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Dear Shareholders:
We are sorry for the delay on this March Q&A due to the start of the Iraqi war. We are all anxious for the human suffering and we all pray for the safe return of our brave soldiers.
Here are your questions:
Q. Will Hartcourt be able to include all of the first quarter revenue from HuaQing in your filing?
A. This is a decision on GAAP accounting treatment to be researched by our auditors. Since they are extremely busy with the year-end audit, we will have to wait a bit longer for their answer. Of course, we will consolidate the revenue and income of Hua Qing in Q2.
Q. Is HuaQing ahead of last year¡¯s revenue pace to this point?
A. The answer is yes; however, the preliminary numbers have not been verified by independent accountant.
Q. I see more of Radvision in the ControlTech web site these days. Is Control Tech doing more business with them as opposed to Polycom? Is the conference calling business booming the way we all thought it might? Especially in China?
A. We have not consummated the merger with ControlTech yet due to the fact that it suffered a slight loss in operating income. We stand firm on our new policy not to acquire or to partner with any loss-incurring operation. We hope that the company will return to profitability this year to allow us proceed with the merger.
Q. Does Hartcourt wish to be recognized by investors as the company that owns HuaQing (because of their revenue and profits) or as Hartcourt Capital, which will try to generate more of these types of deals in the future?
A. Hartcourt Capital is busy developing its business in investment banking deals and in publishing China Report magazine. Hartcourt Companies will consolidate HuaQing revenue and profit and is trying to expand this operation vertically as well as horizontally.
Q. When will the final numbers for 2002 and for the first quarter 2003 be published exactly?
A. The dateline for filing the 10K (Annual Report) is April 14th and the 10Q1 (Quarterly Report) is May 15th.
Q. I must pay you a compliment for hiring GoNow. They are professionals and very qualified to bring more attention to Hartcourt. Thanks. To get GoNow is surely quite expensive, isn¡¯t it? May we know the price of payment and how it will be paid? Is it assumed that the revenues and profits generated this year may easily cover the expenses for hiring GoNow ?
A. We share your opinion on GoNow¡¯s capability. We are working with GoNow management to develop similar business model in China. Therefore, our compensation paid to GoNow is substantially discounted. Of course, we can afford it.
Q. It is the hope of many investors that HRCT will remain what it is until we begin to see a profit from the revenues generated. Will HRCT remain steadfast on that promise or are there more "deals" on the way that may siphon the bottom line?
A. We are focused more than ever on ¡°the bottom line¡±. We think that we shall be able to show a profit in 2003. This strategy has not changed a bit.
Q. Free trading sounds very good to me. What about the trading costs for foreign shareholders like us Germans? Also for free?
A. If you open an account with GoNow (via Ameritrade), you shall be able to trade the shares of all member companies of GoNow (like HRCT) for free, no matter how many trades you execute each day. However, you would pay regular charges and fees like other Ameritrade customers if you trade non-member stocks. GoNow free trade accounts are available to all HRCT shareholders, within the US or anywhere else.
Q. Can you shed some light on how "GoNow" was selected for HRCT's IR needs? Is there a specific example of "GoNow" taking a non-descript company from obscurity to prominence in their resume? If so, can you provide that example in your answer?
A. We engage GoNow because we believe they could increase the exposure of Hartcourt business plan and achievements to institutional as well as retail investors. Most members of GoNow, as listed on GoNow Web site, expressed satisfaction with GoNow performance. However, we expect to go from obscurity to prominence on our own fundamentals and strength. There is no substitution for the real financial results and growth pattern.
Q. We can see the "Powered by Knobias" logo on the bottom of the GoNow site. Exactly what is the relationship between GoNow and Knobias?
A. According to GoNow management, they are business partners and there is cross-ownership between the two companies.
Q. Does Hartcourt think that by promoting the free trading from GoNow and Ameritrade that it will help our share price in the long term? Or will it be more difficult for the share price to sustain higher levels due to the increase in trading activity?
A. We think that free commission will encourage existing and new shareholders to trade HRCT more actively. These activities would create liquidity, excitement and exposure for the stock. We also believe that our stock will reflect its true value in the long term, in spite of all current fluctuation. Buying and selling any stock is a very personal matter and we do not have any opinion; but with a free commission charge, our shareholders would at least be able to save some money.
Q. How do we set up this free trading account and is it possible to have an IRA account?
A. Please go to GoNow Web site, www.gonow.com, and click on ¡°Free Trade¡± then ¡°open an account¡± for member companies. Follow the instruction throughout. If you have any problem or question, please contact Customer Service department of GoNow via Email or telephone.
Q. What are strategic objectives for "GoNow". What is the priority order for those objectives? How much is HRCT paying GoNow for their services and for how long?
A. We signed a one-year service contract with GoNow. The compensation was paid in cash and services to be provided by Hartcourt on GoNow¡¯s plan to expand into China.
Q. Next item for Hartcourt business? E-Education? Sinobull spin-off or merger? AI Asia? HCTV? Or to add another sizable company to the fold?
A. Please be patient and wait for the Press Release. We promise it won¡¯t be long.
Q. Is the TV deal dead or just in limbo? What is the stumbling block to get this deal done? Would this sector not bring a lot of attention to Hartcourt? Are the Chinese ready for this type of media? If we don't move soon on this sector we will be left behind.
