EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

 

HeartCore Reports Second Quarter 2022 Financial Results

 

NEW YORK, NY and TOKYO, JAPAN – August 15, 2022 – HeartCore Enterprises, Inc. (“HeartCore” or “the Company”), a leading software development company, today reported financial results for the second quarter ended June 30, 2022.

 

Second Quarter 2022 and Recent Operational Highlights

 

●Grew total number of global enterprise customers to 877 as of June 30, 2022.
   
●Launched “truRes-12K”, the world’s first 12k-compatible real-time 360° virtual reality camera.
   
●Released Robot Store, an e-commerce website that provides Robotic Automation Process (“RPA”) services to its Japanese enterprise-level customers.
   
●Launched the Human Resources Digital Transformation Development Service, to help implement and advance HR related digital transformation initiatives for its enterprise-level customers.
   
●Authorized a $3.5 million share repurchase program.
   
●Signed Go IPO consulting agreement with SYLA, marking the Company’s third Go IPO client.
   
●Selected by BestStartup.Asia as one of the 101 top Tokyo software companies and startups.

 

Management Commentary

 

“We’ve begun generating momentum across all fronts of new and existing lines of business, as we look to expand through organic and inorganic methods,” said CEO Sumitaka Yamamoto. “Although the depreciation of the Yen against the U.S. dollar has been stark, I am encouraged by the 6% increase on Yen-based sales as we’re starting to recognize revenues from Go IPO and continuing to grow our core enterprise software business. The continued inbound interest we’ve received for Go IPO is promising and we expect to capitalize on that growing demand as the only company in Japan to provide this type of service. Additionally, we remain laser focused on looking to expand through M&A and are keen on finding the right company to help augment our growth efforts. I am truly encouraged by all the progress that is being made and look forward to finishing off what we expect will be a strong calendar year for HeartCore.”

 

Second Quarter 2022 Financial Results

 

Revenues were $2.7 million compared to $2.9 million in the same period last year. The decrease in revenues was primarily due to a 14% depreciation of the Yen against the U.S. dollar, which was offset by revenue from the Company’s recently launched Go IPO program. On Yen-based sales, revenues increased by 6% year-over-year.

 

Gross profit decreased to $1.3 million (gross margin of 50%) from $1.7 million (gross margin of 59%) in the same period last year.

 

 
 

 

 

Operating expenses increased to $3.0 million from $1.2 million in the same period last year. The increase was due to an increase in selling, general and administrative, and research and development expenses. In particular, the Company experienced a one-time expense in developing the truRes-12K camera, in addition to an increase in employee salary expenses as it ramped up hiring efforts.

 

Net loss attributable to HeartCore Enterprises, Inc. was $1.7 million, or $(0.09) per share, compared to a net income attributable to HeartCore Enterprises, Inc. of approximately $401,000, or $0.03 per share, in the same period last year. The net loss was primarily due to an increase in operating expenses.

 

As of June 30, 2022, the Company had a cash balance of $12.5 million compared to $2.6 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-enterprises.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 and Comprehensive Income (Loss)

 

   For the three months ended June 30, 
   2022   2021 
   (Unaudited)   (Unaudited) 
         
Revenues  $2,670,297   $2,865,192 
Cost of revenues   1,337,296    1,175,387 
Gross profit   1,333,001    1,689,805 
           
Operating expenses:          
Selling expenses   728,836    101,124 
General and administrative expenses   1,850,315    1,020,842 
Research and development expenses   417,228    80,025 
Total operating expenses   2,996,379    1,201,991 
           
Income (loss) from operations   (1,663,378)   487,814 
           
Other income (expenses):          
Interest income   9,091    3,726 
Interest expenses   (17,590)   (12,404)
Other income   8,777    14,207 
Other expenses   (31,562)   (5,403)
Total other income (expenses)   (31,284)   126 
           
Income (loss) before income tax provision   (1,694,662)   487,940 
           
Income tax expense   8,979    76,226 
           
Net income (loss)   (1,703,641)   411,714 
Less: net income attributable to non-controlling interest   -    10,924 
Net income (loss) attributable to HeartCore Enterprises, Inc.  $(1,703,641)  $400,790 
           
Other comprehensive income (loss):          
Foreign currency translation adjustment   219,360    (13,848)
           
Total comprehensive income (loss)   (1,484,281)   397,866 
Less: comprehensive income attributable to non-controlling interest   -    10,557 
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.  $(1,484,281)  $387,309 
           
Net earnings (loss) per common share attributable to HeartCore Enterprises, Inc.*          
Basic  $(0.09)  $0.03 
Diluted  $(0.09)  $0.03 
           
Weighted average common shares outstanding*          
Basic   18,936,829    15,242,454 
Diluted   18,936,829    15,515,943 

 

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

 

 
 

 

 

HeartCore Enterprises, Inc.

