-Company’s Q1 2023 Revenue Nearly Exceeds its Full Year 2022 Revenue
-Company’s Q1 2023 Net Income Exceeds its Full Year 2022 Net Income

NEW YORK and TOKYO, May 22, 2023 (GLOBE NEWSWIRE) — HeartCore Enterprises, 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 first quarter ended March 31, 2023.

First Quarter 2023 and Recent Operational Highlights

  • Grew total number of global enterprise customers to 916 as of March 31, 2023.
  • Signed tenth Go IPO consulting service agreement with rYojbaba Inc.
  • Integrated ChatGPT, a natural language artificial intelligence model, with HeartCore CMS to support automatic content creation for websites.
  • Partnered with Works Applications and AIM Consulting to improve their respective digital auditing solutions through its DX suite of offerings.
  • Signed eighth and ninth Go IPO clients by engaging Libera Gaming Operations and ICheck Co.
  • Acquired a 51% majority stake in Sigmaways Inc., a software engineering service provider delivering IT solutions.
  • Announced that HeartCore’s Content Management System (“CMS”) was introduced by Subaru Group to its centralized management platform for approximately 100 Subaru websites.

Management Commentary
“The first quarter was impressive in several ways, namely behind our record revenue and net income figures,” said CEO Sumitaka Yamamoto. “Our core software division drove robust operating results stemming from newly adopted marketing techniques and customer acquisition methods that were implemented last year; these changes led to profitability within this sector of our company. We are seeing this encouraging trend continue to persist which is why we are confident our software division will have a strong 2023. Additionally, our recently acquired subsidiary, Sigmaways, has been seamlessly integrated within our core operations and we’ve begun to manifest the synergies and capitalize on all joint projects.

“A significant contributing factor to our record-breaking quarter relates to our Go IPO business. Following the completion of two IPOs this past quarter, we’ve been able to reap the benefits from the warrants we received as part of the deal consummation. As I’ve previously shared, we have just scratched the tip of the iceberg with our Go IPO business line, as we expect to benefit from the closing of another six deals for the remainder of this year, including our biggest one yet around SBC Medical Group, which will add approximately $32.4 million to our top line. With our two-pronged growth strategy going into full effect, I am very confident in our team’s ability to make 2023 the strongest year for HeartCore across several measures.”

First Quarter 2023 Financial Results
Revenues increased 284% to $8.7 million compared to $2.3 million in the same period last year. The increase was primarily due to the expansion of the Go IPO business, as a growing number of Japanese venture companies continue to express interest in going public on the Nasdaq, in addition to the acquisition of Sigmaways and its subsidiaries.

Gross profit increased 361% to $5.6 million (gross margin of 64%) from $1.2 million (gross margin of 54%) in the same period last year. The increase was primarily due to the aforementioned expansion of the Company’s Go IPO business.

Operating expenses increased to $3.3 million from $2.8 million in the same period last year. The increase was primarily due to increased selling expenses, as well as increased general and administrative expenses.

Net income was $1.8 million, or $0.10 per diluted share, compared to net loss of approximately $1.6 million or $(0.09) per diluted share last year. The increase in net income was primarily due to the aforementioned expansion of the Company’s Go IPO business in addition to relatively stable operating expenses.

As of March 31, 2023, the Company had cash and cash equivalents of $5.2 million compared to $7.2 million as of December 31, 2022.

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 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, 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
(949) 574-3860

