Item 1A. Risk Factors 34
Item 1B. Unresolved Staff Comments 68
Item 2. Properties 68
Item 3. Legal Proceedings 69
Item 4. Mine Safety Disclosures 69
Part II
Item 6. Reserved 70
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83
Item 8. Financial Statements and Supplementary Data 83
Item 9A. Controls and Procedures 83
Item 9B. Other Information 84
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 84
Part III
Item 10. Directors, Executive Officers and Corporate Governance 84
Item 11. Executive Compensation 90
Item 14. Principal Accountant Fees and Services 105
Part IV
Item 15. Exhibit and Financial Statement Schedules 106
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements contained in this annual report may constitute “forward-looking statements” for purposes of the federal
securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The
words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify forward-looking statements, but
the absence of these words does not mean that a statement is not forward-looking.
The
forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
● the level of demand for our products and services;
● competition in our markets;
● our ability to grow and manage growth profitably;
● our ability to access additional capital;
● changes in applicable laws or regulations;
● our ability to attract and retain qualified personnel;
Should
one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities
laws.
PART
I
ITEM
1. BUSINESS
This
Business section, along with other sections of this annual report on Form 10-K, includes statistical and other industry and market data
that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party
research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although
they do not guarantee the accuracy or completeness of such information. While we believe that these industry publications and third-party
research, surveys and studies are reliable, we have not independently verified such data and we do not make any representation as to
the accuracy of the information. Unless the context
otherwise requires, “HeartCore,” “we,” “us,” “our,” or the “Company” refers
to HeartCore Enterprises, Inc. and its consolidated subsidiary, including, but not limited to, HeartCore Co., Ltd.
Overview
We
are a leading software development company based in Tokyo, Japan. We provide software through two business units. The first business
unit includes a customer experience management business that has been in existence for 12 years. Our CXM Platform includes marketing,
sales, service and content management systems, as well as other tools and integrations, that enable companies to attract and engage customers
throughout the customer experience. We also provide education, services and support to help customers be successful with our CXM Platform.
The
second business unit is a digital transformation business which provides customers with robotics process automation, process mining and
task mining to accelerate the digital transformation of enterprises. We also have an ongoing technology innovation team to develop software
that supports the narrow needs of large enterprise customers.
We
have made significant investments in our sales and marketing efforts globally. As of December 31, 2021, our sales and marketing organization
was comprised of 45 employees including our field sales organization, which maintains a physical sales presence in the Japanese software
market. Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified
revenue and customer base. As of December 31, 2021, our combined business units (customer experience management business unit and digital
transformation business unit) had 839 total customers in Japan, of which 581, or 69.2%, were paying customers, and 24 total customers
outside Japan, of which 2, or 1.0%, was a paying customer. Our 280 non-paying customers were originally paying customers that utilized
our paid services but now use a free version of the CXM Platform. There is the potential for non-paying customers to become paying customers
again if and when they start utilizing our paid services again.
Industry
Overview
Customer
Experience Management Business
Companies
must manage a huge amount of content, collaborate with other kinds of business processes, and build infrastructure to fulfill customers’
needs. To make it happen, companies need a content management system that allows easy implementation of a wide range of features including
content creation, analysis, search capability and access controls into their websites, and enables them to deliver and receive content
at the best time responding market changes. A customer experience management system is also becoming essential for companies to manage
customers and deliver personalized content based on the users’ behavior, device, location and context. A customer experience management
system is also required to analyze big data to deliver even the subconscious wants and needs of customers. Furthermore, these capabilities
are not supposed to be limited to general websites but also to various kinds of services such as E-commerce, smartphone sites, smartphone
apps, social networking services, blogs, and digital signage. Content management systems and customer experience management systems need
to provide rich features to fill the new generation of customers’ needs.
Digital
Transformation Business
RPA
is a technology that allows automation for a defined set of tasks. RPA robots can emulate most human-computer interactions to carry out
error-free tasks at high volume and speed. Some common tasks RPA can do include: (i) invoice processing; (ii) process sales orders; (iii)
account reconciliation; (iv) enterprise resource planning data entry for core processes such as finance, human resources, manufacturing,
supply chain, services, and procurement; (v) employee onboarding; (vi) payroll; and (vii) data queries.
As
companies have strived to automate, it has become more and more challenging to identify RPA opportunities. This has included uncovering
processes that would be good candidates for automation and having fundamental metrics about those processes (via task mining and process
mining technology) at their disposal – like utilization and the specific steps in the process if it is not already documented –
to aid them in their decision.
Task
mining is a technology that enables organizations to discover, understand, and analyze the tasks employees perform as they relate to
completing larger processes. Task mining software works by monitoring the actions users take. A recorder is installed on an employee’s
computer to capture their interactions in the different applications they use, recording data like keystrokes, clicks, data entry, etc.,
to uncover how tasks are completed within the organization. The purpose of using task mining software is to discover and understand the
tasks employees are performing. The ultimate objective is to find ways to improve how those tasks are carried out or automate them to
increase operational efficiency, reduce errors, and improve employee engagement.
