HeartCore Reports Second Quarter 2024 Financial Results

NEW YORK and TOKYO, Aug. 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 second quarter ended June 30, 2024.

Second Quarter 2024 and Recent Operational Highlights

• Partnered with INCUDATA Corp. to enhance corporate digital marketing strategies
• Announced Go IPO Client, BloomZ, began trading on the Nasdaq Stock Exchange
• Authorized second dividend payment of $0.02 per share
• Partnered with Hitachi Systems, Ltd. to offer combined package of HeartCore CMS and GRED Web Security Assessment Cloud
• Announced and hosted seminar on U.S. exchange listing strategies for Japanese companies with Akerman LLP and Gateway Group
• Sold a Go IPO Client Warrant for $9 million that will be recognized as revenue when 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
• Signed 14^th Go IPO Client
• Formed an Artificial Intelligence Software Development Division
  
  

Management Commentary

"We achieved significant strides in our Go IPO business, highlighted by the successful listing of one of our clients on the Nasdaq, which is the first Japanese IPO since September 2023 and the third IPO since the inception of this business," said HeartCore CEO Sumitaka Kanno Yamamoto. "We are hopeful that this milestone marks the genesis of a second wave of Japanese IPOs, as the Go IPO pipeline continues to show promising developments. Currently, we have three to four clients scheduled to go public by the end of the year. These Go IPO deals are expected to be instrumental in our second-half performance, and with an optimistic outlook on the resurgence of Japanese IPOs, we anticipate that our Go IPO business will play a key role in driving profitable returns in the upcoming quarter."

"With 20% organic growth this quarter, and 30% organic growth expected for 2024, our software division continues to remain a stable growth engine and reliable source of cash flow, serving as the lifeblood of HeartCore's business operations. In addition, our strategic partnerships with Hitachi Systems and INCUDATA Corp., two prominent Japanese IT companies, will further enhance and innovate our software offerings, which will play a vital role in maintaining our 90% plus customer retention rate and separating ourselves from competitors. I am very encouraged by every arm within our software umbrella, as each one is projected to be profitable and has proven to deliver immense value to clients. The next few quarters look extremely bright for HeartCore; we look forward to sharing additional positive news around our Go IPO initiatives and other general operational updates."

Second Quarter 2024 Financial Results

Revenues were $4.1 million compared to $5.1 million in the same period last year. The decrease was primarily due to an approximate 10% depreciation on the Japanese yen and a decrease in maintenance and supporting services, as the Company entered into a significant maintenance service contract with an important customer in 2023. Additionally, although the organic software business has grown by more than 20%, the Company's subsidiary, Sigmaways recognized losses within its business, and one of the Company's GO IPO clients has returned its fees after discovering that it could not go public.

Gross profit decreased to $0.8 million compared to $1.5 million in the same period last year. The decrease was primarily due to the aforementioned reasons above.

Operating expenses decreased to $2.3 million compared to $3.0 million in the same period last year. The improvement was primarily due to lower selling and general and administrative expenses.

Net loss was about $2.2 million or $(0.09) per diluted share compared to a net loss of $1.0 million or $(0.04) per diluted share, in the same period last year.

As of June 30, 2024, the Company had cash and cash equivalents of $3.8 million compared to $1.0 million on December 31, 2023.

Six-Months 2024 Financial Results

Revenues were $9.1 million compared to $13.8 million in the same period last year. The decrease was primarily due to decreased revenues from Go IPO consulting services, as the Company received warrants from two IPO consulting customers who successfully listed on the Nasdaq in the same period last year, and a decrease in maintenance and supporting services, as the Company entered into a significant maintenance service contract with an important customer in 2023. Additionally, although the organic software business has grown by more than 20%, the Company's subsidiary, Sigmaways recognized losses within its business, and one of the Company's GO IPO clients has returned its fees after discovering that it could not go public.

Gross profit was $2.8 million compared to $7.1 million in the same period last year. The decrease was primarily due to the aforementioned reasons above.

Operating expenses decreased to $5.0 million compared to $6.3 million in the same period last year. The decrease was primarily due to lower selling and general and administrative expenses.

