|
2,747 |
|
|
|
10,919 |
|
Deferred revenue |
|
1,724,519 |
|
|
|
1,690,917 |
|
Mandatorily redeemable financial interest |
|
- |
|
|
|
447,986 |
|
Other current liabilities |
|
53,027 |
|
|
|
281,673 |
|
Total current liabilities |
|
3,647,693 |
|
|
|
4,553,843 |
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
Long-term debts |
|
1,123,735 |
|
|
|
1,871,580 |
|
Operating lease liabilities, non-current |
|
2,421,054 |
|
|
|
3,076,204 |
|
Finance lease liabilities, non-current |
|
459 |
|
|
|
23,861 |
|
Other non-current liabilities |
|
138,018 |
|
|
|
156,627 |
|
Total non-current liabilities |
|
3,683,266 |
|
|
|
5,128,272 |
|
|
|
|
|
|
|
Total liabilities |
|
7,330,959 |
|
|
|
9,682,115 |
|
|
|
|
|
|
|
Shareholders' equity (deficit): |
|
|
|
|
|
Preferred shares ($0.0001 par value, 20,000,000 shares authorized,
no shares issued and outstanding as of December 31, 2022 and
2021) |
|
- |
|
|
|
- |
|
Common shares ($0.0001 par value, 200,000,000 shares authorized;
17,649,886 and 15,819,943 shares issued; 17,649,886 and 15,546,454
shares outstanding as of December 31, 2022 and 2021,
respectively) |
|
1,764 |
|
|
|
1,554 |
|
Additional paid-in capital |
|
15,014,607 |
|
|
|
3,350,779 |
|
Accumulated deficit |
|
(10,573,579 |
) |
|
|
(3,896,113 |
) |
Accumulated other comprehensive income (loss) |
|
364,837 |
|
|
|
(15,172 |
) |
Total shareholders' equity (deficit) |
|
4,807,629 |
|
|
|
(558,952 |
) |
Total liabilities and shareholders' equity
(deficit) |
$ |
12,138,588 |
|
|
$ |
9,123,163 |
|
|
|
|
|
|
|
HeartCore Enterprises,
Inc.Consolidated Statements of Cash
Flows
|
|
For the year ended December 31, |
|
|
For the year ended December 31, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
Net loss |
$ |
(6,677,466 |
) |
|
$ |
(327,044 |
) |
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |
|
|
|
|
Depreciation expenses |
|
83,333 |
|
|
|
105,394 |
|
Amortization of debt issuance costs |
|
4,546 |
|
|
|
6,865 |
|
Non-cash lease expense |
|
273,836 |
|
|
|
332,207 |
|
Deferred income taxes |
|
(1,610 |
) |
|
|
329,829 |
|
Share-based compensation |
|
1,519,743 |
|
|
|
18,787 |
|
Gain on shares redemption |
|
- |
|
|
|
(27 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
296,835 |
|
|
|
(341,112 |
) |
Prepaid expenses |
|
62,195 |
|
|
|
(81,473 |
) |
Other assets |
|
(201,226 |
) |
|
|
52,005 |
|
Accounts payable and accrued expenses |
|
(70,525 |
) |
|
|
553,009 |
|
Accrued payroll and other employee costs |
|
149,617 |
|
|
|
39,241 |
|
Due to related party |
|
(575 |
) |
|
|
- |
|
Operating lease liabilities |
|
(283,921 |
) |
|
|
(346,136 |
) |
Finance lease liabilities |
|
(440 |
) |
|
|
(1,182 |
) |
Income tax payables |
|
(6,915 |
) |
|
|
1,898 |
|
Deferred revenue |
|
239,129 |
|
|
|
304,536 |
|
Other liabilities |
|
(195,103 |
) |
|
|
119,503 |
|
Net cash flows provided by (used in) operating
activities |
|
(4,808,547 |
) |
|
|
766,300 |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Purchases of property and equipment |
|
(57,071 |
) |
|
|
(36,153 |
) |
Advance and loan provided to related parties |
|
- |
|
|
|
(142,876 |
) |
Repayment of loan provided to related party |
|
44,871 |
|
|
|
- |
|
Net cash flows used in investing activities |
|
(12,200 |
) |
|
|
(179,029 |
) |
|
|
|
|
|
|
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 |
|
|
|
677,945 |
|
Repurchase of common shares |
|
(3,500,000 |
) |
|
|
- |
|
Payments for finance leases |
|
(34,465 |
) |
|
|
(53,640 |
) |
Proceeds from long-term debt |
|
258,087 |
|
|
|
- |
|
Repayment of long-term debts |
|
(810,750 |
) |
|
|
(878,625 |
) |
Repayment of insurance premium financing |
|
(388,538 |
) |
|
|
- |
|
Payments for debt issuance costs |
|
(1,630 |
) |
|
|
(3,033 |
) |
Payment for mandatorily redeemable financial interest |
|
(430,489 |
) |
|
|
- |
|
Net cash flows provided by (used in) financing
activities |
|
8,915,341 |
|
|
|
(257,353 |
) |
|
|
|
|
|
|
Effect of exchange rate changes |
|
(54,107 |
) |
|
|
(251,254 |
) |
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
4,040,487 |
|
|
|
78,664 |
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the year |
|
3,136,839 |
|
|
|
3,058,175 |
|
|
|
|
|
|
|
Cash and cash equivalents - end of the year |
$ |
7,177,326 |
|
|
$ |
3,136,839 |
|
|
|
|
|
|
|
Supplemental cash flow disclosure: |
|
|
|
|
|
Interest paid |
$ |
41,848 |
|
|
$ |
25,081 |
|
Income taxes paid |
$ |
3,013 |
|
|
$ |
9,623 |
|
|
|
|
|
|
|
Non-cash investing and financing transactions |
|
|
|
|
|
Remeasurement of the lease liability and right-of-use asset due to
lease modification |
$ |
- |
|
|
$ |
225,983 |
|
Payroll withheld as repayment of loan receivable from
employees |
$ |
12,034 |
|
|
$ |
10,948 |
|
Expenses paid by related parties on behalf of the Company |
$ |
- |
|
|
$ |
125,054 |
|
Reclassification of non-controlling interest to mandatorily
redeemable financial interest |
$ |
- |
|
|
$ |
447,986 |
|
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 |
|
|
$ |
- |
|
Retirement of treasury shares |
$ |
3,500,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
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