Hartcourt Companies, Inc. Announces Profitable Second Quarter 2009 Ended November 30, 2009

Jan 19, 2010, 14:57 ET from Hartcourt Companies, Inc.

SHANGHAI, Jan. 19 /PRNewswire-Asia-FirstCall/ -- The Hartcourt Companies, Inc. (OTC Bulletin Board: HRCT; Frankfurt 900009) ("Hartcourt" or "the Company"), a growing provider of vocational education and technical training services in the People's Republic of China ("PRC"), today announced that it obtained profits in financial results for the second quarter ended November 30, 2009.

    Second Quarter 2009 Highlights:
    -- Total revenues were $955,847 for the six months ended November 30,
       2009, increased 11% from $859,963 in the same period 2008;
    -- Gross profit in the second quarter was $378,992 and gross margin was
       76.0%;
    -- For the six months ended November 30, 2009, gross profit was $727,948
       and gross margin was 76%;
    -- Operating expenses decreased 42.8% to $170,911 for the three months
       ended November 30, 2009 compared with that in the same period 2008;
    -- Net income was $55,829 for the three months ended November 30, 2009;
    -- Hartcourt entered in an engagement letter with KingWeet AMS, which
       helped on investor relations services.

"We continued to be optimistic on the prospects for China's vocational education market and are very pleased with our profitable results," said Ms. Amanda Zhang, Senior Vice President of The Hartcourt Companies, Inc. "Hartcourt's management believes the vocational education market in China has great potential and plans to capitalize on this opportunity to develop the business. In anticipation of Hartcourt's pending transaction with Sino-Canada Investment Group, management focused on reducing non-essential expenses in its existing businesses in the second quarter.

Second Quarter 2009 Results

Total revenues for the second quarter of 2009 decreased 22.5% to $498,909 from $643,996 in the second quarter of 2008. The Company believes this was primarily the result of recovery of the job market as less people turned to vocational education. In the second quarter of 2008, at the heights of the global financial crisis, many people had lost their jobs and even students could not find jobs, and many of them chose to take vocational education.

Gross profit in the second quarter of 2009 was $378,992 and gross margin was 76.0%.

Operating expenses in the second quarter of 2009 were $170,911, down 42.8% from 298,741 in the second quarter of 2008. During operating expense, general and administrative expenses were $57,763 compared to $293,246 for the same period in 2008, a decrease of $ 235,483 or 80.30%. The decrease of expenses was primarily due to the improvement of working efficiency and the decrease of unnecessary expenses. Depreciation and amortization expenses were $113,148 for the three months ended November 30, 2009 compared to $5,495 for the same period in 2008, or a $107,653 increase. The increase was primarily due to the acquisitions of Beijing Yanyuan and China Arts & Science Academy.

Operating income was $208,081 in the second quarter of 2009, compared to $311,473 in the second quarter of 2008. Provision for income taxes was $44,646 in the second quarter of 2009, compared to $74,391 in the same quarter of the previous year.

Net income for the second quarter of 2009 was $55,829, or $0.00 per diluted share, compared to $274,633, or $0.00 per diluted share, in the second quarter of 2008. Fully diluted weighted average shares increased to 386,966,816 from 255,430,112 in the second quarter of 2008.

Six Month Results

For the first half of 2009, revenues increased to $955,847, up 11% from $859,963 in the corresponding period of 2008. Gross profit was $727,948 in the first six months of 2009, versus $806,640 in the same period a year ago. Operating income in the first half of 2009 decreased to $264,976 compared to $377,197 in the first half 2008. Net loss for the first six months of 2009 was $32,417 or $ 0.00 per diluted share, while net income was $251,571, or $0.00 per diluted share in the first half of 2008.

Financial Condition

As of November 30, 2009, Hartcourt had $2.6 million in current assets, a 45.8% increase over $1.8 million recorded at May 31, 2009 without debt. Stockholders' equity at November 30, 2009 slightly increased to $4.3 million compared to $4.0 million at May 31, 2009. The Company used $95,640 in net cash flow from operating activities in the first half of 2009, up from $202,788 in the same quarter of 2008.

