HeartCore Reports First Quarter 2022 Results

NEW YORK and TOKYO, May 16, 2022 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc., (“HeartCore” or “the Company”), a leading software development company, today reported financial results for the first quarter ended March 31, 2022.

First Quarter 2022 and Recent Operational Highlights

  • Grew total number of global enterprise customers to 858.

  • Signed agreements with two private companies looking to go public on the Nasdaq Stock Market for the recently announced Go IPO consulting service.

  • Released a practical guide to the open source process mining tool Apromore titled "Starting with Open Source Process Mining. The Complete Guide to Apromore”.

  • Launched a revamped corporate digital marketing solution, Content Management System (“CMS”), a platform that streamlines website operations, allowing users to easily create, manage and modify content on websites without the need for specialized technical knowledge.

  • Announced the launch of Go IPO, an initial public offering consulting service for Japanese companies interested in listing on the Nasdaq Stock Market.

  • Closed initial public offering, for aggregate gross proceeds of $15.0 million.

 Management Commentary
“The first quarter was an encouraging period for our company, as we closed a successful IPO, increased revenues year-over-year, and launched our newest ‘Go IPO’ offering,” said CEO Sumitaka Yamamoto. “Although we weren’t able to recognize the revenues from the two recent Go IPO consulting agreements, we expect that revenues generated from those deals, along with potentially several more in the pipeline, will be accounted for in the second quarter of 2022. Our Go IPO consulting service is gaining traction with private Japanese companies, and we anticipate that this segment of our business will continue to grow. Additionally, we expect to continue to deliver our highly reputable CMS and Digital Transformation solutions to our enterprise customers worldwide.”

First Quarter 2022 Financial Results
Revenues increased 8% to $2.3 million compared to $2.1 million in the same period last year. The increase was due to the increase in sales of on-premises software, offset by a decrease in software development revenues and a decrease from maintenance and support services revenues.

Gross profit increased 74% to $1.2 million (gross margin of 54%) from $703,000 (gross margin of 33%) in the same period last year.

Operating expenses increased to $2.8 million from $861,000 in the same period last year. The year-over-year increase was due to an increase in selling, general & administrative, and research & development expenses. Furthermore, the Company spent additional costs associated with its initial public offering and recognized the costs for its annual marketing fees in the first quarter.

Net loss was $1.6 million, or $(0.09) loss per share, compared to a net loss of $188,000, or $(0.01) loss per share, in the same period last year. The year-over-year increase in net loss was primarily due to an increase in operating expenses.

As of March 31, 2022, the Company had a cash balance of $13.9 million compared to $1.7 million in the same period last year.

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. Additional information about the Company’s products and services is available at www.heartcore.co.jp and https://heartcore-usa.com/.

Forward-Looking Statements
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 "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, 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@gatewayir.com
(949) 574-3860

HeartCore Enterprises, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

   

For the three months ended
March 31,

   

For the three months ended
March 31,

 
   

2022

   

2021

 
             

Revenues

$

2,276,001

   

$

2,110,309

   

Cost of revenues

 

1,055,356

     

1,407,632

   

Gross profit

 

1,220,645

     

702,677

   
             

Operating expenses:

           

Selling expenses

 

205,918

     

46,341

   

General and administrative expenses

 

2,468,933

     

762,748

   

Research and development expenses

 

108,259

     

52,146

   

Total operating expenses

 

2,783,110

     

861,235

   
             

Loss from operations

 

(1,562,465

)

   

(158,558

)

 
             

Other income (expenses):

           

Interest income

 

1,458

     

122

   

Interest expenses

 

(11,271

)

   

(10,828

)

 

Other income

 

16,673

     

988

   

Other expenses

 

(23,662

)

   

(12,272

)

 

Total other expenses

 

(16,802

)

   

(21,990

)

 
             

Loss before income tax provision

 

(1,579,267

)

   

(180,548

)

 
             

Income tax expense (benefit)

 

(816

)

   

7,689

   
             

Net loss

 

(1,578,451

)

   

(188,237

)

 

Less: net loss attributable to non-controlling interest

 

-

     

(4,988

)

 

Net loss attributable to HeartCore Enterprises, Inc.

$

(1,578,451

)

 

$

(183,249

)

 
             

Other comprehensive income:

           

Foreign currency translation adjustment

 

80,053

     

97,522

   
             

Total comprehensive loss

 

(1,498,398

)

   

(90,715

)

 

Less: comprehensive loss attributable to non-controlling interest

 

-

     

(2,404

)

 

Comprehensive loss attributable to HeartCore Enterprises, Inc.

$

(1,498,398

)

 

$

(88,311

)

 
             

Net loss per common share attributable to HeartCore Enterprises, Inc.*

           

Basic

$

(0.09

)

 

$

(0.01

)

 

Diluted

$

(0.09

)

 

$

(0.01

)

 
             

Weighted average common shares outstanding*

           

Basic

 

17,265,332

     

15,242,454

   

Diluted

 

17,265,332

     

15,242,454

   
             

*Retrospectively restated for effect of share issuances on July 16, 2021

           
             

HeartCore Enterprises, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

         
   

March 31,

 

December 31,

   

2022

 

2021

         

ASSETS

         

Current assets:

       

Cash and cash equivalents

$

13,913,886

 

$

3,136,839

 

Accounts receivable, net

 

1,116,254

   

960,964

 

Prepaid expenses

 

1,123,050

   

444,405

 

Due from related party

 

52,105

   

50,559

 

Loan receivable from employee

 

7,880

   

8,341

 

Other current assets

 

50,135

   

15,654

 

Total current assets

 

16,263,310

   

4,616,762

 
         

