EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

HeartCore Reports First Quarter 2024 Financial Results

 

NEW YORK and TOKYO, May 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 first quarter ended March 31, 2024.

 

First Quarter 2024 and Recent Operational Highlights

 

  ● Sold a Go IPO Client Warrant for $9 million. During the first quarter ended March 31, 2024, the Company received $5 million, with the remaining $4 million received in April 2024. Due to specific accounting treatments and stipulations in the warrant agreement, HeartCore will not recognize the $9 million as revenue on the balance sheet until 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
  ● Formed an Artificial Intelligence Software Development Division
  ● Signed 12th, 13th, and 14th Go IPO Contract
  ● Established HeartCore Luvina Vietnam Co., Ltd., a joint venture with Luvina Software Joint Stock Company
  ● Signed with Toshiba Elevator and Building Systems Corporation to implement its CMS platform

 

Management Commentary

 

“The first quarter brought promising developments for our software business, marking a pivotal shift as this division turned profitable for the quarter,” said HeartCore CEO Sumitaka Kanno Yamamoto. “This success stems from our proactive cost reduction initiatives without having taken our foot off the gas pedal from a sales & marketing standpoint, which have significantly improved our margins in this division. Moreover, the establishment of two new divisions within HeartCore has bolstered this momentum, demonstrating encouraging traction since its inception and contributing to the profitability of our software arm. We believe that our strategic joint venture and partnership with Luvina Software Joint Stock Company offers a dependable and cost-effective IT outsourcing and software development partner, with forecasts projecting roughly $1 million in sales within its first year, which is all attributable to HeartCore’s P&L. Additionally, our recently formed AI software development division has already secured two deals within its first month, signaling promising opportunities for further expansion of our enterprise software capabilities and customer portfolio.”

 

“Additionally, though the optics of our quarterly results reflect a decline, it’s crucial to note that these figures do not encompass the significant sale of a Go IPO client warrant in March that totaled $9 million. As we explained in a previous press release yesterday, a total of $9 million was received by our team following the sale of a Go IPO’s client’s warrants in Q1 2024, but due to specific accounting treatments and stipulations, we cannot record this amount as revenue unless and until the client goes public. Despite this accounting nuance, we’ve already put the capital to work by allocating it to various strategic initiatives, including our dividend payment which was disbursed on May 3rd.”

 

First Quarter 2024 Financial Results

 

Revenues were $5.0 million compared to $8.7 million in the same period last year. The decrease was primarily due to lower revenues from GO IPO consulting services as the Company’s two IPO consulting customers successfully listed on the Nasdaq in the same quarter last year, offset by increases in revenue from the sale of on-premises software, and customized software development and services.

 

Gross profit decreased to $2.0 million compared to $5.6 million in the same period last year. The decrease was primarily due to the aforementioned reason above.

 

 

 

 

Operating expenses decreased to $2.7 million compared to $3.3 million in the same period last year. The decrease was primarily due to lower selling expenses and general and administrative expenses.

 

Net loss was about $1.5 million or $(0.06) per diluted share compared to a net income of $1.8 million or $0.10 per diluted share, in the same period last year.

 

As of March 31, 2024, the Company had cash and cash equivalents of $1.2 million compared to $1.0 million on December 31, 2023.

 

2024 Strategic Outlook

 

HeartCore CEO Sumitaka Kanno Yamamoto added: “Looking forward to the remainder of the year, our focus remains on expanding our enterprise software business through ongoing cost reduction strategies and identifying synergistic opportunities with our subsidiaries and divisions to optimize operational efficiencies and capabilities. Building on the momentum of a profitable quarter within this arm, we remain committed to sustaining this trajectory throughout 2024 as we strive towards overall profitability. Additionally, our dedicated Go IPO team continues to uphold its white-glove approach, guiding our expanding pipeline of clients through the comprehensive IPO process. With an optimistic outlook on the IPO market, we anticipate announcing the completion of several IPOs this year and reaping the benefits of additional Go IPO warrants.”

