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 third quarter ended September 30, 2023.

Third Quarter 2023 and Recent Operational Highlights

  • Q3 2023 Revenue of $4.7 million, 150% higher than Q3 2022.
  • Enterprise software revenue doubled compared to Q3 2022.
  • Consulting services revenues were only approximately $612,000, as client IPOs have been moved to Q4 2023.
  • Year-to-Date 2023 revenue of $18.5 million, 172% higher than Q3 2022.
  • Year-to-Date 2023 Net Loss of $1.8 million, or $(0.07) per share.
  • Launched its digital experience platform, Daishiwake platform into the U.S. and Japanese markets.
  • Awarded top market share (15%) in Japan for its CMS platform for eight consecutive years.
  • Signed eleventh Go IPO contract with GATES GROUP Inc. 
  • Hired the New York-based sales team of Sabatini Global, further augmenting the Company’s headcount in the U.S.
  • Hosted Nasdaq Listing Guidance seminar for Japanese companies as part of the Company’s Go IPO business development efforts.
  • Engaged licensing agreement with Marushin Corporation for CONTROLIO software.
  • Partnered with INTRIX, Inc. to license HeartCore’s Content Management System (CMS).

Management Commentary“HeartCore’s transformation continued in the third quarter, as we made progress across all facets of our business operations,” said CEO Sumitaka Kanno Yamamoto. “In October, our Content Management System (CMS) platform was awarded as the solution with top market share in Japan for the eighth consecutive year by ITR Corporation, an independent IT consulting research firm. As the market leader in Japan, we are now focused on growing our global footprint. Our acquisition of Sigmaways and the hiring of the New York-based sales team of Sabatini Global provides talented individuals and new technologies to expand our business in the dynamic U.S. market.

“The second and third quarters of 2023 did not turn out exactly like we expected for our consulting service clients, as the IPO market was turbulent, and markets were faced with rising interest rates and economic uncertainty. During the first nine months of 2023, we generated $6.4 million in revenue, primarily from valuation of warrants from our GO IPO consulting services business. Nearly all of that, over $5 million, occurred in the first quarter 2023 when two of our clients launched their IPOs. We have entered into consulting agreements with 11 companies to assist them in their IPO process. With two of them across the finish line and three more companies slated to IPO soon, we anticipate this segment of the business to be a vital growth engine for our organization that will drive significant revenue growth and add value to our balance sheet in the coming quarters.”

Third Quarter 2023 Financial ResultsRevenues increased 150.4% to $4.7 million compared to $1.9 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of the acquisition of Sigmaways and its subsidiaries, and an increase from Go IPO consulting services as the Company obtained more IPO consulting customers in 2023.

Gross profit increased 151.7% to $0.8 million from $0.3 million in the same period last year. The increase was primarily from increased maintenance and support services, customized software development and services, and Go IPO consulting services.

Operating expenses increased to $2.6 million from $2.3 million in the same period last year. The increase was primarily due to general and administrative expenses and research and development expenses, slightly offset by decreases in selling expenses.

Net loss was $2.5 million or $(0.11) per diluted share, compared to a net loss of $2.0 million or $(0.11) per diluted share, in the same period last year.

As of September 30, 2023, the Company had cash and cash equivalents of $2.2 million compared to $7.2 million in December 31, 2022.

Nine Months 2023 Financial ResultsRevenues increased 171.6% to $18.5 million compared to $6.8 million in the same period last year. The increase was primarily due to an increase in Go IPO consulting service revenues and received warrants from customers, and an increase from customized software development and services as a result of Sigmaways and its subsidiaries.

Gross profit increased 176.5% to $8.0 million from $2.9 million in the same period last year. The increase was primarily due to an increase in Go IPO consulting service revenues and received warrants from customers, and an increase from customized software development and services as a result of Sigmaways and its subsidiaries.

Operating expenses increased to $8.9 million from $8.1 million in the same period last year. The increase was primarily due to increases in general and administrative expenses, offset by a decrease in selling expense, and research and development expenses.

Net loss was about $1.8 million or $(0.07) per diluted share compared to a net loss of $5.3 million or $(0.29) 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 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 “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 YiHTCR@gateway-grp.com(949) 574-3860

  HeartCore Enterprises, Inc.
  Unaudited Consolidated Statements of Operations and Comprehensive Loss
                         
                         
      For the nine months ended September 30,     For the three months ended September 30,
      2023       2022       2023       2022  
                         
  Revenues $ 18,518,431     $ 6,818,774     $ 4,688,908     $ 1,872,476  
  Cost of revenues   10,548,245       3,935,908       3,860,241       1,543,256  
  Gross profit   7,970,186       2,882,866       828,667       329,220  
                         