A. We fully agree with you that Chinese media industry will grow exponentially in the near future. However, it is highly regulated to prevent any foreign influence. Sinobull Group is still pursuing the TV project, but the legal structure must be transformed to get through the approval process. You will hear about this effort soon enough.
Q. There are 5 Division and some are new. (: HuaQing Group, Sinobull Financial Group, Media Services Group, E-learning Group and Hartcourt Capital). In which group are AI-Asia, HCTV, Sinobull Magazine involved?
A. As stated previously, Hartcourt will focus on expanding the HuaQing operation, while disposing or spinning off unprofitable businesses. This process takes longer than expected, but by the end of Q2, you won¡¯t see that many operating divisions left in Hartcourt. We will stay only in one or two businesses where we have the strongest competitive edge among the market leaders.
Q. Could you tell if HuaQing could profit of IBM and Kangrun partnership?
A. In our plan to expand HuaQing operation nationwide, we analyze all possible scenarios and synergies. It is still under internal discussion.
Q. Is the number of employees (199) on GoNow website right?
A. It is correct, including the HuaQing employees.
Q. Where are the 9 locations that we read on GoNow Website?
A. We have 4 locations in Shanghai (Hartcourt, Sinobull, HCTV, HuaQing), 2 in Beijing (Meija College, Sinobull), 1 in Shenzhen (Sinobull), 2 in Hong Kong (FTL, AI-Asia) and 1 in the US (Hartcourt).
Q. Does HuaQing expect to acquire any of their competitors within 2003?
A. It is one of the development strategies planned for the expansion.
Q. Will Hartcourt Capital associate itself with a particular bank or financial institution in China or the US? Or will they go it alone?
A. Hartcourt Capital has been working with a number of banks, hedge funds, venture capitalists in the US, Europe and China to obtain funding for clients. In addition, we have held discussion with some financial institutions for strategic partnership and investment. We shall inform you once the agreement is in place.
Q. What, in your opinion, are the most critical steps Hartcourt needs to take in the next six months to develop the company to its maximum potential?
A. We repeat again that our main focus now is to get Hartcourt profitable in 2003. To complete this objective, we plan to expand HuaQing substantially and to spin-off and dispose all unprofitable assets. By 2004, we should have a solid platform to launch a much more ambitious project, aiming at the creation of a major-league company which all shareholders would be proud of.
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.
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FOR IMMEDIATE RELEASE
Los Angeles April 2nd, 2003
Source: The Hartcourt Companies, Inc.
Press Release
Hartcourt Added 2 Independent Directors To Its Board
Higher Standards Set For Corporate Governance
LOS ANGELES, April 2nd /PRNewswire-FirstCall/ -- The Hartcourt Companies, Inc. (OTC Bulletin Board: HRCT, Frankfurt: 900009), www.hartcourt.com, today announced that it has appointed Dr. XiaoYang Li and Mr. Geoffrey Wei to its Board of Directors. Dr. XiaoYang Li, an attorney, will replace Mr. Anthony Qiao who resigned due to potential conflict of interest. Mr. Jeffrey Wei, a certified public accountant, will head the Audit Committee. The two new independent directors who are well-known and respected in China-related business will contribute substantially to company progress thanks to their experience and contacts. Together with Dr. Billy Wang, the three independent directors will share equal voting power with the management and will establish high standards for corporate governance, in response to the new requirements set forth by the Sarbanes-Oxley Act.
Following are brief resumes of these independent directors:
Dr. XiaoYang Li
Dr. Li is the Managing Partner of King & Wood Law firm in Shanghai office. King & Wood is the top international law firm in China, specialized in M&A and investment banking deals. Dr. Li has over 18 years of legal experience, working for other well-known international law firms in China business such as Squire, Sanders & Dempsey, Graham & James, Allen & Overy, Morrison & Foerester and was the legal counsel for Norinco, the giant state-owned company. Dr. Li received his M.A. from China¡¯s Jilin University Law School, L.L.M. from Harvard Law School, and J.D. from Standford Law School.
Dr. Billy Wang
Dr. Wang is the China General Manager for NCH Corporation, a multi-national firm headquartered in Texas. He was previously the General Manager for Chem Aqua and Xibic Enterprise. Dr. Wang has been involving in China related projects since 1991 as a consultant to WCE Inc and as an International Business Advisor to the Office of Information Business of Washington DC. Dr. Wang received his Bachelor of Science degree from University of Massachusetts, Master of Science and PhD degrees from University of Virginia.
Mr. Geoffrey Wei, CICPA
Mr. Wei is an independent financial consultant as well as CFO for GW Technologies Co. In 2001, he was the interim CFO, Vice President and Chief Accountant for Netease.com Inc (NasdaqNM: NTES). Mr Wei had worked as Manager in audit, tax and business advisory at Price Waterhouse Coopers and KPMG for over 8 years. He received his Bachelor of Arts degree from Beijing Polytechnic University and Chartered Accountant in Vancouver, Canada.
About Hartcourt Companies, Inc.