Process
mining is a technology that investigates the mountains of data in enterprise event logs to discover and present end-to-end processes
that the organization is performing to complete work. Event logs are essentially banks of data that store different information. The
benefit of process mining software is that it presents the process it successfully mined, along with the process’ variants and
suggestions on how to optimize and improve that process. Like task mining, the most common use case for adopting process mining technology
is to improve processes, with the ideal goal of automating them for all the benefits and returns that come with automation, like improved
customer and employee experiences.
Industry
Characteristics
Explosive
Growth of Cloud-Based Applications Creating a New Era of IT Complexity. Businesses around the world are spending hundreds of billions
of dollars to adopt applications that help advance digital transformation and drive competitive advantages. With the proliferation of
cloud technologies and SaaS, traditional software suites have been disaggregated into point solutions. For example, human capital management
software has been segregated across recruiting, payroll, benefits administration, and other key business functions. As a result, enterprises
have transitioned from managing a handful of multi-purpose, largely on-premises applications to managing hundreds and even thousands
of specialized point solutions deployed across on-premises, cloud, and hybrid environments. According to the Wall Street Journal, in
2019 the number of software applications deployed by large firms across all industries worldwide had increased by approximately 70% over
the previous four years. These applications, which were generally not designed for interoperability, run in tandem with long-running,
legacy technologies. The increasing volume of applications has a compounding effect on the complexity of business processes and the IT
environments that support them.
The
Benefits of Digital Transformation Have Yet to Make Their Way to the Workforce. Modern enterprise applications enable deep and nuanced
functionalities, such as conducting personalized marketing campaigns, predictive service delivery, and real time visibility of goods
movement across the supply chain. However, despite massive functional advancement, the true promise and potential of digital transformation—reallocating
human capital towards cognitive, higher-value activities—remains elusive, which is limiting improvements in productivity. For example,
in the United States, non-farm real output per hour grew 31% during the decade ended December 31, 2009, but only 13% in the subsequent
decade ended December 31, 2019.
Individual
Business Processes Rely on Multiple Business Applications, and Workers to Orchestrate Them. While specialized applications deliver
extensive functionality, they do not account for the full spectrum of how work gets done. The proliferation of specialized applications
has resulted in humans being the connective tissue in an enterprise, working across a wide range of applications that individually are
not built to address the needs of the actual processes they are supporting. As a result, activities performed by many workers today are
still manual, mundane, and administrative tasks, limiting workers from focusing on higher-value activities that can directly improve
business performance.
Automation
is the New Frontier of Competitive Differentiation. Enterprises are demanding a new approach to unify, tailor, and run applications
without significant IT resources or changes to existing infrastructure. Automation enables organizations to design and optimize business
processes to improve productivity and business performance. Additionally, automation solutions that can accurately and consistently emulate
human behavior can work within existing business processes in a way that traditional applications cannot. This allows businesses to harness
the power of specialized applications in a differentiated manner. With the ability to emulate human behavior, this new approach to automation
is disrupting traditional automation and transforming data-processing work by allowing customers to find efficiencies without materially
changing business processes and supporting infrastructure.
Empowering
Workers to Automate their Personal Workflows is Leading to a Democratization of Automation. The emerging workforce is graduating
with increasingly advanced technical skills and training in automation. Individuals are entering the workforce with higher expectations
related to job impact, satisfaction, and efficiency, and view software as a driving force in realizing those expectations. As a result,
organizations are looking to empower workers with tools to optimize the more tedious parts of their jobs. The combination of technology
that can emulate human behavior and a workforce with the knowledge and tools to create their own automations has enabled enterprises
to begin to automate a significant number of use cases, from individual tasks to enterprise-wide processes.
Cost
of Skilled Human Capital is Accelerating the Evolution Towards the Fully Automated Enterprise. The cost of skilled human capital
continues to rise due to growing demand. We believe it is increasingly imperative for enterprises to leverage automation to liberate
workers from menial, repetitive, and less productive tasks and to better utilize the positive qualities that only humans have, such as
abstract thinking, making connections, dealing with ambiguity, creativity, innovation, passion, and community engagement. We believe
this will drive business value and greater employee engagement. According to a 2020 Gallup study, business units with highly engaged
employees are more present and productive; more attuned to the needs of customers; and more observant of processes, standards, and systems.
When taken together, the behaviors of highly engaged business units result in 21% greater profitability.
Limitations
of Existing Offerings
A
number of technology companies have attempted to address the automation needs of organizations through the application of business process
management, application development software offerings, RPA tools, and AI point offerings, as well as other horizontal software applications.
