HeartCore Reports Strong First Quarter 2023 Financial Results
May 22 2023 - 4:05PM
HeartCore Enterprises, Inc. (Nasdaq: HTCR)
(“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 first quarter ended March 31,
2023.
First Quarter 2023 and Recent Operational
Highlights
- Grew total number of global enterprise customers to 916 as of
March 31, 2023.
- Signed tenth Go IPO consulting service agreement with rYojbaba
Inc.
- Integrated ChatGPT, a natural language artificial intelligence
model, with HeartCore CMS to support automatic content creation for
websites.
- 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.
- Announced that HeartCore’s Content Management System (“CMS”)
was introduced by Subaru Group to its centralized management
platform for approximately 100 Subaru websites.
Management Commentary“The first quarter was
impressive in several ways, namely behind our record revenue and
net income figures,” said CEO Sumitaka Yamamoto. “Our core software
division drove robust operating results stemming from newly adopted
marketing techniques and customer acquisition methods that were
implemented last year; these changes led to profitability within
this sector of our company. We are seeing this encouraging trend
continue to persist which is why we are confident our software
division will have a strong 2023. Additionally, our recently
acquired subsidiary, Sigmaways, has been seamlessly integrated
within our core operations and we’ve begun to manifest the
synergies and capitalize on all joint projects.
“A significant contributing factor to our record-breaking
quarter relates to our Go IPO business. Following the completion of
two IPOs this past quarter, we’ve been able to reap the benefits
from the warrants we received as part of the deal consummation. As
I’ve previously shared, we have just scratched the tip of the
iceberg with our Go IPO business line, as we expect to benefit from
the closing of another six deals for the remainder of this year,
including our biggest one yet around SBC Medical Group, which will
add approximately $32.4 million to our top line. With our
two-pronged growth strategy going into full effect, I am very
confident in our team’s ability to make 2023 the strongest year for
HeartCore across several measures.”
First Quarter 2023 Financial ResultsRevenues
increased 284% to $8.7 million compared to $2.3 million in the same
period last year. The increase was primarily due to the
expansion of the Go IPO business, as a growing number of Japanese
venture companies continue to express interest in going public on
the Nasdaq, in addition to the acquisition of Sigmaways and its
subsidiaries.
Gross profit increased 361% to $5.6 million (gross margin of
64%) from $1.2 million (gross margin of 54%) in the same period
last year. The increase was primarily due to the aforementioned
expansion of the Company’s Go IPO business.
Operating expenses increased to $3.3 million from $2.8 million
in the same period last year. The increase was primarily due to
increased selling expenses, as well as increased general and
administrative expenses.
Net income was $1.8 million, or $0.10 per diluted share,
compared to net loss of approximately $1.6 million or $(0.09) per
diluted share last year. The increase in net income was primarily
due to the aforementioned expansion of the Company’s Go IPO
business in addition to relatively stable operating expenses.
As of March 31, 2023, the Company had cash and cash equivalents
of $5.2 million compared to $7.2 million as of December 31,
2022.
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. |
Unaudited Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three monthsended March 31, |
|
|
For the three monthsended March 31, |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
Revenues |
$ |
8,734,150 |
|
|
$ |
2,276,001 |
|
Cost of revenues |
|
3,101,066 |
|
|
|
1,055,356 |
|
Gross profit |
|
5,633,084 |
|
|
|
1,220,645 |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Selling expenses |
|
568,642 |
|
|
|
205,918 |
|
General and administrative expenses |
|
2,685,207 |
|
|
|
2,468,933 |
|
Research and development expenses |
|
79,624 |
|
|
|
108,259 |
|
Total operating expenses |
|
3,333,473 |
|
|
|
2,783,110 |
|
|
|
|
|
|
|
Income (loss) from operations |
|
2,299,611 |
|
|
|
(1,562,465 |