The Hartcourt Companies, Inc. is an investment holding and developing company specializing in the acquisition and development of private companies within high-growth industries in China. Hartcourt's recent acquisition of HuaQing will bring substantial new revenue and income. Detailed information on Hartcourt can be obtained via the company's Web site, www.hartcourt.com.
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.
Contact: Ms. Wenny He Tel: 8621 5213 0673 Fax: 8621 5213 0664
Email: wenny.he@hartcourt.com
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Total Revenue $1,044,252 $1,795,965 $3,547,599 $4,680,453
Cost Of Revenue $954,311 $1,433,692 $3,022,964 $3,258,160
Gross Profit $89,941 $362,273 $524,635 $1,422,293
Operating Expenses
Research And Development N/A N/A N/A N/A
Selling General And Administrative Expenses $622,333 $807,335 $1,079,593 $2,989,440
Non Recurring N/A N/A N/A $1,785,262
Other Operating Expenses $469,230 $1,168,056 $362,307 $482,340
Operating Income ($1,001,622) ($1,613,118) ($917,265) ($3,834,749)
Total Other Income And Expenses Net N/A $75,000 ($54,233) ($442,370)
Earnings Before Interest And Taxes ($1,001,622) ($1,760,713) ($748,903) ($3,635,200)
Interest Expense $8,567 $14,487 $32,926 $73,418
Income Before Tax ($1,010,189) ($1,775,200) ($781,829) ($3,708,618)
Income Tax Expense N/A N/A N/A N/A
Equity Earnings Or Loss Unconsolidated Subsidiary N/A N/A N/A N/A
Minority Interest $273,235 $514,131 $222,595 ($11,845)
Net Income From Continuing Operations ($736,954) ($1,038,474) ($781,829) ($4,362,382)
Nonrecurring Events
Discontinued Operations $659,653 N/A N/A ($52,789)
Extraordinary Items N/A N/A N/A $1,506,853
Effect Of Accounting Changes N/A N/A N/A N/A
Other Items N/A N/A N/A N/A
Net Income ($77,301) ($1,038,474) ($781,829) ($2,908,318)
Preferred Stock And Other Adjustments N/A N/A N/A N/A
Net Income Applicable To Common Shares ($77,301) ($1,038,474) ($781,829) ($2,908,318)
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Ich würde bei der momentanen Situation als spekulativer Anleger den Sack mit geringerem Einsatz mit vielen tausenden 900009 Aktien ERWEITERN...allein aus Sympathie zum Management!
hartmoneygrüsse
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± Within me is infinite power, before me is endless possibility, around me is boundless opportunity¡why should I fear?¡±
From all Hartcourt employees, a warm greeting and best wishes for A GREAT CHRISTMAS and WONDERFUL NEW YEAR. May good luck be your best companion throughout.
It¡¯s also that time of the year to go through our achievements and failures to learn and prepare for the new beginning.
2002 was a watershed year for Hartcourt. On management, Dr. Ching stepped down and David Chen took over the rein of Hartcourt. The company moved its operational headquarter to Shanghai to be right on the front line. The overhead expenses were reduced dramatically to ensure a profitable result in 2003. ETLK successfully went public in January and spun-off in October. ETLK dividends were paid, equaling 6 percent annual return. The Hogue judgment of $2.3 Million was set aside. Disposal of old assets is being carried out at the same time of new acquisition. In spite of doubters, the annual shareholders meeting in LA was successfully completed.
On the other hand, 2002 witnessed the worst stock market downturn. China hi-tech and financial sectors were also affected by global recession, despite a strong gain in GDP and manufacturing sector. Hartcourt had to struggle with dwindling resources and personnel changes. The business plan to build 5 powerful divisions must be scaled down dramatically. Despite WTO, new opportunities were slow to develop due to lack of adequate funding. Strategic partnerships were idled due to internal problems of major multi-nationals caused by the stock market crash. Public and investor relation campaign failed to generate any investor interest. Management had to face daily complaints and challenges from laid-off employees and dissatisfied shareholders.
Over all, we think the worst was over with 2002. A new chapter in Hartcourt history will be written in 2003. The following plan will be executed:
New acquisitions would result in a profitable fiscal year and stronger financial position;
Spin-off of existing assets should deliver more dividends to shareholders;
New PR program should bring in new investors and financiers if stock markets return to normalcy;
Additional listings in BBX, Hong Kong GEM and other exchanges would be sought to facilitate 24-hour trading of HRCT and its subsidiaries.
None of the above is too ambitious, and if we could complete any one of these plans, shareholders value should increase tremendously. In a way, we are lucky because we have hit the bottom of the pit and there is no other way but up.
We sincerely apologize for all the mistakes, delays, disappointments and inconvenience suffered by our loyal shareholders. Sometimes, the best intention is not sufficient. However, we are still here and we still believe in our goal and mission. No one can defeat us, except ourselves. We will give 110 percent of our heart and our brain in 2003 to make up for the lost years. We will never give up until Hartcourt fulfill its promise.
We would like to share with you the wisdom of an old Chinese sage,¡± Within me is infinite power, before me is endless possibility, around me is boundless opportunity¡why should I fear?¡±
Let us say goodbye to 2002 and welcome 2003 with all our heart.