However, these existing offerings are challenged by a number of inherent limitations, including:
Lack
of An End-to-End Software. Many existing automation software offerings are point technologies and cannot offer end-to-end automation
capabilities on an integrated software.
Not
Capable of Emulating Human Behavior, Relying too Heavily on APIs. Many existing offerings do not effectively integrate AI computer
vision and machine learning (“ML”) capabilities needed to accurately identify and emulate human actions in conjunction with
APIs. Without these capabilities, organizations are limited to pursuing automation only within the narrow pathways permitted by existing
APIs. Even when applications have an API, the functionality provided often does not fully capture what is required to conduct the business
process. As the scope of a task or process expands from a single, discrete action to a sequence of multiple steps and sub-processes,
the limitation in scope and complexity of supported API actions becomes more of an impediment to fully emulating the process. This frequently
prevents this work from being truly automated solely through APIs alone. Bringing APIs together with an emulative approach made possible
by AI computer vision and machine learning greatly expands the use cases for automation.
Inability
to Automate Across Applications. While business processes typically involve multiple applications, many existing automation capabilities
are built into specific applications and are limited in their ability to automate business processes across multiple applications. Accordingly,
we believe enterprises build inefficient business processes to compensate for limited cross-functional automation capabilities.
Difficult
to Link AI Capabilities to Execution. AI and ML (“AI/ML”) capabilities are needed to automate cognitive, high-value tasks.
In recent years, enterprises have made significant investments in developing AI/ML models. However, it is difficult to leverage these
models as the environments for developing them, typically used by data scientists, are distinct from the environments where processes
are carried out, typically by employees using enterprise applications. This separation of environments limits the ability of an organization
to deploy models that are necessary to automate complex processes.
Need
to Change an Enterprise’s Underlying Infrastructure. Existing offerings generally are unable to emulate the human’s role
in executing a business process, requiring organizations to make significant changes either to their applications and infrastructure
or to the business processes themselves. The costs associated with changing underlying infrastructure and business processes make it
uneconomical to automate anything outside of narrowly defined, high-volume tasks.
Unable
to Realize Full Value of Automation Throughout an Organization. Existing solutions do not typically make automations accessible to
everyone within the organization as they are often built with non-intuitive user interfaces and code heavy technology stacks. These solutions
are too technical for most knowledge workers, limiting their application to a small number of use cases and users with significant developer
experience. Existing solutions also frequently require additional time and resources to enable the resulting automation to be used by
non-technical workers or to adapt the automation to nonstandard circumstances and environments.
Lack
Governance Capabilities at Scale. Existing offerings do not typically offer centralized, secure governance capabilities to enforce,
manage, and deploy organizational development standards.
Difficult
to Deploy. We believe existing automation solutions generally require complicated, invasive implementation processes that, in turn,
require extensive upfront and ongoing training and time commitment. This makes it difficult to build and maintain automations, resulting
in the persistence of manual processes throughout enterprises.
Lack
of Openness and Interoperability. Many existing solutions are not modular and lack the ability to integrate new, third-party technologies
and operate with customized applications. Enterprises using these solutions are locked into a limited set of proprietary options not
built for the future.
Lack
of an Engaged Community of Automation Developers. Many existing automation vendors do not have open software and have not invested
the time and resources required to cultivate a vibrant ecosystem of automation developers that freely exchange innovations and best practices.
Addressable
Market
Our
software addresses the market for intelligent process automation, which, in February 2021, International Data Corporation estimates to
grow at a five-year compound annual growth rate of approximately 18.4% to $37.9 billion by the end of 2024. However, we believe that
this does not fully encompass the opportunity associated with our vision of the fully automated enterprise.
According
to an estimate by Bain & Company in the report Beyond Cost Savings: Reinventing Business Through Automation, the expansion
of automation software by incorporating broader capabilities and technologies has increased the size of the addressable market for automation
software to approximately $65 billion.
The
size of our addressable market opportunity is underpinned by the substantial amount of business processes that could be improved through
automation but are not currently automated. According to Forbes, there are more than 1 billion knowledge workers globally as of December
10, 2020. We expect our estimated global market opportunity will continue to expand as customers increase the size of their business
units and hire additional employees, resulting in a greater number of users and processes that can benefit from automation throughout
these enterprises. Additionally, we believe that we are unlocking a myriad of still unexplored automation possibilities as we continue
to contribute to this market. We believe those possibilities represent a significant greenfield opportunity for us.
Organizations
across the world are only beginning to understand the power of automation and we believe we are at the forefront of a revolution in the
way that people do work. We believe that the opportunity that lies ahead of us is largely untapped and has the potential to be one of
the largest ever in enterprise software.
Our
CXM Platform
Our
CXM Platform includes marketing, sales, service and content management systems, as well as other tools and integrations, that enable
companies to attract and engage customers throughout the customer experience. We also provide education, services and support to help
customers be successful with our CXM Platform.
