8-K
HeartCore Enterprises, Inc. (HTCR)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Dateof report (Date of earliest event reported): August 14, 2023
HEARTCORE
ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-41272 | 87-0913420 |
|---|---|---|
| (State<br> or other jurisdiction<br><br> <br>of<br> incorporation) | (Commission<br><br> <br>File<br> Number) | (I.R.S.<br> Employer<br><br> <br>Identification<br> Number) |
1-2-33,Higashigotanda, Shinagawa-ku, Tokyo, Japan
(Address of principal executive offices)
+81-3-6409-6966
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions.
| ☐ | Written<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title<br> of each class | Trading<br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common<br> Stock | HTCR | Nasdaq<br> Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item2.02. Results of Operations and Financial Condition.
On August 14, 2023, HeartCore Enterprises, Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2023. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information contained in any website is not a part of this Current Report on Form 8-K.
The information included in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item9.01 Financial Statement and Exhibits.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release of the registrant dated August 14, 2023. |
| 104 | Cover<br> Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HEARTCORE ENTERPRISES, INC. | ||
|---|---|---|
| Dated:<br> August 14, 2023 | By: | /s/ Sumitaka Yamamoto |
| Name: | Sumitaka<br> Yamamoto | |
| Title: | Chief<br> Executive Officer |
Exhibit 99.1
HeartCore Reports Second Quarter 2023 FinancialResults
NEW YORK and TOKYO, August 14, 2023 (GLOBE NEWSWIRE) — HeartCoreEnterprises, Inc. (Nasdaq: HTCR) (“HeartCore” or “the Company”), a leading software development company offering Customer Experience Management Platform (“CXM Platform”) and Digital Transformation (“DX”), reported financial results for the second quarter ended June 30, 2023.
Second Quarter 2023 and Recent Operational Highlights
| ● | Partnered<br> with INTRIX, Inc. to license HeartCore’s Content Management System (CMS). |
|---|---|
| ● | Executed<br> a deal with Honda Trading Corporation for HeartCore’s task mining software solution, CONTROLIO, a web-based cloud system for<br> employee monitoring and productivity enhancement. |
| ● | Presented<br> virtually and held one-on-one meetings at the Sidoti & Co.’s June Virtual Small-Cap Conference. |
| ● | Hosted a<br> U.S. Exchange Listing seminar in Tokyo, Japan on June 9, 2023 to a myriad<br> of Japanese companies on the realities of going public on U.S. Exchanges in addition to an overview of<br> its very successful Go IPO consulting service. |
| ● | Partnered<br> with Toppan Inc. to strengthen and expand Toppan’s digital marketing business utilizing HeartCore’s Contents Management<br> System, in addition to both companies collaborating on joint business ventures. |
| ● | Signed tenth<br> Go IPO consulting service agreement with rYojbaba Inc. |
| ● | Second quarter<br> revenue grew 91% compared to same period 2022. |
| ● | Year-to-Date<br> revenue grew 180% compared to same period 2022. |
| ● | Q2 2023 EPS<br> loss of $0.04 was primarily due to lower consulting services revenue as none of HeartCore’s clients’ pending IPOs were<br> completed in the second quarter. |
| ● | YTD 2023<br> Company remained profitable and expects significant growth in second half 2022. |
Management Commentary
“This past quarter reflected a period of growth from our enterprise software division, in addition to a time of important back-end movement within our Go IPO segment as our two-pronged growth strategy continues to manifest into full effect,” said CEO Sumitaka Yamamoto. “As evidenced by growth of 102% and successfully hitting profitability within our enterprise software vertical, we continue to garner new customers and capitalize on synergistic opportunities with Sigmaways. Though we didn’t have any Go IPO clients go public in Q2, we have a significant amount of progress being made behind the scenes and expect to see a robust second half of the year and beyond. I am very encouraged by the results we’ve generated year to date and expect an even stronger end to the calendar year.”
Second Quarter 2023 Financial Results
Revenues increased 91% to $5.1 million compared to $2.7 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaway and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023.
Gross profit increased 13% to $1.5 million (gross margin of 30%) from $1.3 million (gross margin of 50%) in the same period last year. The increase was primarily from increased maintenance and support services and customized software development and services, offset by decrease in sales of on-premise software.