As always,
Hartcourt
Dr. Alan Phan, Chairman
Hartcourt Companies Inc.
China Tel: 8621 5213 0673
China Fax: 8621 5213 0664
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We are sorry for the delay on this March Q&A due to the start of the Iraqi war. We are all anxious for the human suffering and we all pray for the safe return of our brave soldiers.
Here are your questions:
Q. Will Hartcourt be able to include all of the first quarter revenue from HuaQing in your filing?
A. This is a decision on GAAP accounting treatment to be researched by our auditors. Since they are extremely busy with the year-end audit, we will have to wait a bit longer for their answer. Of course, we will consolidate the revenue and income of Hua Qing in Q2.
Q. Is HuaQing ahead of last year’s revenue pace to this point?
A. The answer is yes; however, the preliminary numbers have not been verified by independent accountant.
Q. I see more of Radvision in the ControlTech web site these days. Is Control Tech doing more business with them as opposed to Polycom? Is the conference calling business booming the way we all thought it might? Especially in China?
A. We have not consummated the merger with ControlTech yet due to the fact that it suffered a slight loss in operating income. We stand firm on our new policy not to acquire or to partner with any loss-incurring operation. We hope that the company will return to profitability this year to allow us proceed with the merger.
Q. Does Hartcourt wish to be recognized by investors as the company that owns HuaQing (because of their revenue and profits) or as Hartcourt Capital, which will try to generate more of these types of deals in the future?
A. Hartcourt Capital is busy developing its business in investment banking deals and in publishing China Report magazine. Hartcourt Companies will consolidate HuaQing revenue and profit and is trying to expand this operation vertically as well as horizontally.
Q. When will the final numbers for 2002 and for the first quarter 2003 be published exactly?
A. The dateline for filing the 10K (Annual Report) is April 14th and the 10Q1 (Quarterly Report) is May 15th.
Q. I must pay you a compliment for hiring GoNow. They are professionals and very qualified to bring more attention to Hartcourt. Thanks. To get GoNow is surely quite expensive, isn’t it? May we know the price of payment and how it will be paid? Is it assumed that the revenues and profits generated this year may easily cover the expenses for hiring GoNow ?
A. We share your opinion on GoNow’s capability. We are working with GoNow management to develop similar business model in China. Therefore, our compensation paid to GoNow is substantially discounted. Of course, we can afford it.
Q. It is the hope of many investors that HRCT will remain what it is until we begin to see a profit from the revenues generated. Will HRCT remain steadfast on that promise or are there more "deals" on the way that may siphon the bottom line?
A. We are focused more than ever on “the bottom line”. We think that we shall be able to show a profit in 2003. This strategy has not changed a bit.
Q. Free trading sounds very good to me. What about the trading costs for foreign shareholders like us Germans? Also for free?
A. If you open an account with GoNow (via Ameritrade), you shall be able to trade the shares of all member companies of GoNow (like HRCT) for free, no matter how many trades you execute each day. However, you would pay regular charges and fees like other Ameritrade customers if you trade non-member stocks. GoNow free trade accounts are available to all HRCT shareholders, within the US or anywhere else.
Q. Can you shed some light on how "GoNow" was selected for HRCT's IR needs? Is there a specific example of "GoNow" taking a non-descript company from obscurity to prominence in their resume? If so, can you provide that example in your answer?
A. We engage GoNow because we believe they could increase the exposure of Hartcourt business plan and achievements to institutional as well as retail investors. Most members of GoNow, as listed on GoNow Web site, expressed satisfaction with GoNow performance. However, we expect to go from obscurity to prominence on our own fundamentals and strength. There is no substitution for the real financial results and growth pattern.
Q. We can see the "Powered by Knobias" logo on the bottom of the GoNow site. Exactly what is the relationship between GoNow and Knobias?
A. According to GoNow management, they are business partners and there is cross-ownership between the two companies.
Q. Does Hartcourt think that by promoting the free trading from GoNow and Ameritrade that it will help our share price in the long term? Or will it be more difficult for the share price to sustain higher levels due to the increase in trading activity?
A. We think that free commission will encourage existing and new shareholders to trade HRCT more actively. These activities would create liquidity, excitement and exposure for the stock. We also believe that our stock will reflect its true value in the long term, in spite of all current fluctuation. Buying and selling any stock is a very personal matter and we do not have any opinion; but with a free commission charge, our shareholders would at least be able to save some money.
Q. How do we set up this free trading account and is it possible to have an IRA account?
A. Please go to GoNow Web site, www.gonow.com, and click on “Free Trade” then “open an account” for member companies. Follow the instruction throughout. If you have any problem or question, please contact Customer Service department of GoNow via Email or telephone.
Q. What are strategic objectives for "GoNow". What is the priority order for those objectives? How much is HRCT paying GoNow for their services and for how long?
A. We signed a one-year service contract with GoNow. The compensation was paid in cash and services to be provided by Hartcourt on GoNow’s plan to expand into China.
Q. Next item for Hartcourt business? E-Education? Sinobull spin-off or merger? AI Asia? HCTV? Or to add another sizable company to the fold?