We
focus on selling our CXM Platform to mid-market business-to-business companies, which we define as companies that have between 100 and
5,000 employees. We sell our CXM Platform on a subscription basis. As of December 31, 2021, our combined business units (customer experience
management business unit and digital transformation business unit) had 839 total customers in Japan, of which 581, or 69.2%, were paying
customers and 24 total customers outside Japan, of which 2, or 1.0%, was a paying customer. Our 280 non-paying customers were originally
paying customers that utilized our paid services but now use a free version of the CXM Platform. There is the potential for non-paying
customers to become paying customers again if and when they start utilizing our paid services again.
Advantages
of our CXM Platform
Our
CXM Platform features a central database of lead and customer interactions and integrated applications designed to help businesses attract
visitors to their websites, convert visitors into leads, close leads into customers, and fulfill the needs of customers so they become
promoters of those businesses.
Designed
to Help Companies Grow Better. Our CXM Platform was architected from the ground up to enable businesses to transform their marketing,
sales, services, and content management playbook to meet the demands of customers today. Our CXM Platform includes both a system of record
for maintaining a unified view of the customer experience and a system of engagement for efficiently engaging customers through search
engine optimization, web content, social, blogging, email, marketing automation, messaging, support ticketing, knowledge base and more.
And it is also easy to integrate with customer data platforms.
Ease
of Use of a Single, Extensible Platform. We provide a set of integrated applications on a common platform, which offers businesses
ease of use and simplicity. Our CXM Platform has one login, one user interface, one database, and one team for support. Our CXM Platform
starts free and grows with our customers. It is designed to scale its power and technical sophistication without losing its ease-of-use.
In addition to being a comprehensive suite itself, our CXM Platform seamlessly integrates with external applications, making it easy
to extend the functionality of our CXM Platform and customize it for any business.
Power
of a Unified Customer View. At the core of our CXM Platform is a single customer experience management database for each business
that captures its lead and customer activity throughout the customer lifecycle. Our CXM Platform creates a unified timeline incorporating
all the interactions with a particular customer. In contrast to many customer experience management system suites which are cobbled together,
we have a set of core functionalities, including reporting, content, messaging, data, and automation, which runs across our product lines,
which we refer to as functions.
Scalability.
Our CXM Platform was designed and built to serve a large number of customers with demanding use cases. Our CXM Platform currently processes
billions of data points each week, and we use leading global cloud infrastructure providers and our own automation technology to dynamically
allocate capacity to handle processing workloads of all sizes. We have built our CXM Platform on modern, scalable distributed technologies.
We built the infrastructure to support hundreds of microservices and can easily add new features and capabilities to the CXM Platform.
We utilize a variety of open-source distributed systems including customer data platform and consent management platform to scale our
data collection and processing. Our scalability gives us flexibility for future growth and enables us to service a large variety of businesses
of different sizes across different industries.
Extensible
and Open Architecture. Our CXM Platform features a variety of open APIs that allow easy integration of our platform with other
applications. We enable our customers to connect our platform to their other applications, such as ecommerce, event management and videoconferencing
applications. By connecting third-party applications, our customers can leverage our centralized inbound database to perform additional
functions and analysis.
CXM
Platform Functions
Our
CXM Platform features integrated applications and tools that enable companies to create a cohesive and adaptable customer experience.
Each function can be used standalone or in conjunction with the other functions. Our functions are available in both free and paid tiers
(i.e., Starter, Professional and Enterprise) with gradually increasing levels of functionality that support the needs of our customers
as they see success with our tools and their businesses grow.
Customer
Experience Management. The core of our CXM Platform is a single database of lead and customer information that allows businesses
to track their interactions with contacts and customers, manage their sales activities, and report on their pipeline and sales. This
allows a complete view of lead and customer interactions across all of our integrated functions, giving our CXM Platform substantial
power. This integration makes it possible to personalize every aspect of the customer interaction across web content, social media engagement,
and email messages across devices, including mobile. The integrated functions on our CXM Platform have a common user interface and are
accessed through a single login. There is a free version of our CXM Platform that can be used standalone, or with any combination of
content management systems function, marketing function, sales function, and/or service function.
Marketing
Function. The marketing function is an all-in-one toolset for marketers to attract, engage, and nurture new leads towards sales
readiness over the entire customer lifecycle. The marketing function is available in both free and paid tiers, and can be used standalone,
with our customer experience management system, a third party customer experience management system, and/or any version of content management
systems function, sales function or service function. Features include marketing automation and email, social media, search engine optimization,
and reporting and analytics.
Sales
Function. We designed the sales function to enhance the productivity and effectiveness of sales teams. Businesses can empower
their teams with tools that deliver a personalized experience for prospects with less work for sales representatives. The sales function
is available in both free and paid tiers, and can be used with our customer experience management system, a third party customer experience
management system, and/or any version of marketing function, content management system function or service function. Features include
email templates and tracking, conversations and live chat, meeting and call scheduling, lead and website visit alerts, sales automation,
and lead scoring.
