HTCR: HeartCore Announces Sale of $9.0 Million in Go IPO Client Warrants

By Thomas Kerr, CFA

On April 1, 2024, HeartCore Enterprises HTCR announced it had authorized a dividend payment in the amount of $0.02 per share which will total $417,283 to be paid by the company.

After evaluating the Company's balance sheet and financial profile, HeartCore and its Board of Directors deemed it was in the best interest of the company and stockholders to declare the d dividend. The record date for holders to participate in the dividend is April 26, 2024, and the payment date will be May 3, 2024. HeartCore may issue quarterly dividends going forward, contingent upon the financial results.

HeartCore CEO Sumitaka Kanno Yamamoto stated, "I am pleased to announce our inaugural dividend payment, a testament to our strong financial health and cash management throughout the year. After a thorough assessment of our balance sheet and the recent influx of cash from the sale of a Go IPO client warrant, we felt that rewarding our valued shareholders was appropriate and long overdue. We are confident in the current Go IPO pipeline that has become a revenue-generating catalyst for the Company, and eagerly anticipate sharing further updates as they unfold. Looking ahead, we anticipate sales and gross profit to reach their highest levels since HeartCore's inception in the first quarter of 2024. We thank all of our valued shareholders for your continued support, and we're excited for the growth that lies ahead in 2024."

On March 18, 2024, the company announced that it had signed an agreement with PharmaBio Corporation for its 13th Go IPO consulting service win. As compensation for its services, HeartCore expects to generate an aggregate of $500,000 in initial fees and $300,000 in success fees. In addition, HeartCore has received a warrant to acquire 3.0% of PharmaBio's common stock, on a fully diluted basis.

HeartCore CEO Sumitaka Kanno Yamamoto stated, "I am pleased to announce our 13th Go IPO contract win and our second contract for 2024. With the recent $9 million generated from the sale of a Go IPO client's warrant, this business remains a pivotal driver for our long-term financial growth and our ability to pursue M&A opportunities within our software business. As our clients achieve successful listings on U.S. exchanges, HeartCore is poised to reach new heights, fueled by the revenue influx from the post-IPO sale of additional Go IPO client warrants. Our team's reputation and services continue to solidify, establishing us as the preferred, go-to U.S. IPO advisory firm within the Japanese markets. We look forward to announcing our client's successful listings and eagerly await the financial benefits that will help stabilize and propel the HeartCore business. Our team is confident that 2024 will be the strongest year in company history."

On March 4, 2024, HeartCore announced that it had signed an agreement to sell a Go IPO client's warrants to a Japanese financial institution, with the total contract value amounting to $9 million in cash.

By selling the warrants it received for the Go IPO client, HeartCore is able to realize the full $9.0 million payment in cash in the 1st quarter of 2024 which will significantly bolster its cash reserves. This addition of capital strategically positions the company to pursue its M&A efforts with a focus on expanding its software business as well as driving global expansion initiatives. The company intends to sell additional warrants as more Go IPO clients list on major U.S. exchanges.

On February 29, 2024, the company announced that it had signed an agreement with Jyo Co., Ltd for its 12th Go IPO consulting service win.

As part of the agreement, HeartCore will assist Jyo in its efforts to go public and list on the Nasdaq Stock Market or the New York Stock Exchange. Through Go IPO, the Heartcore services clients by assisting throughout the audit and legal firm hiring process, translating requested documents into English, assisting in the preparation of documentation for internal controls required for an initial public offering or de-SPAC, providing general support services, assisting in the preparation of the S-1 or F-1 filing, and more. As compensation for its services, HeartCore expects to generate from Jyo an aggregate of $700,000 in initial fees. In addition, HeartCore has received a warrant to acquire 2% of Jyo's common stock.

We maintain our 2023 revenue estimate of $23.3 million and our 2023 EPS estimate of ($0.08). Our 2024 revenue estimate is increased to $24.3 million, and our 2024 EPS estimate is $0.44. We introduce a 2025 EPS estimate of $0.55.

We maintain our target price of $3.00 pending results of full year 2023 and 1st quarter 2024 financial results.

We believe this to be a conservative estimate as revenue growth rates could greatly exceed our estimates as a result of better than expected client IPO revenues. There is also potential for gross margin improvements above our estimates. Our discount rate also utilizes a high equity risk premium to account for execution risks and possible macroeconomic disruptions.

The markets which HeartCore is focused on are expected to produce above average growth rates for an extended period of time. We expect the company's revenues to grow at solid double-digit rates over the next 10 years.