Operating expenses remained consistent at $3.0 million from the same period last year. The increase in general and administrative expenses was offset by decreases in selling and research and development expenses.
Net loss was $1.0 million or $(0.04) per diluted share, compared to a net loss of $1.7 million or $(0.09) per diluted share, in the same period last year.
As of June 30, 2023, the Company had cash and cash equivalents of $4.2 million compared to $7.2 million in December 31, 2022.
Six Months 2023 Financial Results
Revenues increased 180% to $13.8 million compared to $4.9 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaways and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023 and received warrants from its customers.
Gross profit increased 180% to $7.1 million (gross margin of 52%) from $2.6 million (gross margin of 52%) in the same period last year. The increase was primarily due to an increase from GO IPO consulting services and customized software development and services.
Operating expenses increased to $6.3 million from $5.8 million in the same period last year. The increase was primarily due to increases in selling and general and administrative expenses, offset by a decrease in research and development expenses.
Net income was about $785,000 or $0.05 per diluted share compared to a net loss of $3.3 million or $(0.18) per diluted share, 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. Furthermore, HeartCore offers “Go IPO,” a consulting service where it assists private companies with uplisting onto the Nasdaq Stock Market. Additional information about the Company’s products and services is available at 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, 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
HEARTCOREENTERPRISES, INC.
UnauditedCondensed Consolidated Statements of Operations and Comprehensive Income (Loss)
| For<br> the six months ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Revenues | $ | 13,829,523 | $ | 4,946,298 | ||
| Cost of revenues | 6,688,004 | 2,392,652 | ||||
| Gross profit | 7,141,519 | 2,553,646 | ||||
| Operating<br> expenses: | ||||||
| Selling<br> expenses | 1,056,704 | 934,754 | ||||
| General<br> and administrative expenses | 5,133,094 | 4,319,248 | ||||
| Research<br> and development expenses | 119,232 | 525,487 | ||||
| Total<br> operating expenses | 6,309,030 | 5,779,489 | ||||
| Income<br> (loss) from operations | 832,489 | (3,225,843 | ) | |||
| Other income<br> (expenses): | ||||||
| Changes<br> in fair value of investments in marketable securities | (229,022 | ) | - | |||
| Changes<br> in fair value of investments in warrants | 166,107 | - | ||||
| Interest<br> income | 50,270 | 10,549 | ||||
| Interest<br> expenses | (82,454 | ) | (28,861 | ) | ||
| Other<br> income | 124,001 | 25,450 | ||||
| Other<br> expenses | (36,754 | ) | (55,224 | ) | ||
| Total<br> other expenses | (7,852 | ) | (48,086 | ) | ||
| Income<br> (loss) before income tax provision | 824,637 | (3,273,929 | ) | |||
| Income<br> tax expense (benefit) | 39,446 | 8,163 | ||||
| Net income<br> (loss) | 785,191 | (3,282,092 | ) | |||
| Less:<br> net loss attributable to non-controlling interest | (185,298 | ) | - | |||
| Net<br> income (loss) attributable to HeartCore Enterprises, Inc. | $ | 970,489 | $ | (3,282,092 | ) | |
| Other comprehensive<br> income: | ||||||
| Foreign<br> currency translation adjustment | 5,499 | 299,413 | ||||
| Total comprehensive<br> income (loss) | 790,690 | (2,982,679 | ) | |||
| Less:<br> comprehensive loss attributable to non-controlling interest | (187,258 | ) | - | |||
| Comprehensive<br> income (loss) attributable to HeartCore Enterprises, Inc. | $ | 977,948 | $ | (2,982,679 | ) | |
| Net income<br> (loss) per common share attributable to HeartCore Enterprises, Inc. | ||||||
| Basic | $ | 0.05 | $ | (0.18 | ) | |
| Diluted | $ | 0.05 | $ | (0.18 | ) | |
| Weighted average common shares<br> outstanding | ||||||
| Basic | 19,959,333 | 18,105,698 | ||||
| Diluted | 19,959,333 | 18,105,698 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
HEARTCORE ENTERPRISES, INC.