Service
Function. The service function is our customer service software that is designed to help businesses manage and connect with customers.
The service function is available in free and paid tiers, and can be used standalone, with our customer experience management system,
a third party customer experience management system, and/or any version of marketing function, content management system function or
sales function. Features include tickets and help desk, automation and routing, knowledge base, team emails, feedback and reporting tools,
and set customer goals.
Content
Management System Function. Our content management system function combines the power of customer experience management and a
content management system into one integrated platform. Our content tools enable businesses to create new and edit existing web content
while also personalizing their websites for different visitors and optimizing their websites to convert more visitors into leads and
customers. Our content management system function can be purchased as a standalone product, with our customer experience management system,
a third party customer experience management system, and/or with any version of marketing function, sales function, or service function.
Features include manage website pages, business blogging, smart content, landing pages and forms, search engine optimization tools, forms
and lead flow, web analytics reporting, calls-to-action, and digital asset management and product information management file manager.
Platform
Application (“App”) Partners. Businesses that use software outside of our software can leverage our ecosystem of
third-party integrations. We make it easy to find and install new or existing software solutions that complement our CXM Platform. Over
20 integrations and applications are available for our users, across a wide range of categories, including integrations with leading
social media, email, sales, video, analytics, content and webinar tools.
CXM
Platform Services
We
complement our product offerings with professional services, customer success and support, which we view as critical elements of ensuring
the long-term retention of our customers. The majority of our services and support is offered over email, phone, chat applications and
via web meeting technology rather than in-person, which is a more efficient business model for us and our customers.
Professional
Services. We offer professional services to educate and train customers on how to leverage our CXM Platform to transform how
their business attracts, engages and delights customers. Depending on which functions and services a customer purchases, they receive
one-on-one training and guidance from one of our onboarding or technical specialists by web meeting and can purchase additional group
training and education in online or in-person classes. Our professional services are also available to customers who need additional
assistance on a one-time or ongoing basis for an additional fee.
Customer
Success. Our customers have access to a customer success manager or customer success team which are responsible for our customers’
long term success, retention and growth on the CXM Platform. Our customer success managers and customer success teams address the unique
needs and goals of our customers through a series of ongoing interactions and strategy calls on how to best engage and use our CXM Platform.
Support.
In addition to assistance provided by our online articles and customer discussion forums, we offer phone and/or email and chat-based
support, which is included in the cost of a subscription for our Hubs. Phone support is available starting at the Professional product
level for all functions while email and chat-based support is available for Starter functions. We strive to maintain an exceptional quality
of customer service. We continuously monitor key customer service metrics such as ticket resolution rates, and we monitor the customer
satisfaction of our customer support interactions. We believe our customer support is an important reason why businesses choose our CXM
Platform and recommend it to their colleagues.
CXM
Platform Technology
Our
customers have chosen us as their CXM Platform, which we architected and built to be secure, highly distributed and highly scalable.
Since our founding, we have embraced rapid, iterative product development lifecycles, cloud automation and open-source technologies,
including big data platforms, to power marketing, sales, service, and content management programs and provide insights not previously
possible or available.
Our
CXM Platform is a multi-tenant, single code-based, globally available software-as-a-service delivered through APIs, web browsers or mobile
applications. Our commitment to a highly available, reliable, and scalable platform for businesses of all sizes is accomplished through
the use of these technologies.
Platform
Approach. We built our customer experience management system on a single platform with reusable and composable libraries, allowing
us to rapidly address new feature areas and bring new products to market that have a consistent user experience and data model. We have
built this platform with scale in mind, supporting thousands of components including hundreds of microservices.
Modern
Database Architecture. We process billions of data points weekly across various channels, including social media, email, search
engine optimization and website visits, and continue to drive nearly real-time analytics across these channels. This is possible because
we built our database from the ground up using distributed big data technologies such as content delivery network, Edge computing and
customer data platform to both process and analyze the large amounts of data we collect. We also utilize cloud environment to operate
customer data at scale, allowing our engineers to choose the best datastore for each task.
Agility.
Our infrastructure and development and software release processes allow us to update our platform for specific groups of customers or
our entire customer base at any time. This means we can rapidly innovate and deliver new functionality frequently, without waiting for
quarterly or annual release cycles. We typically make a significant number of customer data updates to our software platform in a single
day, enabling us to gather immediate customer feedback and improve our product quickly and continuously.
Cost
Leverage. Because our CXM Platform was built on an almost exclusive footprint of open-source software, own developed source code
and designed to operate in cloud-based data centers, we have benefited from large-scale price reductions by these cloud computing service
providers as they continue to innovate and compete for market share. As our processing volume continues to grow, we continue to receive
larger volume discounts on a per-unit basis for costs such as storage, bandwidth and computing capacity. We also believe that our extensive
use of open-source software will provide additional leverage as we scale our CXM Platform and infrastructure.