HeartCore Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
    For the three months
ended March 31,
    For the three months
ended March 31,
    2023     2022
Revenues $ 8,734,150     $ 2,276,001  
Cost of revenues   3,101,066       1,055,356  
Gross profit   5,633,084       1,220,645  
Operating expenses:          
Selling expenses   568,642       205,918  
General and administrative expenses   2,685,207       2,468,933  
Research and development expenses   79,624       108,259  
Total operating expenses   3,333,473       2,783,110  
Income (loss) from operations   2,299,611       (1,562,465 )
Other income (expenses):          
Changes in fair value of investments in warrants   193,365        
Interest income   31,605       1,458  
Interest expenses   (39,840 )     (11,271 )
Other income   14,201       16,673  
Other expenses   (29,457 )     (23,662 )
Total other income (expenses)   169,874       (16,802 )
Income (loss) before income tax provision   2,469,485       (1,579,267 )
Income tax expense (benefit)   661,448       (816 )
Net income (loss)   1,808,037       (1,578,451 )
Less: net loss attributable to non-controlling interest   (74,252 )      
Net income (loss) attributable to HeartCore Enterprises, Inc. $ 1,882,289     $ (1,578,451 )
Other comprehensive income (loss):          
Foreign currency translation adjustment   (25,034 )     80,053  
Total comprehensive income (loss)   1,783,003       (1,498,398 )
Less: comprehensive loss attributable to non-controlling interest   (76,542 )      
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. $ 1,859,545     $ (1,498,398 )
Net income (loss) per common share attributable to HeartCore Enterprises, Inc.      
Basic $ 0.10     $ (0.09 )
Diluted $ 0.10     $ (0.09 )
Weighted average common shares outstanding          
Basic   19,066,160       17,265,332  
Diluted   19,066,160       17,265,332  
HeartCore Enterprises, Inc.
Condensed Consolidated Balance Sheets
    March 31,   December 31,
    2023   2022
Current assets:        
Cash and cash equivalents $ 5,209,915   $ 7,177,326  
Accounts receivable   2,380,128     551,064  
Short-term investment in warrants   437,812      
Prepaid expenses   919,916     538,230  
Due from related party   47,536     48,447  
Other current assets   31,534     220,070  
Total current assets   9,026,841     8,535,137  
Non-current assets:        
Property and equipment, net   214,566     203,627  
Operating lease right-of-use assets   2,549,834     2,644,957  
Intangible asset, net   4,993,750      
Goodwill   3,276,441      
Long-term investment in warrants   3,764,888      
Deferred tax assets   245,997     263,339  
Security deposits   367,981     244,395  
Long-term loan receivable from related party   229,955     246,472  
Other non-current assets   75     661  
Total non-current assets   15,643,487     3,603,451  
Total assets $ 24,670,328   $ 12,138,588  
Current liabilities:        
Accounts payable and accrued expenses $ 1,160,309   $ 497,742  
Accrued payroll and other employee costs   416,779     360,222  
Due to related party   2,923     402  
Current portion of long-term debts   640,534     697,877  
Insurance premium financing   352,518      
Factoring liability   173,582      
Operating lease liabilities, current   288,081     291,863  
Finance lease liabilities, current   13,663     19,294  
Income tax payables   681,830     2,747  
Deferred revenue   1,530,472     1,724,519  
Other current liabilities   225,167     53,027  
Total current liabilities   5,485,858     3,647,693  
Non-current liabilities:        
Long term debts   1,490,664     1,123,735  
Operating lease liabilities, non-current   2,314,160     2,421,054  
Finance lease liabilities, non-current       459  
Deferred tax liabilities   1,398,250      
Other non-current liabilities   135,536     138,018  
Total non-current liabilities   5,338,610     3,683,266  
Total liabilities   10,824,468     7,330,959  
Shareholders’ equity:        
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 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 March 31, 2023 and December 31, 2022, respectively)   2,083     1,764  
Additional paid-in capital   19,079,516     15,014,607  
Accumulated deficit   (8,691,290 )   (10,573,579 )
Accumulated other comprehensive income   342,093     364,837  
Total HeartCore Enterprises, Inc. shareholders’ equity   10,732,402     4,807,629  
Non-controlling interest   3,113,458      
Total shareholders’ equity   13,845,860     4,807,629  
Total liabilities and shareholders’ equity $ 24,670,328   $ 12,138,588  
HeartCore Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
    For the three months ended March 31,   For the three months ended March 31,
    2023   2022
Cash flows from operating activities        
Net income (loss) $ 1,808,037   $ (1,578,451 )
Adjustments to reconcile net income (loss) to net cash        
used in operating activities:        
Depreciation and amortization expenses   123,312     24,889  
Amortization of debt issuance costs   758     866  
Non-cash lease expense   76,017     75,986  
Deferred income taxes   (17,284 )   6,311  
Stock-based compensation   915,228     422,164  
Warrants received as noncash consideration   (4,009,335 )    
Changes in fair value of investments in warrants   (193,365 )    
Changes in assets and liabilities:        
Accounts receivable   (66,833 )   (217,638 )
Prepaid expenses   (45 )   (488,970 )
Other assets   78,241     (34,896 )
Accounts payable and accrued expenses   (94,363 )   (79,982 )
Accrued payroll and other employee costs   (178,733 )   (27,492 )
Due to related party   2,544      
Operating lease liabilities   (73,147 )   (78,226 )
Finance lease liabilities   (53 )   (174 )
Income tax payables   678,725     (10,037 )
Deferred revenue   (167,873 )   (295,176 )
Other liabilities   70,110     (113,027 )
Net cash flows used in operating activities   (1,048,059 )   (2,393,853 )
Cash flows from investing activities        
Purchases of property and equipment   (9,409 )   (18,903 )
Advance and loan provided to related party       (25,480 )
Repayment of loan provided to related party   11,955     9,102  
Payment for acquisition of subsidiary, net of cash acquired   (724,910 )    
Net cash flows used in investing activities   (722,364 )   (35,281 )
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   (5,658 )   (14,916 )
Proceeds from long-term debt       258,087  
Repayment of long-term debts   (265,255 )   (308,121 )
Repayment of insurance premium financing   (36,517 )   (41,280 )
Repayment to related party       (903 )
Net proceeds from factoring arrangement   173,582      
Payments for debt issuance costs   (448 )   (1,030 )
Payment for mandatorily redeemable financial interest       (430,489 )
Net cash flows provided by (used in) financing activities   (134,296 )   13,284,474  
Effect of exchange rate changes   (62,692 )   (78,293 )
Net change in cash and cash equivalents   (1,967,411 )   10,777,047  
Cash and cash equivalents – beginning of the period   7,177,326     3,136,839  
Cash and cash equivalents – end of the period $ 5,209,915   $ 13,913,886  
Supplemental cash flow disclosures:        
Interest paid $ 16,968   $ 13,262  
Income taxes paid $   $ 1,489  
Non-cash investing and financing transactions        
Payroll withheld as repayment of loan receivable from employees $   $ 2,065  
Expense paid by related party on behalf of the Company $   $ 25,480  
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  
Liabilities assumed in connection with purchase of property and equipment $ 6,288   $  
Common shares issued for acquisition of subsidiary $ 3,150,000   $