EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

HeartCore Reports Full Year 2023 Results and Provides Strategic Priorities for 2024

 

NEW YORK and TOKYO, April 8, 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 fourth quarter and full year ended December 31, 2023 and outlined its strategic priorities for a robust 2024.

 

Fourth Quarter 2023 and Recent Operational Highlights

 

●Full year 2023 revenue of $21.8 million, up 148% compared to full year 2022
●Strong growth from enterprise software businses
●Formed Artificial Intelligence (AI) Software Development Division
●Authorized a dividend payment
●Signed 13th Go IPO contract and signed 12th Go IPO contract
●Announced the sale of Go IPO client warrant for $9 million
●Established HeartCore Luvina Vietnam Co., Ltd. as part of its global sales expansion initiative
●Signed Toshiba Elevator and Building Systems Corporation to implement its CMS platform
●

Extended partnership with TOPPAN Inc. to jointly promote Dashiwake platform

●Implemented new function to enhance its flagship HeartCore CMS platform
●Announced its subsidiary Sigmaways signed binding MOU with Actiquest
●Announced its subsidiary Sigmaways launched Psyche60s VR experience
●Announced its subsidiary Sigmaways signed Heart-Tech Health and Coherent Health
●Launched Dashiwake platform into the U.S. and Japanese markets
●Awarded 8th consecutive top market share for its CMS platform

 

Full Year 2023 Financial Results

 

Revenues increased 147.7% to $21.8 million compared to $8.8 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 140.7% to $8.1 million from $3.4 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 $12.2 million from $10.0 million in the same period last year. The increase was primarily due to increases in general and administrative expenses and research and development expenses, offset by a decrease in selling expenses.

 

Net loss was about $4.9 million or $(0.21) per diluted share compared to a net loss of $6.7 million or $(0.37) per diluted share, in the same period last year.

 

As of December 31, 2023, the Company had cash and cash equivalents of $1.0 million compared to $7.2 million in December 31, 2022.

 

 
 

 

Management Commentary

 

“Over the past year, our operational footprint has extended beyond Japan into the dynamic U.S. markets, marked by the strategic acquisition of Sigmaways and the partnership with Sabatini Global’s sales and marketing team,” said CEO Sumitaka Kanno Yamamoto. “These pivotal moves have significantly bolstered and diversified our enterprise software business’ revenue streams and reduced our reliance solely on sales from Japan, a trend we have carried into 2024. Nonetheless, we have sustained our dominance and have achieved top market share status for the CMS platform segment in Japan for the 8th consecutive year. Despite challenges such as the ongoing depreciation of the yen against the dollar, we have consistently experienced year-over-year top-line growth since becoming a publicly traded company.

 

“On the Go IPO front, we have signed and engaged with 10 new clients, with additional companies in the pipeline, showcasing the robust demand among Japanese companies seeking listings on major U.S. exchanges. While macro-economic factors presented some uncontrollable hurdles for our clients, which resulted in a limited revenue influx for us this year, the recent sale of a $9 million warrant underscores the revenue-generating potential of our consulting business. As we navigate through these challenging market conditions, we remain committed to supporting our valued clients through the listing process with our white glove approach.”

 

Full Year 2024 Strategic Priorities

 

●Maintain improved cost structure from synergies with the recently established HeartCore Luvina Vietnam, a high-quality and low-cost IT outsourcing provider
●Capitalize on strong organic growth opportunities within the enterprise software business through newly established Artificial Intelligence Software Division
●Expand upon the Go IPO business with the U.S. IPO markets expected to improve in 2024
●Sustain market share as the number one CMS provider in Japan while fueling global expansion

 

Full Year 2024 Outlook

 

In anticipation of a robust 2024, HeartCore is poised to capitalize on its strong momentum within the enterprise software sector. The recently established HeartCore Luvina Vietnam joint venture and its low-cost, high-quality IT outsourcing capabilities is primed to contribute to the financial resiliency of the Company. With access to 850 talented software engineers, this joint venture is expected to significantly elevate the Company’s global sales expansion efforts. Additionally, the AI software division is positioned to unlock a fresh revenue stream within the U.S. and Japanese markets, with opportunities to upsell other HeartCore software. As part of its growth strategy, HeartCore remains vigilant for synergistic M&A opportunities that seamlessly complement the expanding software business.