Scalability.
By leveraging leading cloud infrastructure providers along with our automated technology stack, we are able to scale workloads of varying
sizes at any time. This allows us to handle customers of all sizes and demands without traditional operational limitations such as network
bandwidth, computing cycles, or storage capacity as we can scale our platform on-demand.
Reliability.
Customer data is distributed and processed across multiple data centers within a region to provide redundancy. We built our CXM Platform
on a distributed computing architecture with reduced single points of failure and we operate across data center boundaries daily. In
addition to datacenter level redundancy, this architecture supports multiple live copies of each data set along with snapshot capabilities
for faster, point-in-time data recovery instead of traditional backup and restore methodologies.
Security.
We leverage industry standard network and perimeter defense technologies, distributed denial-of-service, protection systems (including
web application firewalls) and enterprise grade domain name system services across multiple vendors. Our data-center providers operate
and certify to high industry compliance levels. Due to the broad footprint of our customer base, we regularly test and evaluate our platform
with trusted third-party vendors to ensure the security and integrity of our services.
Digital
Transformation Solutions
Our
mission is to unlock human creativity and ingenuity by enabling the fully automated enterprise and empowering workers through automation.
The
modern enterprise is complex as employees must navigate an ever-increasing number of systems and applications to perform their day-to-day
work. This dynamic forces workers to constantly execute manual, time-consuming, and repetitive tasks to get their work done. The friction
faced by workers often results in lost productivity that can have a direct impact on a company’s bottom line. Traditional automation
solutions intended to reduce this friction have generally been designed to be used by developers and engineers, rather than the employees
directly involved in executing the actual work being automated. As a result, employees are limited by the lack of flexibility of these
traditional automation technologies causing employee productivity, innovation, and satisfaction to suffer.
Our
software is designed to transform the way humans work. We provide our customers with a robust set of capabilities to discover automation
opportunities and build, manage, run, engage, measure, and govern automations across departments within an organization. Our software
leverages the power of AI based computer vision to enable our software robots to perform a vast array of actions as a human would when
executing business processes. These actions include, but are not limited to, logging into applications, extracting information from documents,
moving folders, filling in forms, and updating information fields and databases. Our robots’ ability to learn from and replicate
workers’ steps in executing business processes drives continuous improvements in operational efficiencies and enables companies
to deliver on key digital initiatives with greater speed, agility, and accuracy.
Our
software is designed to interact with and automate processes across a company’s existing enterprise stack. As a result, our customers
can leverage the power of our software with lower overall IT infrastructure cost. Our software enables employees to quickly build automations
for both existing and new processes. Employees can seamlessly maintain and scale automations across multiple deployment options, constantly
improve and evolve automations, and continuously track and measure the performance of automations, all without substantial technical
experience.
At
the core of our automation software is a set of capabilities that emulates human behavior, which provides our customers with the ability
to automate both simple and complex use cases. Automations on our software can be built, consumed, managed, and governed by any employee
who interacts with computers, resulting in the potential for broad applicability of our software across departments within an organization.
Society is at a turning point in how organizations execute work, and we believe the ability to leverage software to enrich the employee
experience will unlock tremendous value and efficiency opportunities. While we are still in the early days of a multi-year journey to
the fully automated enterprise, momentum is growing as organizations across the world are only now beginning to understand the power
of automation.
Many
of our customers expand the scope and size of use cases of our software across their organizations as they quickly realize the power
of our software. We believe that the success of our land-and-expand business model is centered on our ability to deliver significant
value in a very short time. We grow with our customers as they identify and expand the number of business processes to automate, which
increases the number of robots deployed and the number of users interacting with our robots. Our ability to expand within our customer
base is demonstrated by our net retention rate, which represents the rate of net expansion of annualized renewal run-rate from existing
customers over the last 12 months. Our net retention rate for our paying customers of our digital transformation business unit (RPA business)
was 45%, 52% and 75% as of December 31, 2021, December 31, 2020 and December 31, 2019, respectively. The reduction in the net retention
rate was due to a number of small and medium-sized customers cancelling their contracts due to the COVID-19 pandemic.
Advantages
of our Solutions
Our
mission is to be at the forefront of innovation and thought leadership in enterprise business automation, analyzing enterprise users’
desktops and mission-critical systems, and creating end-to-end software that provides business automation based on the results of that
analysis and further simulating the numbers. We create end-to-end software that provides business automation. Our software uses a combination
of RPA, task mining, and process mining to remove pain points in business operations, allowing software robots to emulate human behavior
and perform specific business processes, thereby eliminating the need for employees to perform specific manual or routine tasks. This
allows employees to focus on higher value-added tasks, and also allows them to seamlessly automate business processes, from legacy IT
systems and on-premise applications to new cloud-native infrastructure and applications, without making significant changes to the organization’s
underlying technology infrastructure. It can seamlessly automate business processes. Our software enables you to automate legacy mission-critical
systems as well as work without desktops, and automate across multiple applications where no APIs exist. It is also intended to be used
by employees within an enterprise, and supports a variety of use cases, from simple tasks to complex business processes over time.