  Operating expenses:                      
  Selling expenses   1,330,747       1,706,250       274,043       771,496  
  General and administrative expenses   7,305,392       5,832,276       2,172,298       1,513,028  
  Research and development expenses   289,303       583,762       170,071       58,275  
  Total operating expenses   8,925,442       8,122,288       2,616,412       2,342,799  
                         
  Loss from operations   (955,256 )     (5,239,422 )     (1,787,745 )     (2,013,579 )
                         
  Other income (expenses):                      
  Changes in fair value of investments in marketable securities   (500,762 )     -       (271,740 )     -  
  Changes in fair value of investments in warrants   (294,565 )     -       (460,672 )     -  
  Interest income   64,633       32,256       14,363       21,707  
  Interest expenses   (125,073 )     (39,361 )     (42,619 )     (10,500 )
  Other income   176,641       40,645       52,640       15,195  
  Other expenses   (62,701 )     (58,050 )     (25,947 )     (2,826 )
  Total other income (expenses)   (741,827 )     (24,510 )     (733,975 )     23,576  
                         
  Loss before income tax provision   (1,697,083 )     (5,263,932 )     (2,521,720 )     (1,990,003 )
                         
  Income tax expense (benefit)   58,859       (10,906 )     19,413       (19,069 )
                         
  Net loss   (1,755,942 )     (5,253,026 )     (2,541,133 )     (1,970,934 )
  Less: net loss attributable to non-controlling interest   (419,211 )     -       (233,913 )     -  
  Net loss attributable to HeartCore Enterprises, Inc. $ (1,336,731 )   $ (5,253,026 )   $ (2,307,220 )   $ (1,970,934 )
                         
  Other comprehensive income (loss):                      
  Foreign currency translation adjustment   (85,244 )     428,118       (90,743 )     128,705  
                         
  Total comprehensive loss   (1,841,186 )     (4,824,908 )     (2,631,876 )     (1,842,229 )
  Less: comprehensive loss attributable to non-controlling interest   (422,352 )     -       (235,094 )     -  
  Comprehensive loss attributable to HeartCore Enterprises, Inc. $ (1,418,834 )   $ (4,824,908 )   $ (2,396,782 )   $ (1,842,229 )
                         
  Net loss per common share attributable to HeartCore Enterprises, Inc.                    
  Basic $ (0.07 )   $ (0.29 )   $ (0.11 )   $ (0.11 )
  Diluted $ (0.07 )   $ (0.29 )   $ (0.11 )   $ (0.11 )
                         
  Weighted average common shares outstanding                      
  Basic   20,257,020       18,014,483       20,842,690       17,835,027  
  Diluted   20,257,020       18,014,483       20,842,690       17,835,027  
                         
         
HeartCore Enterprises, Inc.
Consolidated Balance Sheets
         
    September 30,   December 31,
    2023     2022  
    (Unaudited)    
ASSETS
         
Current assets:        
Cash and cash equivalents $ 2,199,565   $ 7,177,326  
Accounts receivable   2,562,239     551,064  
Investments in marketable securities   757,106     -  
Prepaid expenses   683,327     538,230  
Note receivable   300,000     -  
Current portion of long-term note receivable   100,000     -  
Due from related party   42,439     48,447  
Other current assets   111,326     220,070  
Total current assets   6,756,002     8,535,137  
         
Non-current assets:        
Property and equipment, net   752,940     203,627  
Operating lease right-of-use assets   2,413,814     2,644,957  
Intangible asset, net   4,675,000     -  
Goodwill   3,276,441     -  
Long-term investments in warrants   2,456,902     -  
Long-term note receivable   200,000     -  
Deferred tax assets   222,172     263,339  
Security deposits   338,220     244,395  
Long-term loan receivable from related party   184,076     246,472  
Other non-current assets   67     661  
Total non-current assets   14,519,632     3,603,451  
         
Total assets $ 21,275,634   $ 12,138,588  
         
LIABILITIES AND SHAREHOLDERS' EQUITY
         
Current liabilities:        
Accounts payable and accrued expenses $ 1,779,953   $ 497,742  
Accrued payroll and other employee costs   558,394     360,222  
Due to related party   7,859     402  
Current portion of long-term debts   525,440     697,877  
Insurance premium financing   122,279     -  
Factoring liability   217,250     -  
Operating lease liabilities, current   365,241     291,863  
Finance lease liabilities, current   17,076     19,294  
Income tax payables   103,935     2,747  
Deferred revenue   1,740,877     1,724,519  
Other current liabilities   222,089     53,027  
Total current liabilities   5,660,393     3,647,693  
         