) |
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
Changes in fair value of investments in warrants |
|
193,365 |
|
|
|
- |
|
Interest income |
|
31,605 |
|
|
|
1,458 |
|
Interest expenses |
|
(39,840 |
) |
|
|
(11,271 |
) |
Other income |
|
14,201 |
|
|
|
16,673 |
|
Other expenses |
|
(29,457 |
) |
|
|
(23,662 |
) |
Total other income (expenses) |
|
169,874 |
|
|
|
(16,802 |
) |
|
|
|
|
|
|
Income (loss) before income tax provision |
|
2,469,485 |
|
|
|
(1,579,267 |
) |
|
|
|
|
|
|
Income tax expense (benefit) |
|
661,448 |
|
|
|
(816 |
) |
|
|
|
|
|
|
Net income (loss) |
|
1,808,037 |
|
|
|
(1,578,451 |
) |
Less: net loss attributable to non-controlling interest |
|
(74,252 |
) |
|
|
- |
|
Net income (loss) attributable to HeartCore Enterprises,
Inc. |
$ |
1,882,289 |
|
|
$ |
(1,578,451 |
) |
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
Foreign currency translation adjustment |
|
(25,034 |
) |
|
|
80,053 |
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
1,783,003 |
|
|
|
(1,498,398 |
) |
Less: comprehensive loss attributable to non-controlling
interest |
|
(76,542 |
) |
|
|
- |
|
Comprehensive income (loss) attributable to HeartCore
Enterprises, Inc. |
$ |
1,859,545 |
|
|
$ |
(1,498,398 |
) |
|
|
|
|
|
|
Net income (loss) per common share attributable to
HeartCore Enterprises, Inc. |
|
|
|
Basic |
$ |
0.10 |
|
|
$ |
(0.09 |
) |
Diluted |
$ |
0.10 |
|
|
$ |
(0.09 |
) |
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
Basic |
|
19,066,160 |
|
|
|
17,265,332 |
|
Diluted |
|
19,066,160 |
|
|
|
17,265,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HeartCore Enterprises, Inc. |
Condensed Consolidated Balance Sheets |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
5,209,915 |
|
$ |
7,177,326 |
|
Accounts receivable |
|
2,380,128 |
|
|
551,064 |
|
Short-term investment in warrants |
|
437,812 |
|
|
- |
|
Prepaid expenses |
|
919,916 |
|
|
538,230 |
|
Due from related party |
|
47,536 |
|
|
48,447 |
|
Other current assets |
|
31,534 |
|
|
220,070 |
|
Total current assets |
|
9,026,841 |
|
|
8,535,137 |
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
Property and equipment, net |
|
214,566 |
|
|
203,627 |
|
Operating lease right-of-use assets |
|
2,549,834 |
|
|
2,644,957 |
|
Intangible asset, net |
|
4,993,750 |
|
|
- |
|
Goodwill |
|
3,276,441 |
|
|
- |
|
Long-term investment in warrants |
|
3,764,888 |
|
|
- |
|
Deferred tax assets |
|
245,997 |
|
|
263,339 |
|
Security deposits |
|
367,981 |
|
|
244,395 |
|
Long-term loan receivable from related party |
|
229,955 |
|
|
246,472 |
|
Other non-current assets |
|
75 |
|
|
661 |
|
Total non-current assets |
|
15,643,487 |
|
|
3,603,451 |
|
|
|
|
|
|
Total assets |
$ |
24,670,328 |
|
$ |
12,138,588 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued expenses |
$ |
1,160,309 |
|
$ |
497,742 |
|
Accrued payroll and other employee costs |
|
416,779 |
|
|
360,222 |
|
Due to related party |
|
2,923 |
|
|
402 |
|
Current portion of long-term debts |
|
640,534 |
|
|
697,877 |
|
Insurance premium financing |
|
352,518 |
|
|
- |
|
Factoring liability |
|
173,582 |
|
|
- |
|
Operating lease liabilities, current |
|
288,081 |
|
|
291,863 |
|
Finance lease liabilities, current |
|
13,663 |
|
|
19,294 |
|
Income tax payables |
|
681,830 |
|
|
2,747 |
|
Deferred revenue |
|
1,530,472 |
|
|
1,724,519 |
|
Other current liabilities |
|
225,167 |
|
|
53,027 |
|
Total current liabilities |
|
5,485,858 |
|
|
3,647,693 |
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
Long term debts |
|
1,490,664 |
|
|
1,123,735 |
|
Operating lease liabilities, non-current |
|
2,314,160 |
|
|
2,421,054 |
|
Finance lease liabilities, non-current |
|
- |
|
|
459 |
|
Deferred tax liabilities |
|
1,398,250 |
|
|
- |
|
Other non-current liabilities |
|
135,536 |
|
|
138,018 |
|
Total non-current liabilities |
|
5,338,610 |
|
|
3,683,266 |
|
|
|
|
|
|
Total liabilities |
|
10,824,468 |
|
|
7,330,959 |
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
Preferred shares ($0.0001 par value, 20,000,000 shares authorized,
no shares issued and outstanding as of March 31, 2023 and December
31, 2022, respectively) |
|
- |
|
|
- |
|
Common shares ($0.0001 par value, 200,000,000 shares authorized;
20,842,690 and 17,649,886 shares issued and outstanding as of March