Key
Benefits to Organizations
Our
software is built to help companies run their operations in a fully automated manner. Our solutions are designed to remove the friction
that exists between employees and departments by increasing operational transparency, fostering collaboration between departments, and
allowing people to focus on the work that matters. In addition, companies can deploy highly customized robots to support agile and fast
automation creation, while reducing the overall cost of their IT infrastructure. Our goal is to shorten the time to value creation, increase
efficiency, and drive innovation. Our software delivers the following key benefits to enterprises:
Empower
Customers to Achieve Digital Transformation. Our software makes it fast and easy to drive digital transformation, which is typically
time-consuming. Companies use our solutions to continuously discover and automate both simple tasks and complex business processes to
increase operational efficiency and digital transformation. Our software reduces the time it takes for people to complete tasks from
days and hours to minutes and seconds, allowing employees to focus on more creative, mission-critical, and innovative work. As a result,
our software helps companies accelerate innovation, improve productivity, create competitive differentiation, and enrich the employee
and customer experience. We help companies achieve true digital transformation.
Build
Business Resiliency and Agility into Digital Business Operations. Our software provides our customers with the flexibility they need
to operate under ever-changing conditions. A company’s operations change over time. If companies have to modify their robots each
time a change occurs, true efficiency will not be achieved. Our software robots are not only capable of performing tasks just like humans,
but they can also keep changing as the business changes. Our robots can be deployed manned, unmanned, desktop, server-side, or hybrid,
and can adjust seamlessly as conditions change. If necessary, they can also utilize spare resources in the enterprise (such as desktops
at midnight) to perform time-consuming tasks and processes. Our software provides our customers with the ability to have a virtually
unlimited digital workforce that operates 24/7, resulting in a more efficient and less error-prone digital workflow.
Fast
Time-to-Value. We believe that our solutions provide companies with an immediate return on investment. Our software can be easily
installed on any operating system, or company. It is also designed to be intuitive, minimizing the need for time-consuming and costly
implementation and training. With automatic recording and playback capabilities, workers can create robots by simply performing routine
tasks. Our simulation feature also allows us to verify the efficiency of the automation before it goes live and measure its effectiveness.
By using our software, customers can reap significant benefits such as improved costs and increased worker productivity.
Organization-Wide
Automation. Powerful, easy-to-use software allows workers across an enterprise organization to automate their work. Our software
is designed to automate any business process or task, from individual desktop tasks to complex mission-critical business processes for
departments across the enterprise. It also provides development software that does not require technical skills, allowing any employee
in the organization to spread the automation. This will help spread automation throughout the organization as employees across departments
and job functions use our technology to improve their performance.
Inspect,
improve, and analyze business execution. Our solutions provide visibility into how work is actually being done in the enterprise,
enabling our customers to understand, identify, and execute automation opportunities on an ongoing basis. For example, if there is duplication
of work between multiple departments, you can choose to automate one of them but not the other. This allows us to optimize the automation.
Our solution leverages advanced process discovery techniques and ML models from actual log data to understand individual patterns for
executing work and address bottlenecks and inefficiencies. It is a very powerful solution that can optimize the entire company.
Improve
Employee Productivity, Experience, and Satisfaction. By using our solutions, companies can achieve true digital transformation and
establish a better work environment for their workers. With our software, enterprise workers will be able to automate tasks that can
be used and operated efficiently and automate time-consuming manual tasks. We believe that this will improve the overall experience of
our customers’ employees and allow them to focus on developing higher value-added skill sets. As a result, our clients will be
able to retain a high-value, engaged workforce that is capable of delivering optimal business results.
Improve
Accuracy and Compliance with Speed. Operations automated by our software are designed to be performed consistently as designed, allowing
companies to achieve greater accuracy. For example, a sudden change in the user interface of a website will not affect the execution
of the robot. It is very highly adaptive and is designed to eliminate human errors and inconsistencies that are common to workers who
do their work manually. The work performed by the robot generates a log that can be reviewed and monitored at any time, allowing administrators
to better control and comply with the work.
Enhance
Customer Experiences. Companies can use our robots to solve known problems faster and more efficiently. We can also identify potential
problems and help solve them. Business is always changing, and our software allows employees to focus on addressing critical customer
issues and concerns, rather than performing repetitive, routine, and low-value tasks. Our robots improve the overall speed, accuracy,
and effectiveness of a company’s customer service, increasing customer retention and loyalty.