 

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

 

   March 31,   December 31, 
   2024   2023 
   (Unaudited)     
ASSETS          
           
Current assets:          
Cash and cash equivalents  $1,219,251   $1,012,479 
Accounts receivable   3,086,203    2,623,682 
Investments in marketable securities   408,266    642,348 
Investment in equity securities   -    300,000 
Prepaid expenses   3,942,371    536,865 
Current portion of long-term note receivable   100,000    100,000 
Due from related party   41,948    44,758 
Other current assets   223,222    234,761 
Total current assets   9,021,261    5,494,893 
           
Non-current assets:          
Property and equipment, net   688,826    763,730 
Operating lease right-of-use assets   2,271,955    2,467,889 
Intangible asset, net   4,356,250    4,515,625 
Goodwill   3,276,441    3,276,441 
Long-term investment in equity securities   300,000    - 
Long-term investment in warrants   1,325,421    2,004,308 
Long-term note receivable   200,000    200,000 
Deferred tax assets   381,307    369,436 
Security deposits   325,267    348,428 
Long-term loan receivable from related party   160,974    182,946 
Other non-current assets   22,566    71 
Total non-current assets   13,309,007    14,128,874 
           
Total assets  $22,330,268   $19,623,767 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable and accrued expenses  $2,015,959   $1,757,038 
Accrued payroll and other employee costs   550,916    723,305 
Due to related party   256    1,476 
Short-term debt   66,081    135,937 
Current portion of long-term debts   446,601    371,783 
Insurance premium financing   157,917    - 
Factoring liability   179,414    562,767 
Operating lease liabilities, current   374,671    396,535 
Finance lease liabilities, current   16,512    17,445 
Income tax payables   150,174    162,689 
Deferred revenue   1,791,697    2,166,175 
Other current liabilities   5,268,130    216,405 
Total current liabilities   11,018,328    6,511,555 
           
Non-current liabilities:          
Long-term debts   1,524,485    1,770,352 
Operating lease liabilities, non-current   1,959,671    2,135,160 
Finance lease liabilities, non-current   58,087    66,779 
Deferred tax liabilities   1,219,750    1,264,375 
Other non-current liabilities   191,933    208,732 
Total non-current liabilities   4,953,926    5,445,398 
           
Total liabilities   15,972,254    11,956,953 
           
Shareholders’ equity:          
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 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 March 31, 2024 and December 31, 2023, respectively)   2,085    2,083 
Additional paid-in capital   19,686,511    19,594,801 
Accumulated deficit   (16,096,819)   (14,763,469)
Accumulated other comprehensive income   347,087    331,881 
Total HeartCore Enterprises, Inc. shareholders’ equity   3,938,864    5,165,296 
Non-controlling interests   2,419,150    2,501,518 
Total shareholders’ equity   6,358,014    7,666,814 
           
Total liabilities and shareholders’ equity  $22,330,268   $19,623,767 

 

 

 

 

HEARTCORE ENTERPRISES, INC.

Unaudited CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

  

For the three

months ended

March 31, 2024

  

For the three

months ended

March 31, 2023

 
         
Revenues  $5,046,732   $8,734,150 
Cost of revenues   3,014,543    3,101,066 
Gross profit   2,032,189    5,633,084 
           
Operating expenses:          
Selling expenses   219,707    568,642 
General and administrative expenses   2,406,303    2,685,207 
Research and development expenses   89,134    79,624 
Total operating expenses   2,715,144    3,333,473 
           
Income (loss) from operations   (682,955)   2,299,611 
           
Other income (expenses):          
Changes in fair value of investments in marketable securities   (234,082)   - 
Changes in fair value of investments in warrants   (678,887)   193,365 
Interest income   2,594    31,605 
Interest expenses   (36,661)   (39,840)
Government grants   -    - 
Other income   97,016    14,201 
Other expenses   (25,194)   (29,457)
Total other income (expenses)   (875,214)   169,874 
           