Net loss was about $3.7 million or $(0.16) per diluted share compared to a net income of $0.8 million or $0.05 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 IPO^SM 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

[email protected]

(949) 574-3860

	HeartCore Enterprises, Inc. Consolidated Balance Sheets
			June 30,			December 31,
			2024			2023
			(Unaudited)
	ASSETS
	Current assets:
	Cash and cash equivalents	$	3,806,349		$	1,012,479
	Accounts receivable		2,440,872			2,623,682
	Investments in marketable securities		435,498			642,348
	Investment in equity securities		-			300,000
	Prepaid expenses		3,877,454			536,865
	Current portion of long-term note receivable		100,000			100,000
	Due from related party		40,495			44,758
	Other current assets		199,221			234,761
	Total current assets		10,899,889			5,494,893
	Non-current assets:
	Accounts receivable, non-current		640,197			-
	Property and equipment, net		640,787			763,730
	Operating lease right-of-use assets		2,106,466			2,467,889
	Intangible asset, net		4,196,875			4,515,625
	Goodwill		3,276,441			3,276,441
	Long-term investment in SAFE		350,000			-
	Long-term investment in equity securities		300,000			-
	Long-term investment in warrants		543,120			2,004,308
	Long-term note receivable		200,000			200,000
	Deferred tax assets		395,743			369,436
	Security deposits		310,833			348,428
	Long-term loan receivable from related party		145,274			182,946
	Other non-current assets		70,309			71
	Total non-current assets		13,176,045			14,128,874
			-
	Total assets	$	24,075,934		$	19,623,767
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current liabilities:
	Accounts payable and accrued expenses	$	1,757,545		$	1,757,038
	Accounts payable and accrued expenses - related party		21,579			-
	Accrued payroll and other employee costs		628,136			723,305
	Due to related party		140			1,476
	Short-term debt		-			135,937
	Current portion of long-term debts		508,729			371,783
	Insurance premium financing		112,488			-
	Factoring liability		320,759			562,767
	Operating lease liabilities, current		358,377			396,535
	Finance lease liabilities, current		15,992			17,445
	Income tax payables		1,142			162,689
	Deferred revenue		2,207,420			2,166,175
	Other current liabilities		9,261,012			216,405
	Total current liabilities		15,193,319			6,511,555
	Non-current liabilities:
	Long-term debts		1,403,569			1,770,352
	Operating lease liabilities, non-current		1,804,967			2,135,160
	Finance lease liabilities, non-current		52,055			66,779
	Deferred tax liabilities		1,175,125			1,264,375
	Other non-current liabilities		685,364			208,732
	Total non-current liabilities		5,121,080			5,445,398
	Total liabilities		20,314,399			11,956,953
	Shareholders' equity:
	Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 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 June 30, 2024 and December 31, 2023, respectively)		2,085			2,083
	Additional paid-in capital		19,325,270			19,594,801
	Accumulated deficit		(18,047,919	)		(14,763,469	)
	Accumulated other comprehensive income		325,857			331,881
	Total HeartCore Enterprises, Inc. shareholders' equity		1,605,293			5,165,296
	Non-controlling interests		2,156,242			2,501,518
	Total shareholders' equity		3,761,535			7,666,814
	Total liabilities and shareholders' equity	$	24,075,934		$	19,623,767

	HeartCore Enterprises, Inc. Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
			For the six months ended June 30,
			2024			2023
	Revenues	$	9,113,120		$	13,829,523
	Cost of revenues		6,275,050			6,688,004
	Gross profit		2,838,070			7,141,519
	Operating expenses:
	Selling expenses		399,115			1,056,704
	General and administrative expenses		4,428,712			5,133,094
	Research and development expenses		200,402			119,232
	Total operating expenses		5,028,229			6,309,030
	Income (loss) from operations		(2,190,159	)		832,489
	Other income (expenses):
	Changes in fair value of investments in marketable securities		(430,331	)		(229,022	)
	Changes in fair value of investments in warrants		(1,237,707	)		166,107
	Interest income		4,624			50,270
	Interest expenses		(73,701	)		(82,454	)
	Other income		134,874			124,001
	Other expenses		(49,050	)		(36,754	)
	Total other expenses		(1,651,291	)		(7,852	)
	Income (loss) before income tax provision		(3,841,450	)		824,637
	Income tax expense (benefit)		(152,330	)		39,446
	Net income (loss)		(3,689,120	)		785,191
	Less: net loss attributable to non-controlling interests		(404,670	)		(185,298	)
	Net income (loss) attributable to HeartCore Enterprises, Inc.	$	(3,284,450	)	$	970,489
	Other comprehensive income (loss):
	Foreign currency translation adjustment		(13,825	)		5,499
	Total comprehensive income (loss)		(3,702,945	)		790,690
	Less: comprehensive loss attributable to non-controlling interests		(412,471	)		(187,258	)
	Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.	$	(3,290,474	)	$	977,948
	Net income (loss) per common share attributable to HeartCore Enterprises, Inc.
	Basic	$	(0.16	)	$	0.05
	Diluted	$	(0.16	)	$	0.05
	Weighted average common shares outstanding
	Basic		20,859,429			19,959,333
	Diluted		20,859,429			19,959,333