Key
Benefits to Employees
Our
software is designed to eliminate the need for employees to execute low-value, manual tasks, freeing up time to focus on more meaningful,
strategic work. We believe that this, in turn, causes employees to feel empowered and be more valuable in contributing to broader organizational
goals. “Robotics Engineer” is one of the fastest emerging job roles globally, with LinkedIn reporting a 40% compound annual
growth rate in job postings from 2015 to 2019. According to a survey conducted by International Data Corporation, 53% of respondents
indicated that AI and robotics would have a positive impact on jobs in their companies. Additionally, according to a survey published
in UiPath, Inc.’s 2020 “State of the RPA Developer Report,” 84% of respondents believe that having RPA skills would
positively impact their future career moves.
We
believe the democratization of automation leads to the following benefits tied to an improved employee experience:
● greater professional fulfillment and job satisfaction;
● increased creativity and innovation;
● improved performance and accuracy;
● enhanced skillsets;
● increased autonomy and job opportunities; and
● more collaboration and better human interactions.
Our
Digital Transformation Software
Our
software is purpose-built to advance the next generation of automation. By addressing the complete lifecycle of automation, including
identifying specific tasks and processes to automate, building and managing automation software robots, deploying them to execute processes,
and measuring their business impact, our software is intended to address a wide and diverse array of automation opportunities, including
complex, long-running workflows. We believe our software delivers compelling ease-of-use and intuitive user experiences through our low-code
development environment and seamlessly integrates with an ever-expanding ecosystem of third-party technologies and enterprise applications
without changing the existing infrastructure of an organization. In doing all of this, we enable businesses to redefine the relationship
between enterprise applications and business processes.
Our
software encapsulates seven modular product pillars that together address the automation lifecycle within an enterprise:
Our
software is powered by the following key differentiating elements that are necessary for end-to-end automation within today’s enterprise:
HeartCore
Community
We
have created and cultivated a vibrant, global network of nearly several hundred thousand automation professionals who are building and
sharing automations that are transforming work and their organizations.
Our
Digital Transformation Products
Our
software is built so that automation processes can be used throughout the enterprise. Customers can either adopt our products as a unified
solution or use a subset of our products for each.
Discover
Process
Mining. Process mining visualizes the event logs generated through various systems and applications by connecting them in chronological
order and by pattern, by using process mining tools. This enables us to identify problems and their causes, such as exception processing
that creates a burden for corrective actions, insufficient segregation of duties and rule deviations, inefficient business processing,
bottlenecks, etc., so that we can improve our business effectively and speedily. In addition, if using the function to evaluate whether
or not there is a problem by using the best practices of business processes as benchmarks, it becomes easier to examine the image of
appropriate business processes. Furthermore, by updating the data to be captured and monitoring it continuously, it is possible to recognize
the performance of business quality, changes, and anomalies in a timely manner, which can lead to improvements.
Currently,
business process reforms are rapidly advancing, as exemplified by the automation of routine tasks through the introduction of RPA. In
business process reform efforts, business processes have traditionally been visualized and evaluated in order to identify inefficient
operations that need to be improved. However, these methods require a great deal of time and effort, such as interviewing the person
in charge of the business, manually transcribing the contents of the business manual, which lacks accuracy and completeness, into a business
flow, and repeatedly checking and revising the transcribed contents with various parties involved in the business. Furthermore, depending
on the level of understanding and risk sensitivity of the interviewees, infrequent exceptions and so-called local rules were sometimes
overlooked.
One
of the concepts that will drive and enhance digital transformation is digital twin technology. Digital twin technology reproduces what
is happening in a factory in a computer, for example, by outputting logs of information on machine tools, manufacturing equipment, and
products in production, and putting the logs into process mining. It is also called a digital twin organization, which is an organization
model that makes it easier to understand and manage business processes in real time, and to plan for the future. Using a model that behaves
like a twin of a real factory system, it is possible to test the effects of production conditions that are not possible in reality, to
test processes for efficiency, and to predict fatigue when manufacturing equipment is kept running. This factory simulation environment
can reproduce the same environment as in reality.
In
the 5G era, local 5G will be able to collect even more detailed logs of the factory. This will increase the accuracy of the simulations
and enable even more advanced operational efficiency. By recreating not only factories but also white-collar workplaces in a digital
twin, it will be possible to identify problems, eliminate bottlenecks, change workflows, and reform work styles.
Task
Mining. Task mining is a method of analyzing individual PC operations of staff engaged in various tasks, i.e., detailed PC operation
log data such as “application launch,” “screen launch,” “file open,” “mouse click,” “text
input,” “copy and paste,” etc., to discover issues and problems. Task mining can highlight task-level issues such as,
for example, whether a series of tasks to convert paper documents into digital data by reading them with OCR is taking longer than expected
(inefficient tasks), or copying and pasting from email body to Excel is repeated with high frequency (repetitive tasks).
The
merit of task mining is that it can point out issues and problems related to tasks, i.e., the various tasks that individual staff members