Income (loss) before income tax provision   (1,558,169)   2,469,485 
           
Income tax expense (benefit)   (80,167)   661,448 
           
Net income (loss)   (1,478,002)   1,808,037 
Less: net loss attributable to non-controlling interests   (144,652)   (74,252)
Net income (loss) attributable to HeartCore Enterprises, Inc.  $(1,333,350)  $1,882,289 
           
Other comprehensive income (loss):          
Foreign currency translation adjustment   10,295    (25,034)
           
Total comprehensive income (loss)   (1,467,707)   1,783,003 
Less: comprehensive loss attributable to non-controlling interests   (149,563)   (76,542)
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.  $(1,318,144)  $1,859,545 
           
Net income (loss) per common share attributable to HeartCore Enterprises, Inc.          
Basic  $(0.06)  $0.10 
Diluted  $(0.06)  $0.10 
           
Weighted average common shares outstanding          
Basic   20,854,714    19,066,160 
Diluted   20,854,714    19,066,160 

 

 

 

 

HEARTCORE ENTERPRISES, INC.

Unaudited CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  

For the three

months ended

March 31, 2024

  

For the three

months ended

March 31, 2023

 
         
Cash flows from operating activities          
Net income (loss)  $(1,478,002)  $1,808,037 
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Depreciation and amortization expenses   188,085    123,312 
Amortization of debt issuance costs   1,173    758 
Non-cash lease expense   93,133    76,017 
Deferred income taxes   (80,780)   (17,284)
Stock-based compensation   91,712    915,228 
Warrants received as noncash consideration   -    (4,009,335)
Changes in fair value of investments in marketable securities   234,082    - 
Changes in fair value of investments in warrants   678,887    (193,365)
Gain on termination of lease   (469)   - 
Changes in assets and liabilities:          
Accounts receivable   (523,110)   (66,833)
Prepaid expenses   (3,257,972)   (45)
Other assets   (18,618)   78,241 
Accounts payable and accrued expenses   295,799    (94,363)
Accrued payroll and other employee costs   (149,603)   (178,733)
Due to related party   (1,161)   2,544 
Operating lease liabilities   (90,035)   (73,147)
Income tax payables   (2,387)   678,725 
Deferred revenue   (300,011)   (167,873)
Other liabilities   5,060,658    70,057 
Net cash flows provided by (used in) operating activities   741,381    (1,048,059)
           
Cash flows from investing activities          
Purchases of property and equipment   -    (9,409)
Repayment of loan provided to related party   10,814    11,955 
Payment for acquisition of subsidiary, net of cash acquired   -    (724,910)
Net cash flows provided by (used in) investing activities   10,814    (722,364)
           
Cash flows from financing activities          
Payments for finance leases   (4,474)   (5,658)
Proceeds from short-term debt   68,138    - 
Repayment of short-term and long-term debts   (207,486)   (265,255)
Repayment of insurance premium financing   (14,772)   (36,517)
Net proceeds from factoring arrangement   -    173,582 
Net repayment of factoring arrangement   (383,353)   - 
Payments for debt issuance costs   -    (448)
Capital contribution from non-controlling shareholder   67,195    - 
Net cash flows used in financing activities   (474,752)   (134,296)
           
Effect of exchange rate changes   (70,671)   (62,692)
           
Net change in cash and cash equivalents   206,772    (1,967,411)
           
Cash and cash equivalents - beginning of the period   1,012,479    7,177,326 
           
Cash and cash equivalents - end of the period  $1,219,251   $5,209,915 
           
Supplemental cash flow disclosures:          
Interest paid  $37,098   $16,968 
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  $-   $6,288 
Common shares issued for acquisition of subsidiary  $-   $3,150,000