	HeartCore Enterprises, Inc.
	Unaudited Consolidated Statements of Cash Flows
			For the six months ended June 30,
			2024			2023
	Cash flows from operating activities
	Net income (loss)	$	(3,689,120	)	$	785,191
	Adjustments to reconcile net income (loss) to net cash flows
	used in operating activities:
	Depreciation and amortization expenses		374,946			306,097
	Amortization of debt issuance costs		2,296			1,316
	Non-cash lease expense		182,546			155,301
	Gain on termination of lease		(469	)		-
	Deferred income taxes		(153,531	)		(75,240	)
	Stock-based compensation		147,754			1,094,393
	Warrants received as noncash consideration		-			(4,009,335	)
	Changes in fair value of investments in marketable securities		430,331			229,022
	Changes in fair value of investment in warrants		1,237,707			(166,107	)
	Loss on disposal of property and equipment		1,894			-
	Changes in assets and liabilities:
	Accounts receivable		(548,402	)		(596,312	)
	Prepaid expenses		158,110			1,245
	Other assets		(7,526	)		23,277
	Accounts payable and accrued expenses		272,375			(8,359	)
	Accounts payable and accrued expenses - related party		21,956			-
	Accrued payroll and other employee costs		(278,361	)		124
	Due to related party		(1,246	)		4,214
	Operating lease liabilities		(183,047	)		(147,035	)
	Income tax payables		(152,697	)		106,625
	Deferred revenue		165,073			810,639
	Other liabilities		558,667			116,382
	Net cash flows used in operating activities		(1,460,744	)		(1,368,562	)
	Cash flows from investing activities
	Purchases of property and equipment		(4,134	)		(180,451	)
	Prepayment for property and equipment		(35,209	)		-
	Advance on note receivable		-			(300,000	)
	Purchase of long-term investment in SAFE		(350,000	)		-
	Net proceeds from sale of warrants		5,640,000
	Repayment of loan provided to related party		21,166			23,715
	Payment for acquisition of subsidiary, net of cash acquired		-			(724,910	)
	Net cash flows provided by (used in) investing activities		5,271,823			(1,181,646	)
	Cash flows from financing activities
	Payments for finance leases		(8,526	)		(11,243	)
	Proceeds from short-term debt		68,138			-
	Repayment of short-term and long-term debts		(281,451	)		(411,923	)
	Repayment of insurance premium financing		(60,201	)		(149,250	)
	Net proceeds from factoring arrangement		-			328,967
	Net repayment of factoring arrangement		(242,008	)		-
	Payments for debt issuance costs		-			(448	)
	Distribution of dividends		(417,283	)
	Capital contribution from non-controlling shareholder		67,195			-
	Net cash flows used in financing activities		(874,136	)		(243,897	)
	Effect of exchange rate changes		(143,073	)		(144,480	)
	Net change in cash and cash equivalents		2,793,870			(2,938,585	)
	Cash and cash equivalents - beginning of the period		1,012,479			7,177,326
	Cash and cash equivalents - end of the period	$	3,806,349		$	4,238,741
	Supplemental cash flow disclosures:
	Interest paid	$	74,063		$	40,083
	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	$	-		$	2,199
	Common shares issued for acquisition of subsidiary	$	-		$	3,150,000
	Warrants converted to marketable securities	$	223,481		$	1,257,868