 

Successful client listings through the Go IPO business have proven to be a lucrative venture, with the first quarter of 2023 witnessing two successful listings yielding over $5 million in revenue alone. More recently, the Company sold a Go IPO client warrant totaling $9 million in revenue, scheduled to materialize in the first quarter of 2024. Despite a sluggish IPO market in 2023, market sentiment is now shifting toward a more favorable outlook for 2024. With 10 companies currently in the Go IPO pipeline, HeartCore continues to actively expand its reach in the Japanese markets to bolster its pipeline. Though projections and timing of listings remains uncertain due to lingering market uncertainties, HeartCore remains optimistic about the continued financial potential and benefits of its Go IPO business throughout 2024.

 

 
 

 

“We find ourselves amidst a transformative phase,” added Yamamoto. “The outset of 2024 demonstrates significant promise, bolstered by a resilient balance sheet derived from our two-pronged business model and ongoing global expansion of the HeartCore brand. Our adept cash management strategies have led us to authorize our inaugural dividend payment, with plans for additional quarterly payments, contingent upon macro-economic factors and the financial standing of the Company. Building upon the growth momentum seen this past year, we eagerly anticipate sharing strong first-quarter results ahead.”

 

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

 

   December 31, 2023   December 31, 2022 
ASSETS          
Current assets:          
Cash and cash equivalents  $1,012,479   $7,177,326 
Accounts receivable   2,623,682    551,064 
Investments in marketable securities   642,348    - 
Investment in equity securities   300,000    - 
Prepaid expenses   536,865    538,230 
Current portion of long-term note receivable   100,000    - 
Due from related party   44,758    48,447 
Other current assets   234,761    220,070 
Total current assets   5,494,893    8,535,137 
           
Non-current assets:          
Property and equipment, net   763,730    203,627 
Operating lease right-of-use assets   2,467,889    2,644,957 
Intangible asset, net   4,515,625    - 
Goodwill   3,276,441    - 
Long-term investment in warrants   2,004,308    - 
Long-term note receivable   200,000    - 
Deferred tax assets   369,436    263,339 
Security deposits   348,428    244,395 
Long-term loan receivable from related party   182,946    246,472 
Other non-current assets   71    661 
Total non-current assets   14,128,874    3,603,451 
           
Total assets  $19,623,767   $12,138,588 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable and accrued expenses  $1,757,038   $497,742 
Accrued payroll and other employee costs   723,305    360,222 
Due to related party   1,476    402 
Short-term debt   135,937    - 
Current portion of long-term debts   371,783    697,877 
Factoring liability   562,767    - 
Operating lease liabilities, current   396,535    291,863 
Finance lease liabilities, current   17,445    19,294 
Income tax payables   162,689    2,747 
Deferred revenue   2,166,175    1,724,519 
Other current liabilities   216,405    53,027 
Total current liabilities   6,511,555    3,647,693 
           
Non-current liabilities:          
Long-term debts   1,770,352    1,123,735 
Operating lease liabilities, non-current   2,135,160    2,421,054 
Finance lease liabilities, non-current   66,779    459 
Deferred tax liabilities   1,264,375    - 
Other non-current liabilities   208,732    138,018 
Total non-current liabilities   5,445,398    3,683,266 
           
Total liabilities   11,956,953    7,330,959 
           
Shareholders’ equity:          
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2023 and 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 December 31, 2023 and 2022, respectively)   2,083    1,764 
Additional paid-in capital   19,594,801    15,014,607 
Accumulated deficit   (14,763,469)   (10,573,579)
Accumulated other comprehensive income   331,881    364,837 
Total HeartCore Enterprises, Inc. shareholders’ equity   5,165,296    4,807,629 
Non-controlling interest   2,501,518    - 
Total shareholders’ equity   7,666,814    4,807,629 
           
Total liabilities and shareholders’ equity  $19,623,767   $12,138,588 

 

 
 

 

HEARTCORE ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

   For the Years Ended December 31, 
   2023   2022 
Revenues  $21,845,830   $8,818,312 
           
Cost of revenues   13,778,416    5,467,017 
           
Gross profit   8,067,414    3,351,295 
           
Operating expenses:          
Selling expenses   1,516,247    2,826,615 
General and administrative expenses   9,651,381    6,579,734 
Research and development expenses   1,019,141    641,025 
           
Total operating expenses   12,186,769    10,047,374 
           
Loss from operations   (4,119,355)   (6,696,079)
           
Other income (expenses):          
Changes in fair value of investments in marketable securities   (615,520)   - 
Changes in fair value of investments in warrants   (501,445)   - 
Interest income   70,624    66,963 
Interest expenses   (162,968)   (41,800)
Government grants   76,612    - 
Other income   366,283    57,268 
Other expenses   (124,595)   (69,736)
Total other income (expenses)   (891,009)   12,695 
           