Condenssed Consolidated Balance Sheets
| December 31, | |||||
|---|---|---|---|---|---|
| 2022 | |||||
| (Unaudited) | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 4,238,741 | $ | 7,177,326 | ||
| Accounts receivable | 2,812,337 | 551,064 | |||
| Investments in marketable securities | 1,028,846 | — | |||
| Prepaid expenses | 878,539 | 538,230 | |||
| Note receivable | 300,000 | — | |||
| Due from related party | 43,782 | 48,447 | |||
| Other current assets | 79,339 | 220,070 | |||
| Total current assets | 9,381,584 | 8,535,137 | |||
| Non-current assets: | |||||
| Property and equipment, net | 331,389 | 203,627 | |||
| Operating lease right-of-use assets | 2,275,506 | 2,644,957 | |||
| Intangible asset, net | 4,834,375 | — | |||
| Goodwill | 3,276,441 | — | |||
| Long-term investment in warrants | 2,917,574 | — | |||
| Deferred tax assets | 238,783 | 263,339 | |||
| Security deposits | 339,052 | 244,395 | |||
| Long-term loan receivable from related party | 200,849 | 246,472 | |||
| Other non-current assets | 69 | 661 | |||
| Total non-current assets | 14,414,038 | 3,603,451 | |||
| Total assets | 23,795,622 | $ | 12,138,588 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and accrued expenses | 1,194,222 | $ | 497,742 | ||
| Accrued payroll and other employee costs | 561,698 | 360,222 | |||
| Due to related party | 4,250 | 402 | |||
| Current portion of long-term debts | 548,297 | 697,877 | |||
| Insurance premium financing | 239,785 | — | |||
| Factoring liability | 328,967 | — | |||
| Operating lease liabilities, current | 262,063 | 291,863 | |||
| Finance lease liabilities, current | 7,386 | 19,294 | |||
| Income tax payables | 109,625 | 2,747 | |||
| Deferred revenue | 2,375,063 | 1,724,519 | |||
| Other current liabilities | 262,267 | 53,027 | |||
| Total current liabilities | 5,893,623 | 3,647,693 | |||
| Non-current liabilities: | |||||
| Long term debts | 1,324,383 | 1,123,735 | |||
| Operating lease liabilities, non-current | 2,066,343 | 2,421,054 | |||
| Finance lease liabilities, non-current | — | 459 | |||
| Deferred tax liabilities | 1,353,625 | — | |||
| Other non-current liabilities | 124,936 | 138,018 | |||
| Total non-current liabilities | 4,869,287 | 3,683,266 | |||
| Total liabilities | 10,762,910 | 7,330,959 | |||
| Shareholders' equity: | |||||
| Preferred shares (0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 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 June 30, 2023 and December 31, 2022, respectively) | 2,083 | 1,764 | |||
| Additional paid-in capital | 19,258,681 | 15,014,607 | |||
| Accumulated deficit | (9,603,090 | ) | (10,573,579 | ) | |
| Accumulated other comprehensive income | 372,296 | 364,837 | |||
| Total HeartCore Enterprises, Inc. shareholders' equity | 10,029,970 | 4,807,629 | |||
| Non-controlling interest | 3,002,742 | — | |||
| Total shareholders' equity | 13,032,712 | 4,807,629 | |||
| Total liabilities and shareholders' equity | 23,795,622 | $ | 12,138,588 |
All values are in US Dollars.
HEARTCOREENTERPRISES, INC.