A. Please be patient and wait for the Press Release. We promise it won’t be long.
Q. Is the TV deal dead or just in limbo? What is the stumbling block to get this deal done? Would this sector not bring a lot of attention to Hartcourt? Are the Chinese ready for this type of media? If we don't move soon on this sector we will be left behind.
A. We fully agree with you that Chinese media industry will grow exponentially in the near future. However, it is highly regulated to prevent any foreign influence. Sinobull Group is still pursuing the TV project, but the legal structure must be transformed to get through the approval process. You will hear about this effort soon enough.
Q. There are 5 Division and some are new. (: HuaQing Group, Sinobull Financial Group, Media Services Group, E-learning Group and Hartcourt Capital). In which group are AI-Asia, HCTV, Sinobull Magazine involved?
A. As stated previously, Hartcourt will focus on expanding the HuaQing operation, while disposing or spinning off unprofitable businesses. This process takes longer than expected, but by the end of Q2, you won’t see that many operating divisions left in Hartcourt. We will stay only in one or two businesses where we have the strongest competitive edge among the market leaders.
Q. Could you tell if HuaQing could profit of IBM and Kangrun partnership?
A. In our plan to expand HuaQing operation nationwide, we analyze all possible scenarios and synergies. It is still under internal discussion.
Q. Is the number of employees (199) on GoNow website right?
A. It is correct, including the HuaQing employees.
Q. Where are the 9 locations that we read on GoNow Website?
A. We have 4 locations in Shanghai (Hartcourt, Sinobull, HCTV, HuaQing), 2 in Beijing (Meija College, Sinobull), 1 in Shenzhen (Sinobull), 2 in Hong Kong (FTL, AI-Asia) and 1 in the US (Hartcourt).
Q. Does HuaQing expect to acquire any of their competitors within 2003?
A. It is one of the development strategies planned for the expansion.
Q. Will Hartcourt Capital associate itself with a particular bank or financial institution in China or the US? Or will they go it alone?
A. Hartcourt Capital has been working with a number of banks, hedge funds, venture capitalists in the US, Europe and China to obtain funding for clients. In addition, we have held discussion with some financial institutions for strategic partnership and investment. We shall inform you once the agreement is in place.
Q. What, in your opinion, are the most critical steps Hartcourt needs to take in the next six months to develop the company to its maximum potential?
A. We repeat again that our main focus now is to get Hartcourt profitable in 2003. To complete this objective, we plan to expand HuaQing substantially and to spin-off and dispose all unprofitable assets. By 2004, we should have a solid platform to launch a much more ambitious project, aiming at the creation of a major-league company which all shareholders would be proud of.
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HARTCOURT COMPANIES INC (HRCT.OB)
Annual Report (SEC form 10KSB)
Item 6. Management's Discussion and Analysis or Plan of Operation
General
The following is a summary of certain information contained in this Report and is qualified in its entirety by the detailed information and financial statements that appear elsewhere herein. Except for the historical information contained herein, the matters set forth in this Report include forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties are detailed throughout the Report and will be further discussed from time to time in Hartcourt's periodic reports filed with the Commission. The forward-looking statements included in the Report speak only as of the date hereof.
Plan of Operation
The Hartcourt Companies, Inc. is a holding and development enterprise that is building a broad network of Internet, media, and telecommunication companies in Greater China. In partnership with leading Chinese entrepreneurs and government-sponsored entities, Hartcourt is developing and investing in emerging technologies while building an integrated commercial framework for its subsidiaries and their partners. Hartcourt's operative business strategy is designed to establish market-leading position and facilitate a series of venture divestitures via IPO or public mergers in its five main business divisions to fully realize the value of these assets for its investors. The four business divisions are Sinobull Financial Group, Media Services Group, E-learning Group and Hartcourt Capital.
Hartcourt, through a combination of expertly managed internal expansion and accretive strategic acquisitions, is executing plans to provide a sustainable, growing, diversified and profitable revenue base throughout its operations. The company is aggressively identifying and pursuing the best business opportunities available. Through a continued refinement of operational efficiencies, and increasing revenue margins, the Company is providing a clear path to profitability for its current and future businesses."
Results of Operations
Comparison of the fiscal years ended December 31, 2002 and December 31, 2001.
During 2002, Hartcourt continued its previously implemented plan to acquire profitable companies that were in established industries with a history of growth. Since mid-1999, Hartcourt has been focusing on assembling a collection of companies and services that will provide citizens of China with next generation communication services, including China-focused Internet access and financial portals, online share trading services, data broadcasting, and financial services. The Company signed underwriting agreements for the initial public offerings of shares of its two most developed investments, both of which were planned in the year 2001. On January 4, 2002, pursuant to an Agreement of Merger and Plan of Reorganization, Hartcourt's subsidiary Elephant Talk Limited
merged with Staruni Corporation, a California corporation, organized under the laws of California and listed on the over the counter on bulletin board of NASDAQ exchange. Prior to the conclusion of the merger, Hartcourt acquired additional equity in Elephant Talk Limited and retained a 51.7% ownership in ETCI upon conclusion of the merger. Hartcourt plans to eventually build all of its current operations into stand-alone entities that will also be taken public on US and/or Asian Financial markets.