Condensed Consolidated Balance Sheets

 

   June 30,   December 31, 
   2022   2021 
   (Unaudited)     
ASSETS          
           
Current assets:          
Cash and cash equivalents  $12,463,179   $3,136,839 
Accounts receivable, net   1,119,990    960,964 
Prepaid expenses   852,270    444,405 
Due from related party   46,639    50,559 
Loan receivable from employee   -    8,341 
Other current assets   23,304    15,654 
Total current assets   14,505,382    4,616,762 
           
Non-current assets:          
Property and equipment, net   211,180    261,414 
Operating lease right-of-use assets   2,677,171    3,319,749 
Deferred tax assets   239,176    297,990 
Security deposits   235,274    278,237 
Long-term loan receivable from related party   260,592    335,756 
Loan receivable from employee, non-current   -    4,518 
Other non-current assets   4,012    8,737 
Total non-current assets   3,627,405    4,506,401 
           
Total assets  $18,132,787   $9,123,163 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)          
           
Current liabilities:          
Accounts payable and accrued expenses  $818,222   $646,425 
Accrued payroll and other employee costs   364,123    255,082 
Due to related party   5,857    1,110 
Current portion of long-term debts   733,235    849,995 
Insurance premium financing   220,583    - 
Operating lease liabilities, current   280,789    332,277 
Finance lease liabilities, current   20,717    37,459 
Income tax payables   1,322    10,919 
Deferred revenue   1,991,090    1,690,917 
Mandatorily redeemable financial interest   -    447,986 
Other current liabilities   65,547    281,673 
Total current liabilities   4,501,485    4,553,843 
           
Non-current liabilities:          
Long-term debts   1,367,101    1,871,580 
Operating lease liabilities, non-current   2,467,546    3,076,204 
Finance lease liabilities, non-current   9,279    23,861 
Other non-current liabilities   132,648    156,627 
Total non-current liabilities   3,976,574    5,128,272 
           
Total liabilities   8,478,059    9,682,115 
           
Shareholders’ equity (deficit):          
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021)   -    - 
Common shares ($0.0001 par value, 200,000,000 shares authorized; 18,999,276 and 15,819,943 shares issued; 18,440,467 and 15,546,454 shares outstanding as of June 30, 2022 and December 31, 2021, respectively)   1,899    1,554 
Additional paid-in capital   17,883,555    3,350,779 
Treasury shares, at cost (558,809 and 0 shares as of June 30, 2022 and December 31, 2021, respectively)   (1,336,762)   - 
Accumulated deficit   (7,178,205)   (3,896,113)
Accumulated other comprehensive income (loss)   284,241    (15,172)
Total shareholders’ equity (deficit)   9,654,728    (558,952)
Total liabilities and shareholders’ equity (deficit)  $18,132,787   $9,123,163 

 

 
 

 

 

HeartCore Enterprises, Inc.

Consolidated Statements of Cash Flows

 

   For the six months ended June 30,  
   2022   2021 
   (Unaudited)   (Unaudited) 
           
Cash flows from operating activities:          
Net income (loss)  $(3,282,092)  $223,477 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation expenses   46,688    55,458 
Amortization of debt issuance costs   2,768    3,923 
Non-cash lease expense   143,845    171,935 
Deferred income taxes   14,167    96,517 
Share-based compensation   888,826    - 
Changes in assets and liabilities:          
Accounts receivable, net   (344,779)   (570,886)
Prepaid expenses   (266,030)   (282,508)
Other assets   (5,516)   (46,074)
Accounts payable and accrued expenses   281,567    128,308 
Accrued payroll and other employee costs   175,246    105,120 
Due to related party   5,448    - 
Operating lease liabilities   (148,125)   (176,913)
Finance lease liabilities   (288)   (689)
Income tax payables   (8,756)   5,487 
Deferred revenue   596,762    621,707 
Other liabilities   (193,598)   13,049 
Net cash flows provided by (used in) operating activities   (2,093,867)   347,911 
           
Cash flows from investing activities:          
Purchases of property and equipment   (30,963)   (19,894)
Advance and loan provided to related parties   -    (83,798)
Repayment of loan provided to related party   21,508    - 
Net cash flows used in investing activities   (9,455)   (103,692)
           
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   (1,336,762)   - 
Payments for finance leases   (24,189)   (29,561)
Proceeds from long-term debt   258,087    - 
Repayment of long-term debts   (469,166)   (503,230)
Repayment of insurance premium financing   (167,955)   - 
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   11,651,622    (534,211)
           
Effects of exchange rate changes   (221,960)   (149,784)
           
Net change in cash and cash equivalents   9,326,340    (439,776)
           
Cash and cash equivalents - beginning of the period   3,136,839    3,058,175 
           
Cash and cash equivalents - end of the period  $12,463,179   $2,618,399 
           
Supplemental cash flow disclosures:          
Interest paid  $28,025   $20,635 
Income taxes paid  $3,013   $9,047 
           
Non-cash investing and financing transactions          
Payroll withheld as repayment of loan receivable from employees  $12,034   $7,240 
Expense paid by related parties on behalf of the Company  $-   $39,679 
Liabilities assumed in connection with purchase of property and equipment  $9,676   $- 
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   $-