31, 2023 and December 31, 2022, respectively) |
|
2,083 |
|
|
1,764 |
|
Additional paid-in capital |
|
19,079,516 |
|
|
15,014,607 |
|
Accumulated deficit |
|
(8,691,290 |
) |
|
(10,573,579 |
) |
Accumulated other comprehensive income |
|
342,093 |
|
|
364,837 |
|
Total HeartCore Enterprises, Inc. shareholders'
equity |
|
10,732,402 |
|
|
4,807,629 |
|
Non-controlling interest |
|
3,113,458 |
|
|
- |
|
Total shareholders' equity |
|
13,845,860 |
|
|
4,807,629 |
|
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
24,670,328 |
|
$ |
12,138,588 |
|
|
|
|
|
|
|
|
|
|
|
|
HeartCore Enterprises, Inc. |
Unaudited Condensed Consolidated Statements of Cash
Flows |
|
|
|
|
|
|
|
For the three months ended March 31, |
|
For the three months ended March 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Net income (loss) |
$ |
1,808,037 |
|
$ |
(1,578,451 |
) |
Adjustments to reconcile net income (loss) to net
cash |
|
|
|
|
used in operating activities: |
|
|
|
|
Depreciation and amortization expenses |
|
123,312 |
|
|
24,889 |
|
Amortization of debt issuance costs |
|
758 |
|
|
866 |
|
Non-cash lease expense |
|
76,017 |
|
|
75,986 |
|
Deferred income taxes |
|
(17,284 |
) |
|
6,311 |
|
Stock-based compensation |
|
915,228 |
|
|
422,164 |
|
Warrants received as noncash consideration |
|
(4,009,335 |
) |
|
- |
|
Changes in fair value of investments in warrants |
|
(193,365 |
) |
|
- |
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
(66,833 |
) |
|
(217,638 |
) |
Prepaid expenses |
|
(45 |
) |
|
(488,970 |
) |
Other assets |
|
78,241 |
|
|
(34,896 |
) |
Accounts payable and accrued expenses |
|
(94,363 |
) |
|
(79,982 |
) |
Accrued payroll and other employee costs |
|
(178,733 |
) |
|
(27,492 |
) |
Due to related party |
|
2,544 |
|
|
- |
|
Operating lease liabilities |
|
(73,147 |
) |
|
(78,226 |
) |
Finance lease liabilities |
|
(53 |
) |
|
(174 |
) |
Income tax payables |
|
678,725 |
|
|
(10,037 |
) |
Deferred revenue |
|
(167,873 |
) |
|
(295,176 |
) |
Other liabilities |
|
70,110 |
|
|
(113,027 |
) |
Net cash flows used in operating activities |
|
(1,048,059 |
) |
|
(2,393,853 |
) |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchases of property and equipment |
|
(9,409 |
) |
|
(18,903 |
) |
Advance and loan provided to related party |
|
- |
|
|
(25,480 |
) |
Repayment of loan provided to related party |
|
11,955 |
|
|
9,102 |
|
Payment for acquisition of subsidiary, net of cash acquired |
|
(724,910 |
) |
|
- |
|
Net cash flows used in investing activities |
|
(722,364 |
) |
|
(35,281 |
) |
|
|
|
|
|
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 |
|
Payments for finance leases |
|
(5,658 |
) |
|
(14,916 |
) |
Proceeds from long-term debt |
|
- |
|
|
258,087 |
|
Repayment of long-term debts |
|
(265,255 |
) |
|
(308,121 |
) |
Repayment of insurance premium financing |
|
(36,517 |
) |
|
(41,280 |
) |
Repayment to related party |
|
- |
|
|
(903 |
) |
Net proceeds from factoring arrangement |
|
173,582 |
|
|
- |
|
Payments for debt issuance costs |
|
(448 |
) |
|
(1,030 |
) |
Payment for mandatorily redeemable financial interest |
|
- |
|
|
(430,489 |
) |
Net cash flows provided by (used in) financing
activities |
|
(134,296 |
) |
|
13,284,474 |
|
|
|
|
|
|
Effect of exchange rate changes |
|
(62,692 |
) |
|
(78,293 |
) |
|
|
|
|
|
Net change in cash and cash equivalents |
|
(1,967,411 |
) |
|
10,777,047 |
|
|
|
|
|
|
Cash and cash equivalents - beginning of the period |
|
7,177,326 |
|
|
3,136,839 |
|
|
|
|
|
|
Cash and cash equivalents - end of the period |
$ |
5,209,915 |
|
$ |
13,913,886 |
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
Interest paid |
$ |
16,968 |
|
$ |
13,262 |
|
Income taxes paid |
$ |
- |
|
$ |
1,489 |
|
|
|
|
|
|
Non-cash investing and financing transactions |
|
|
|
|
Payroll withheld as repayment of loan receivable from
employees |
$ |
- |
|
$ |
2,065 |
|
Expense paid by related party on behalf of the Company |
$ |
- |
|
$ |
25,480 |
|
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 |
$ |
389,035 |
|
$ |
388,538 |
|
Liabilities assumed in connection with purchase of property and
equipment |
$ |
6,288 |
|
$ |
- |
|
Common shares issued for acquisition of subsidiary |
$ |
3,150,000 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
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