The operations of Hartcourt for 2002 primarily consisted of operations of FTL (58.53% ownership interest), StreamingAsia (85% ownership interest), Sinobull (wholly-owned subsidiary), AI-Asia (wholly-owned subsidiary) and Hartcourt Capital, Inc. (wholly- owned subsidiary) and its investments and advances to entities in China, Hong Kong and US. ElephantTalk (51% ownership interest) and HCTV (66.7% ownership interest) were disposed-off as of September 30, 2002 and June 30 2002 respectively. The operations of Hartcourt for 2001 primarily consisted of operations of FTL (58.53% ownership interest), StreamingAsia (85% ownership interest), ElephantTalk (51% ownership interest), Sinobull (wholly-owned subsidiary), HCTV (66.7% ownership interest), AI-Asia (wholly-owned subsidiary) and Hartcourt Capital, Inc. (wholly-owned subsidiary) and its investments and advances to entities in China, Hong Kong and US.
Net sales and cost of sales. The Company recorded net sales of $1,137,011 in year 2002, compared to $10,621,205 in 2001. Net sales primarily consisted of sales of wireless pagers, rental of equipment, and the related Internet and telephone services provided by FTL; real-time financial data services provided by Sinobull Financial Information using a satellite network to transmit data specializes in stock quotes, futures, indexes and commodities to its customers in China; and StreamingAsia providing web hosting and software development services in audio and video delivery or streaming solutions. The significant drop in sales of 2002 when compared to 2001 is mainly due to the fact that Hartcourt has disposed ETLK of in October 2002. The sales of Elephant Talk covered 72% more of the total sales in 2001. Moreover, the financial sector has been affected badly by the stock market downturn. As a result, most banks and brokerage houses have reduced their spending on data services, causing additional price-cutting among competitors. Cost of sales included cost of capacity associated with the sales recognized from providing telecommunications services, costs associated with in acquiring data-feed from Honk Kong Stock Exchange and various commodities exchanges in China via TV channels and satellite transmissions, equipment rental in providing event real-time Internet broadcasting and on-demand multimedia content delivery and total web solutions. The increase in operating margin is mainly due to the higher margin in financial sector, compared to lower margin in tele-communication services rendered by Elephant Talk only included in 2001.
Selling, general and administrative expenses. SG&A expenses amounted to $2,774,011 for 2002 compared to $7,379,192. Apart from dispose off subsidiaries in 2002, the decrease in SG&A is primarily attributed to reduction in consulting, legal and administrative costs incurred in 2002 as compared to that in 2001. Hartcourt completed the acquisition of Elephant Talk Limited in May 2001, which required significant legal and administrative expense to complete the acquisition. Hartcourt has taken drastic cost cutting measures and deliberately slowed down the development process of all projects on hand. Included in the SG&A expenses in 2002, the Company made bad debt provision amounted to $1,115,963 against these doubtful accounts for prudent purpose. The Company recorded an impairment of $1,563,040 during 2002 to write down certain intangible assets and its investments in Sinobull Group, FTL Group and Streaming
Asia Group. Such expense was not included in the SG&A for the year ended 2002. Hartcourt continued to eliminate less productive units, reduced consulting and legal costs associated due to restructuring of the Company's business in Hong Kong and China.
Impairments. Impairments in year 2002 amounted to $1,563,040 compared to $1,785,262 in the year 2001. As of 31 December 2002, except for Sinobull Group, Hartcourt wrote-off all the goodwill on acquisition of subsidiaries.
Gain on disposal of discontinued operations. Gain on disposal of discontinued operation in 2002 consist of the realized gain of $1,284,048 for disposal of ETCI, and the gain of $659,653 for disposal of HCTV and Topomedia. Hartcourt disposed of the operations of UAC Exchange in 2001 and recognized a gain of $1,060,371.
Loss from discontinued operations. Hartcourt discontinued the operation of ETLK, HCTV and Topomedia during 2002 and incurred $1,020,252 in losses from discontinued operations. The loss in 2001 represents the losses from discontinued operation of UAC exchange.
Gain on extinguishment of debt: During 2001, the Chairman of the Company donated 5,000,000 shares of Hartcourt to the Company. Hartcourt settled a loan payable of $1,862,630 in exchange of 5,000,000 shares of common stock of Hartcourt. The accompanying financial statements at December 31, 2001 reflect the donation of 5,000,000 shares recorded as treasury shares and satisfaction of loan of $1,862,630.
Liquidity and Capital Resources
Hartcourt's principal capital requirements during 2002 were to fund the acquisitions of growth oriented Internet related operating companies in China and Asia. Hartcourt raised substantial funds necessary to carry out its plans of acquisitions by selling its own restricted common shares to accredited investors and bringing in business partners whose contributions included the necessary cash.
As shown in the accompanying financial statements, Hartcourt incurred net losses of $2,550,002 and $5,329,408 for the years ended December 31, 2002 and 2001, respectively. In addition, Hartcourt's working capital deficit of $2,155,058 is not adequate to meet its minimum monthly expenses. These factors, as well as negative cash flows from current operations of $1,852,669, Hartcourt's inability to meet debt obligations, and the need to raise additional funds to accomplish its objectives, create substantial doubt about Hartcourt's ability to continue as a going concern.