Non-current liabilities:        
Long-term debts   1,351,830     1,123,735  
Operating lease liabilities, non-current   2,113,917     2,421,054  
Finance lease liabilities, non-current   68,535     459  
Deferred tax liabilities   1,309,000     -  
Other non-current liabilities   197,817     138,018  
Total non-current liabilities   5,041,099     3,683,266  
         
Total liabilities   10,701,492     7,330,959  
         
Shareholders' equity:        
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of September 30, 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 September 30, 2023 and December 31, 2022, respectively)   2,083     1,764  
Additional paid-in capital   19,431,987     15,014,607  
Accumulated deficit   (11,910,310 )   (10,573,579 )
Accumulated other comprehensive income   282,734     364,837  
Total HeartCore Enterprises, Inc. shareholders' equity   7,806,494     4,807,629  
Non-controlling interest   2,767,648     -  
Total shareholders' equity   10,574,142     4,807,629  
         
Total liabilities and shareholders' equity $ 21,275,634   $ 12,138,588  
         
HeartCore Enterprises, Inc.
Unaudited Consolidated Statements of Cash Flows
         
    For the nine months ended September 30,
    2023     2022  
         
Cash flows from operating activities        
Net loss $ (1,755,942 ) $ (5,253,026 )
Adjustments to reconcile net loss to net cash        
used in operating activities:        
Depreciation and amortization expenses   495,200     64,398  
Gain on disposal of property and equipment   (4,737 )   -  
Amortization of debt issuance costs   2,257     3,051  
Non-cash lease expense   254,876     207,549  
Loss on termination of lease   76     -  
Deferred income taxes   (109,690 )   (5,843 )
Stock-based compensation   1,267,699     1,225,477  
Warrants received as noncash consideration   (4,009,335 )   -  
Changes in fair value of investments in marketable securities   500,762     -  
Changes in fair value of investments in warrants   294,565     -  
Changes in assets and liabilities:        
Accounts receivable   (322,583 )   168,021  
Prepaid expenses   187,269     (56,553 )
Other assets   (23,982 )   (142,967 )
Accounts payable and accrued expenses   597,247     (96,238 )
Accrued payroll and other employee costs   7,471     59,059  
Due to related party   7,562     3,098  
Operating lease liabilities   (231,499 )   (213,691 )
Finance lease liabilities   -     (370 )
Income tax payables   101,058     (7,704 )
Deferred revenue   200,256     45,938  
Other liabilities   83,809     (206,569 )
Net cash flows used in operating activities   (2,457,661 )   (4,206,370 )
         
Cash flows from investing activities        
Purchases of property and equipment   (516,658 )   (41,672 )
Proceeds from disposal of property and equipment   24,935     -  
Advances on note receivable   (600,000 )   -  
Repayment of loan provided to related party   34,823     33,042  
Payment for acquisition of subsidiary, net of cash acquired   (724,910 )   -  
Net cash flows used in investing activities   (1,781,810 )   (8,630 )
         
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   -     (3,500,000 )
Payments for finance leases   (16,537 )   (29,051 )
Proceeds from long-term debt   219,427     258,087  
Repayment of long-term debts   (584,779 )   (699,407 )
Repayment of insurance premium financing   (266,756 )   (298,886 )
Net proceeds from factoring arrangement   217,250     -  
Payments for debt issuance costs   (656 )   (1,030 )
Payment for mandatorily redeemable financial interest   -     (430,489 )
Net cash flows provided by (used in) financing activities   (432,051 )   9,122,350  
         
Effect of exchange rate changes   (306,239 )   (200,981 )
         
Net change in cash and cash equivalents   (4,977,761 )   4,706,369  
         
Cash and cash equivalents - beginning of the period   7,177,326     3,136,839  
         
Cash and cash equivalents - end of the period $ 2,199,565   $ 7,843,208  
    -      
Supplemental cash flow disclosures:        
Interest paid $ 59,290   $ 38,387  
Income taxes paid $ 91,657   $ 3,013  
         
Non-cash investing and financing transactions        
Payroll withheld as repayment of loan receivable from employees $ -   $ 12,034  
Liabilities assumed in connection with purchase of property and equipment $ 9,602   $ 17,731  
Share repurchase liability settled by issuance of common shares $ -   $ 16  
Operating lease right-of-use asset obtained in exchange for operating lease liability $ 317,040   $ -  
Finance lease right-of-use asset obtained in exchange for finance lease liability $ 93,117   $ -  
Remeasurement of operating lease liability and right-of-use asset due to lease modification   12,579     -  
Deferred offering costs recognized against the proceeds from the offering $ -   $ 178,847  
Insurance premium financing $ 389,035   $ 388,538  
Common shares issued for acquisition of subsidiary $ 3,150,000   $ -  
Investments in warrants converted to marketable securities $ 1,257,868   $ -  
         
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