Non-current assets:

       

Property and equipment, net

 

238,787

   

261,414

 

Operating lease right-of-use assets

 

3,063,672

   

3,319,749

 

Deferred tax assets

 

275,490

   

297,990

 

Security deposits

 

262,851

   

278,237

 

Long-term loan receivable from related party

 

304,163

   

335,756

 

Loan receivable from employee, non-current

 

2,298

   

4,518

 

Other non-current assets

 

6,368

   

8,737

 

Total non-current assets

 

4,153,629

   

4,506,401

 
         

Total assets

$

20,416,939

 

$

9,123,163

 
         

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

         

Current liabilities:

       

Accounts payable and accrued expenses

$

485,138

 

$

646,425

 

Accrued payroll and other employee costs

 

239,710

   

255,082

 

Due to related party

 

185

   

1,110

 

Current portion of long-term debts

 

847,316

   

849,995

 

Insurance premium financing

 

347,258

   

-

 

Operating lease liabilities, current

 

313,737

   

332,277

 

Finance lease liabilities, current

 

29,272

   

37,459

 

Income tax payables

 

739

   

10,919

 

Deferred revenue

 

1,315,780

   

1,690,917

 

Mandatorily redeemable financial interest

 

-

   

447,986

 

Other current liabilities

 

157,725

   

281,673

 

Total current liabilities

 

3,736,860

   

4,553,843

 
         

Non-current liabilities:

       

Long term debts

 

1,676,848

   

1,871,580

 

Operating lease liabilities, non-current

 

2,831,624

   

3,076,204

 

Finance lease liabilities, non-current

 

14,425

   

23,861

 

Other non-current liabilities

 

148,073

   

156,627

 

Total non-current liabilities

 

4,670,970

   

5,128,272

 
         

Total liabilities

 

8,407,830

   

9,682,115

 
         

Shareholders' equity (deficit):

       

Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021)

 

-

   

-

 

Common shares ($0.0001 par value, 200,000,000 shares authorized; 18,915,943 and 15,819,943 shares issued; 18,915,943 and 15,546,454 shares outstanding as of March 31, 2022 and December 31, 2021, respectively)

 

1,891

   

1,554

 

Additional paid-in capital

 

17,416,901

   

3,350,779

 

Accumulated deficit

 

(5,474,564

)

 

(3,896,113

)

Accumulated other comprehensive income (loss)

 

64,881

   

(15,172

)

Total shareholders' equity (deficit)

 

12,009,109

   

(558,952

)

Total liabilities and shareholders' equity (deficit)

$

20,416,939

 

$

9,123,163

 
         

 

HeartCore Enterprises, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

         
   

For the three months ended March 31,

 

For the three months ended March 31,

   

2022

 

2021

         

Cash flows from operating activities

       

Net loss

$

(1,578,451

)

$

(188,237

)

Adjustments to reconcile net loss to net cash

       

used in operating activities:

       

Depreciation expenses

 

24,889

   

28,070

 

Amortization of debt issuance costs

 

866

   

949

 

Non-cash lease expense

 

75,986

   

87,247

 

Deferred income taxes

 

6,311

   

11,650

 

Share-based compensation

 

422,164

   

-

 

Changes in assets and liabilities:

       

Accounts receivable, net

 

(217,638

)

 

(458,314

)

Prepaid expenses

 

(488,970

)

 

(186,462

)

Other assets

 

(34,896

)

 

(29,300

)

Accounts payable and accrued expenses

 

(79,982

)

 

319,323

 

Accrued payroll and other employee costs

 

(27,492

)

 

(7,235

)

Operating lease liabilities

 

(78,226

)

 

(89,749

)

Finance lease liabilities

 

(174

)

 

(375

)

Income tax payables

 

(10,037

)

 

(159,991

)

Deferred revenue

 

(295,176

)

 

(233,170

)

Other liabilities

 

(113,027

)

 

54,782

 

Net cash flows used in operating activities

 

(2,393,853

)

 

(850,812

)

         

Cash flows from investing activities

       

Purchases of property and equipment

 

(18,903

)

 

(4,239

)

Advance and loan provided to related parties

 

(25,480

)

 

(60,271

)

Repayment of loan provided to related party

 

9,102

   

-

 

Net cash flows used in investing activities

 

(35,281

)

 

(64,510

)

         

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

 

(14,916

)

 

(16,172

)

Proceeds from long-term debt

 

258,087

   

-

 

Repayment of long-term debts

 

(308,121

)

 

(328,799

)

Repayment to related party

 

(903

)

 

-

 

Repayment of insurance premium financing

 

(41,280

)

 

-

 

Payments for debt issuance costs

 

(1,030

)

 

(1,420

)

Payment for mandatorily redeemable financial interest

 

(430,489

)

 

-

 

Net cash flows provided by (used in) financing activities

 

13,284,474

   

(346,391

)

         

Effects of exchange rate changes

 

(78,293

)

 

(103,801

)

         

Net change in cash and cash equivalents

 

10,777,047

   

(1,365,514

)

         

Cash and cash equivalents - beginning of the period

 

3,136,839

   

3,058,175

 
         

Cash and cash equivalents - end of the period

$

13,913,886

 

$

1,692,661

 
   

-

   

-

 

Supplemental cash flow disclosures:

       

Interest paid

$

13,262

 

$

13,555

 

Income taxes paid

$

1,489

 

$

6,605

 
         

Non-cash investing and financing transactions

       

Payroll withheld as repayment of loan receivable from employees

$

2,065

 

$

3,679

 

Expense paid by related parties on behalf of the Company

$

25,480

 

$

24,891

 

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

$

388,538

 

$

-

 
         

 

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