Hartcourt has taken certain restructuring steps, which in the management's opinion will provide the necessary capital to continue its operations. These steps included: 1) the settlement of certain matters of litigation and disputes; and 2) signed stock sale agreements with accredited investors to raise in excess of $1,000,000. The Company plans to actively seek funding sources once Hartcourt is able to discontinue and dispose- off all non-profitable assets by selling or spinning-off or restructuring to minimize loss or liability.
Operating activities. The net cash used by operating activities in 2002 amounted to $1,852,669 compared to $1,462,551 in 2001. The net increase in operating activities resulted primarily due to more payments on settle of liabilities in
2002 compared to 2001. It resulted also due to the increase of minority interest offset by increase in depreciation and amortization, increase in shares issued in lieu of compensation and services and other changes in operating activities. In addition, the increase of the cash used in discontinued operations also contributed much to the operational cash flow.
Investing activities. Net cash obtained in investing activities amounted to $2,538,962 during 2002 compared to net cash used of $338,950 during 2001. Net cash flow in during 2002 primarily resulted from the proceeds on notes receivable of $1,039,389 and the proceeds from disposal of investment of $1,597,450. Net cash used in investing activities in 2001 is mainly due to the payment of $823,585 in notes receivable, purchase of property and equipment of $51,721, offset by cash of $690,202 acquired in acquisitions of ElephantTalk, Sinobull Group and StreamingAsia.
Financing activities. Net cash used by financing activities amounted to $878,554 in 2002 compared to net cash provided by financing activities of $1,984,912 during 2001. Hartcourt paid $7,986 for the loans due to related parties, paid $265,691 in net from issuance of common stock and adjustment of share price during 2002, proceeds from shareholders' loan $139,865, made payments on factor $198,205, made payments on long-term debt of $433,299, and made payments on capital lease of $113,238. During 2001, Hartcourt raised $1,988,501 from issuance of common stock, made payments on loans due to related parties amounting to $865,048, made payments of shareholders loans of $999,436, and proceeds of long tern debt of $1,619,807.
The ability of Hartcourt to continue as a going concern is still dependent on its success in obtaining additional financing and fulfilling its plan of restructuring as outlined above.
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Wednesday April 16, 3:00 am ET
LOS ANGELES, April 16 /PRNewswire-FirstCall/ -- The Hartcourt Companies, Inc. (OTC Bulletin Board: HRCT, Frankfurt: 900009), www.hartcourt.com , today announced that its subsidiaries made substantial progress in Q1 of 2003 with sales contracts obtained from new clients. These contracts will bring additional revenue to improve drastically the financial results of the company in 2003.
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HuaQing, Shanghai's leading PC assembler and distributor, has signed a contract with the government to supply 900 flat-panel monitors to Shanghai's mass transit railway system for use in public communication and outdoor advertising. The contract, worth RMB$2.2 Million, signified a new marketing push by HuaQing in developing more sales to business and government sectors.
Hartcourt Capital, Hartcourt's investment banking arm, has signed an advisory agreement to provide KS-Direction Development, Ltd. with investment banking services for the private placement to fund its Green Valley project. The US$125 Million project, an agribusiness and bio-science national park, located 25km west of Shanghai in Kunshan, will house companies specializing in ecological, bio-tech and agricultural industries with cutting edges in R&D, education and training. "The development of the Kunshan area opens a new chapter in the growth and development of residential and commercial suburbs lying on the outskirts of the major cities in China. The Kunshan region generated US$4 Billion in GDP last year for China and the Green Valley is expected to bring another US$450 Million to the region over the next 5 years," notes Christian Giannini, Director of Hartcourt Capital. More details on the park and KS Direction are available at www.direction.com.cn and www.ks-direction.com .
Meija College, a government-approved E-Learning institution in Beijing, has obtained approval to open a branch in Shanghai this summer. At present, Meija ( www.mjedu.com ) has over 200 students enrolled in its MBA programs in cooperation with Century University ( www.centuryuniversity.edu ) and University of Management and Technology ( www.umtweb.edu ).
China Report, a magazine published by Hartcourt Capital, reported that its advertising sales for Issue No.2 would increase 100 percent over the previous issue. China Report ( www.hartcourt.com/ chinareport /) has a circulation of 20,000, distributed directly to investment bankers, fund managers and financial executives in the US and Europe.
Mr. David Chen, Hartcourt's President and CEO, comments, "Our principal objective is to be profitable in 2003 in spite of the uncertainty created by the aftermath of the Iraqi war and the SARS epidemic. These sales contracts proved our relentless effort in setting high standards for performance and results. We will continue to surprise our shareholders and our competitors with new achievements to develop a sustainable, profitable operation as the foundation for major expansion in 2004."
About Hartcourt Companies, Inc.
The Hartcourt Companies, Inc. is an investment holding and developing company specializing in the acquisition and development of private companies within high-growth industries in China. Hartcourt's recent acquisition of HuaQing will bring substantial new revenue and income; while the publication of China Report magazine will increase our exposure and credibility among financial institutions. Detailed information on Hartcourt can be obtained via the company's Web site, www.hartcourt.com .
