HeartCore Provides Update on March Go IPO Warrant Sale and Encouraging Outlook

Rhea-AI Summary

HeartCore Enterprises, a Tokyo-based enterprise software and consulting firm, updated the market on the sale of a Go IPO client’s warrant. In March 2024, they sold the warrant to a Japanese financial institution for $9 million. By March 31, 2024, $5 million was received, with the remaining $4 million received in April. After referral fees of $3.36 million, net sales were $5.64 million. However, due to accounting rules, the $9 million will be recognized as revenue only when the client becomes public, expected in Fall 2024. Until then, it is classified as debt. Despite this, the funds have been utilized for initiatives including a dividend payment. HeartCore’s Go IPO pipeline remains strong with three new clients in 2024, generating $1.7 million in initial fees and warrants between 2-3%.

Positive

• HeartCore received $9 million from the warrant sale, enhancing liquidity.
• Net sales from the deal amounted to $5.64 million after referral fees.
• Funds from the sale have been directed to initiatives, including dividend payments.
• HeartCore gained three new clients in 2024, adding $1.7 million in initial fees.
• The Go IPO pipeline remains strong and a key growth driver.

Negative

• The $9 million from the warrant won't be recognized as revenue until Fall 2024.
• The entire $9 million is classified as debt until the client goes public.
• Referral fees to So Management amounted to $3.36 million, reducing net proceeds.

Insights

Financial Analyst

HeartCore Enterprises has announced updates regarding a significant transaction: the sale of a Go IPO client's warrant for $9 million. This is important for investors to consider. Despite the receipt of the full payment, the company won't record this as revenue until the client becomes a publicly listed company, expected in Fall 2024. Until then, the $9 million will be classified as debt on the balance sheet.

For investors, this transaction means that although HeartCore has generated $5.64 million in net sales after referral fees, the revenue won't appear in the near-term financials, affecting immediate earnings reports. However, the cash injection allows the company to fund initiatives, including dividends, potentially increasing shareholder value in the long term.

HeartCore's robust Go IPO pipeline, with $1.7 million in initial fees and new client warrants, signals continued growth. Investors should watch the pending IPOs closely, as successful public listings would convert the current debt into recognized revenue, positively impacting future financials and possibly stock prices. This structure aligns with typical accounting practices for contingent revenue, ensuring transparency and compliance.

Market Research Analyst

The announcement from HeartCore Enterprises offers a promising outlook for the company's future growth through its Go IPO pipeline. With three new client wins and initial fees totaling approximately $1.7 million, HeartCore is positioned to benefit significantly once these clients go public. The warrants acquired between 2% and 3% could translate into substantial future earnings based on the success of these IPOs.

For retail investors, the key takeaway is that while short-term financials might not reflect the full benefits of this transaction, the long-term potential is considerable. The anticipation of multiple companies going public this year could result in significant revenue recognition once these IPOs are completed.

In summary, HeartCore's strategy of leveraging its Go IPO pipeline as a growth driver aligns well with market trends, where facilitating IPOs can be a lucrative business. Investors should monitor the progress of these IPOs closely, as they will be pivotal in determining the company's future financial health and stock performance.

NEW YORK and TOKYO, May 13, 2024 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc. (Nasdaq: HTCR) (“HeartCore” or the “Company”), a leading enterprise software and consulting services company based in Tokyo, announced updates around the previously announced sale of a Go IPO warrant.

In March 2024, HeartCore announced the sale of a Go IPO client’s warrant to a Japanese financial institution for $9 million. During the first quarter ended March 31, 2024, $5 million was received, with the remaining $4 million received in April 2024. With referral fees of $3.36 million having been made to So Management Inc. for sourcing this lead, the Company generated $5.64 million in net sales. However, due to specific accounting treatments and stipulations in the warrant agreement, HeartCore will not recognize the $9 million as revenue on the balance sheet until the client becomes a publicly listed company, which is expected to occur in Fall 2024. Until then, the $9 million will be classified as debt on the balance sheet.

“Although the successful sale of warrants won’t be reflected in our upcoming quarterly financials, HeartCore has already received the full $9 million in gross payment from the financial institution we sold the Go IPO warrant to in March,” said HeartCore CEO Sumitaka Kanno Yamamoto. “Although we have not yet recorded the $9 million as revenue, even though $5 million was received before the close of the first quarter, we have already reaped the benefits of this deal and have directed the capital towards various initiatives, including the authorization of our dividend payment announced in early April.”

HeartCore’s Go IPO pipeline continues to remain robust, with three new client wins announced year to date. The Company has received approximately $1.7 million in initial fees and received warrants between 2% and 3% from these contract wins.

HeartCore CEO Sumitaka Kanno Yamamoto added: “Our Go IPO pipeline remains a key driver and catalyst to fuel our growth and expansion. We have several companies slated to go public this year, and we anticipate capitalizing on the financial benefits and opportunities presented post-IPO. Our outlook on the IPO market remains positive, and we are confident in our ability to continue drumming up interest in companies looking to go public.”

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 IPOSM 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
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
HTCR@gateway-grp.com
(949) 574-3860

FAQ

What is the recent update from HeartCore Enterprises about their Go IPO warrant sale?

HeartCore announced the sale of a Go IPO client’s warrant for $9 million to a Japanese financial institution, with $5 million received by March 31, 2024, and $4 million in April 2024.

How much net sales did HeartCore generate from the Go IPO warrant sale?

After referral fees, HeartCore generated $5.64 million in net sales from the warrant sale.

When will HeartCore recognize the $9 million from the warrant sale as revenue?

The $9 million will be recognized as revenue when the client becomes a publicly listed company, expected in Fall 2024.

How is the $9 million from the Go IPO warrant sale currently classified on HeartCore's balance sheet?

The $9 million is classified as debt on the balance sheet until the client goes public.

How much has HeartCore received in initial fees from new clients in 2024?

HeartCore received approximately $1.7 million in initial fees from three new clients in 2024.

What percentage of warrants did HeartCore receive from new contract wins in 2024?

HeartCore received warrants between 2% and 3% from new contract wins in 2024.