Loss before income tax provision   (5,010,364)   (6,683,384)
           
Income tax benefit   (133,664)   (5,918)
           
Net loss   (4,876,700)   (6,677,466)
           
Less: net loss attributable to non-controlling interest   (686,810)   - 
           
Net loss attributable to HeartCore Enterprises, Inc.  $(4,189,890)  $(6,677,466)
           
Other comprehensive income (loss):          
Foreign currency translation adjustment   (34,628)   380,009 
           
Total comprehensive loss   (4,911,328)   (6,297,457)
Less: comprehensive loss attributable to non-controlling interest   (688,482)   - 
Comprehensive loss attributable to HeartCore Enterprises, Inc.  $(4,222,846)  $(6,297,457)
           
Net loss per common share attributable to HeartCore Enterprises, Inc.          
Basic  $(0.21)  $(0.37)
Diluted  $(0.21)  $(0.37)
Weighted average common shares outstanding          
Basic   20,404,642    17,922,585 
Diluted   20,404,642    17,922,585 

 

 
 

 

HEARTCORE ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Years Ended December 31, 
   2023   2022 
Cash flows from operating activities:          
Net loss  $(4,876,700)  $(6,677,466)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization expenses   683,019    83,333 
Gain on disposal of property and equipment   (4,514)   - 
Amortization of debt issuance costs   3,733    4,546 
Non-cash lease expense   346,070    273,836 
Loss on termination of lease   76    - 
Deferred income taxes   (291,596)   (1,610)
Stock-based compensation   1,430,513    1,519,743 
Warrants received as noncash consideration   (3,763,621)   - 
Changes in fair value of investments in marketable securities   615,520    - 
Changes in fair value of investments in warrants   501,445    - 
           
Changes in assets and liabilities:          
Accounts receivable   (338,312)   296,835 
Prepaid expenses   359,310    62,195 
Other assets   (133,550)   (201,226)
Accounts payable and accrued expenses   532,790    (70,525)
Accrued payroll and other employee costs   152,101    149,617 
Due to related party   1,123    (575)
Operating lease liabilities   (327,877)   (283,921)
Finance lease liabilities   -    (440)
Income tax payables   162,045    (6,915)
Deferred revenue   553,130    239,129 
Other liabilities   64,086    (195,103)
　          
Net cash flows used in operating activities   (4,331,209)   (4,808,547)
　          
Cash flows from investing activities:          
Purchases of property and equipment   (526,260)   (57,071)
Proceeds from disposal of property and equipment   24,814    - 
Advances on notes receivable   (600,000)   - 
Repayment of loan provided to related party   45,404    44,871 
Payment for acquisition of subsidiary, net of cash acquired   (724,910)   - 
           
Net cash flows used in investing activities   (1,780,952)   (12,200)
　          
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   (22,422)   (34,465)
Proceeds from short-term and long-term debts   710,107    258,087 
Repayment of long-term debts   (711,395)   (810,750)
Repayment of insurance premium financing   (389,035)   (388,538)
Net proceeds from factoring arrangement   562,767    - 
Payments for debt issuance costs   (13,828)   (1,630)
Payment for mandatorily redeemable financial interest   -    (430,489)
　          
Net cash flows provided by financing activities   136,194    8,915,341 
　          
Effect of exchange rate changes   (188,880)   (54,107)
　          
Net change in cash and cash equivalents   (6,164,847)   4,040,487 
　          
Cash and cash equivalents - beginning of the year   7,177,326    3,136,839 
　          
Cash and cash equivalents - end of the year  $1,012,479   $7,177,326 
　          
Supplemental cash flow disclosure:          
Interest paid  $85,634   $41,848 
Income taxes paid  $91,707   $3,013 
　          
Non-cash investing and financing transactions:          
Payroll withheld as repayment of loan receivable from employees  $-   $12,034 
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 
Common shares issued for acquisition of subsidiary  $3,150,000   $- 
Investments in warrants converted to marketable securities  $1,257,868   $- 
Finance lease right-of-use asset obtained in exchange for finance lease liability  $93,217   $- 
Operating lease right-of-use asset obtained in exchange for operating lease liability  $317,040   $- 
Remeasurement of operating lease liability and right-of-use asset due to lease modification  $30,186   $- 
Note receivable converted to investment in equity securities  $300,000   $-