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward- looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward- looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward- looking statement.
Source: The Hartcourt Companies, Inc.
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Tuesday March 25, 11:48 pm ET
LOS ANGELES, March 25 /PRNewswire-FirstCall/ -- The Hartcourt Companies, Inc. (OTC Bulletin Board: HRCT, Frankfurt: 900009), www.hartcourt.com , today announced that it has engaged GoNow Financial Network to provide investor relations and other services including media coverage, analyst reports and market strategy for the company. The immediate goal of this new IR program is to increase public exposure of Hartcourt' s recent achievements such as the Hua Qing acquisition and the launching of China Report magazine. GoNow provides the most complete information and data on companies trading on OTC BB, NASDAQ SC and AMEX.
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As an additional benefit to participation in the GoNow network, Hartcourt shareholders will receive the opportunity to trade Hartcourt shares commission free through GoNow's strategic relationship with FreeTrade by Ameritrade. There are no account fees, transaction costs, monthly charges, or any other costs associated with the program.
Hartcourt will also be participating in "Profit," a new innovative newsletter published regularly by GoNow. "Profit" is an informal communication tool between participants and management. Questions asked are from participants and the answers are directly from Company management. In order to participate, investors must visit GoNow's Web site, www.gonow.com , and go to "Member Company" section for Hartcourt.
Mr. David Chen, President and CEO of Hartcourt, comments, "We believe our working relationship with GoNow Financial Network will be greatly beneficial to our shareholders and potential investors. Besides providing a valuable research tool on information about Hartcourt, GoNow will help us improve visibility to the investment community at large. We expect a strong performance in the near future with Hua Qing results and therefore, it's the right time to approach new investors."
About Hartcourt Companies, Inc.
The Hartcourt Companies, Inc. is an investment holding and developing company specializing in the acquisition and development of private companies within high-growth industries in China. Hartcourt's recent acquisition of Hua Qing will bring substantial new revenue and income. Detailed information on Hartcourt can be obtained via the company's Web site, www.hartcourt.com .
About GoNow Financial Network:
Headquartered in San Francisco, California, GoNow.com is the destination for investors, trading professionals, and CEO's interested in SmallCap growth companies. The GoNow Financial Network provides Investors with the best information for companies trading on the Pink Sheets, OTC BB, NASDAQ SC, AMEX, and some NASDAQ NMS stocks. For the Trading Professionals, we provide the best real-time data and trading tools, which are paramount to making money.
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WEDNESDAY, APRIL 16, 2003 03:00 AM
LOS ANGELES, Apr 16, 2003 /PRNewswire-FirstCall via COMTEX/ -- The Hartcourt
Companies, Inc. (OTC Bulletin Board: HRCT, Frankfurt: 900009), www.hartcourt.com
, today announced that its subsidiaries made substantial progress in Q1 of 2003
with sales contracts obtained from new clients. These contracts will bring
additional revenue to improve drastically the financial results of the company
in 2003.
HuaQing, Shanghai's leading PC assembler and distributor, has signed a contract
with the government to supply 900 flat-panel monitors to Shanghai's mass transit
railway system for use in public communication and outdoor advertising. The
contract, worth RMB$2.2 Million, signified a new marketing push by HuaQing in
developing more sales to business and government sectors.
Hartcourt Capital, Hartcourt's investment banking arm, has signed an advisory
agreement to provide KS-Direction Development, Ltd. with investment banking
services for the private placement to fund its Green Valley project. The US$125
Million project, an agribusiness and bio-science national park, located 25km
west of Shanghai in Kunshan, will house companies specializing in ecological,
bio-tech and agricultural industries with cutting edges in R&D, education and
training. "The development of the Kunshan area opens a new chapter in the growth
and development of residential and commercial suburbs lying on the outskirts of
the major cities in China. The Kunshan region generated US$4 Billion in GDP last
year for China and the Green Valley is expected to bring another US$450 Million
to the region over the next 5 years," notes Christian Giannini, Director of
Hartcourt Capital. More details on the park and KS Direction are available at
www.direction.com.cn and www.ks-direction.com .
Meija College, a government-approved E-Learning institution in Beijing, has
obtained approval to open a branch in Shanghai this summer. At present, Meija (
www.mjedu.com ) has over 200 students enrolled in its MBA programs in
cooperation with Century University ( www.centuryuniversity.edu ) and University
of Management and Technology ( www.umtweb.edu ).
China Report, a magazine published by Hartcourt Capital, reported that its
advertising sales for Issue No.2 would increase 100 percent over the previous
issue. China Report ( www.hartcourt.com/chinareport /) has a circulation of
20,000, distributed directly to investment bankers, fund managers and financial
executives in the US and Europe.
Mr. David Chen, Hartcourt's President and CEO, comments, "Our principal
objective is to be profitable in 2003 in spite of the uncertainty created by the
aftermath of the Iraqi war and the SARS epidemic. These sales contracts proved
our relentless effort in setting high standards for performance and results. We
will continue to surprise our shareholders and our competitors with new
achievements to develop a sustainable, profitable operation as the foundation
for major expansion in 2004."
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