UnauditedCondensed Consolidated Statements of Cash Flows
| For<br> the six months ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Cash flows<br> from operating activities | ||||||
| Net income (loss) | $ | 785,191 | $ | (3,282,092 | ) | |
| Adjustments<br> to reconcile net income (loss) to net cash | ||||||
| used in<br> operating activities: | ||||||
| Depreciation<br> and amortization expenses | 306,097 | 46,688 | ||||
| Amortization<br> of debt issuance costs | 1,316 | 2,768 | ||||
| Non-cash<br> lease expense | 155,301 | 143,845 | ||||
| Deferred<br> income taxes | (75,240 | ) | 14,167 | |||
| Stock-based<br> compensation | 1,094,393 | 888,826 | ||||
| Warrants<br> received as noncash consideration | (4,009,335 | ) | - | |||
| Changes<br> in fair value of investments in marketable securities | 229,022 | - | ||||
| Changes<br> in fair value of investments in warrants | (166,107 | ) | - | |||
| Changes<br> in assets and liabilities: | ||||||
| Accounts<br> receivable | (596,312 | ) | (344,779 | ) | ||
| Prepaid<br> expenses | 1,245 | (266,030 | ) | |||
| Other<br> assets | 23,277 | (5,516 | ) | |||
| Accounts<br> payable and accrued expenses | (8,359 | ) | 281,567 | |||
| Accrued<br> payroll and other employee costs | 124 | 175,246 | ||||
| Due to<br> related party | 4,214 | 5,448 | ||||
| Operating<br> lease liabilities | (147,035 | ) | (148,125 | ) | ||
| Finance<br> lease liabilities | - | (288 | ) | |||
| Income<br> tax payables | 106,625 | (8,756 | ) | |||
| Deferred<br> revenue | 810,639 | 596,762 | ||||
| Other<br> liabilities | 116,382 | (193,598 | ) | |||
| Net cash<br> flows used in operating activities | (1,368,562 | ) | (2,093,867 | ) | ||
| Cash flows<br> from investing activities | ||||||
| Purchases of property and<br> equipment | (180,451 | ) | (30,963 | ) | ||
| Advance on note receivable | (300,000 | ) | - | |||
| Repayment of loan provided<br> to related party | 23,715 | 21,508 | ||||
| Payment<br> for acquisition of subsidiary, net of cash acquired | (724,910 | ) | - | |||
| Net cash<br> flows used in investing activities | (1,181,646 | ) | (9,455 | ) | ||
| Cash flows<br> from financing activities | ||||||
| Proceeds from initial public<br> offering, net of issuance cost | - | 13,602,554 | ||||
| Proceeds from issuance of<br> common shares prior to initial public offering | - | 220,572 | ||||
| Repurchase of common shares | - | (1,336,762 | ) | |||
| Payments for finance leases | (11,243 | ) | (24,189 | ) | ||
| Proceeds from long-term debt | - | 258,087 | ||||
| Repayment of long-term debts | (411,923 | ) | (469,166 | ) | ||
| Repayment of insurance premium<br> financing | (149,250 | ) | (167,955 | ) | ||
| Net proceeds from factoring<br> arrangement | 328,967 | - | ||||
| Payments for debt issuance<br> costs | (448 | ) | (1,030 | ) | ||
| Payment<br> for mandatorily redeemable financial interest | - | (430,489 | ) | |||
| Net cash<br> flows provided by (used in) financing activities | (243,897 | ) | 11,651,622 | |||
| Effect of exchange rate changes | (144,480 | ) | (221,960 | ) | ||
| Net change in cash and cash<br> equivalents | (2,938,585 | ) | 9,326,340 | |||
| Cash and cash equivalents<br> - beginning of the period | 7,177,326 | 3,136,839 | ||||
| Cash<br> and cash equivalents - end of the period | $ | 4,238,741 | $ | 12,463,179 | ||
| Supplemental<br> cash flow disclosures: | ||||||
| Interest<br> paid | $ | 40,083 | $ | 28,025 | ||
| Income<br> taxes paid | $ | - | $ | 3,013 | ||
| Non-cash<br> investing and financing transactions | ||||||
| Payroll<br> withheld as repayment of loan receivable from employees | $ | - | $ | 12,034 | ||
| Share<br> repurchase liability settled by issuance of common shares | $ | - | $ | 16 | ||
| Deferred<br> offering costs recognized against the proceeds from the offering | $ | - | $ | 178,847 | ||
| Insurance<br> premium financing | $ | 389,035 | $ | 388,538 | ||
| Liabilities<br> assumed in connection with purchase of property and equipment | $ | 2,199 | $ | 9,676 | ||
| Common<br> shares issued for acquisition of subsidiary | $ | 3,150,000 | $ | - | ||
| Investments<br> in warrants converted to marketable securities | $ | 1,257,868 | $ | - |