Subsequent Events

On January 7, 2010, Hartcourt entered into an engagement letter with KingWeet AMS, an investor relations firm, to provide investor relations services for a period commencing January 7, 2010 and ending December 31, 2010. The company's management believes that Hartcourt is a well established educational service provider in China and is well positioned to take advantage of a largely untapped, emerging market and will work with KingWeet AMS to realize shareholder value for many years to come.

About KingWeet International Ltd. After Market Support (KingWeet AMS)

KingWeet AMS is a financial marketing firm specializing in creating liquidity for publicly traded stocks and a wholly owned subsidiary of Keating International Ltd. KingWeet AMS is uniquely positioned to provide an outsourced, high-level investor relations solution that combines in-depth understanding of China's corporate culture and economic scene with a direct pipeline into the leading funds and broker-dealers in the United States. KingWeet AMS is a global, full-service investor relations agency with corporate headquarters in Hong Kong, and offices in New York, Hong Kong and Shanghai. For more information, contact KingWeet AMS.

About Hartcourt Companies, Inc.

Founded in 1983, Hartcourt is a U.S. corporation with subsidiaries in China and other jurisdictions. Hartcourt moved its headquarters to Shanghai, China in 2002. In August 2006, Hartcourt changed its business model to focus on the education market in China. From May 2007 to October 2008, Hartcourt completed the acquisition of China Princely Education Technology Development Company Limited, an authorized accrediting organization for China vocational education located in Beijing, PRC sixty percent of the outstanding equity of Beijing Yanyuan Rapido Education Company, a well-known training institution in China and sixty percent of the outstanding equity of China E & I Development Co. Ltd., which does business as the China Arts and Science Academy.

Forward-looking Statements

The information contained herein includes forward-looking statements. These statements relate to future events or to our future anticipated financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We do not intend to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act. In addition, please refer to the Risk Factor section of our 2008 Form 10-K filed with the Securities and Exchange Commission on May 13, 2009.





                  The Hartcourt Companies, Inc. and Subsidiaries
                 Unaudited Consolidated Statements of Operations

                               Three Months Ended        Six Months Ended
                                  November 30,              November 30,
                              2009         2008         2009         2008
                            (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    Revenues                  $498,909     $643,996     $955,847     $859,963
    Cost of Goods Sold         119,917       33,782      227,899       53,723
    Gross Profit               378,992      610,214      727,948      806,240
    Operating Expenses
    Selling, general and
     administrative             57,763      293,246      292,990      420,794
    Depreciation and
     amortization              113,148        5,495      169,982        8,249
    Total operating
     expenses                  170,911      298,741      462,972      429,043
    Income from continued
     operations                208,081      311,473      264,976      377,197
    Other Income (Expense)
    Foreign currency
     exchange gain               5,255       45,753        5,049           --
    Interest income             14,003           --       20,998       51,189
    Gain on settlement
     debt                           --      188,765           --      188,848
    Total other income
     (expense)                  19,258      234,518       26,047      240,037
    Income from continued
     operations before
     income taxes and
     noncontrolling            227,339      545,991      291,023      617,234
    Provision for Income
     Taxes                     (44,646)     (74,391)     (81,415)    (110,193)
    Noncontrolling
     interest, net of
     taxes                    (126,864)    (196,967)    (242,025)    (255,470)
    Net Income                 $55,829     $274,633     $(32,417)    $251,571
    Basic Earnings Per
     Share                       $0.00        $0.00        $0.00        $0.00
    Basic Weighted Average
     Shares Outstanding    386,966,816  255,430,112  386,966,816  264,935,687
    Diluted Earnings Per
     Share                       $0.00        $0.00        $0.00        $0.00
    Diluted Weighted
     Average Shares
     Outstanding           386,966,816  255,430,112  386,966,816  266,613,190
    The Components of
     Other Comprehensive
     Income
    Net Income                 $55,829     $274,633     $(32,417)    $251,571
    Foreign currency
     translation
     adjustment                  4,769       30,001        8,563       57,533
    Comprehensive Income       $60,598     $304,634     $(23,854)    $309,104




                 The Hartcourt Companies, Inc. and Subsidiaries
                      Unaudited Consolidated Balance Sheet

    ASSETS
                                         November 30, 2009      May 31, 2009
                                                (Unaudited)       (Unaudited)
    Current Assets
    Cash and cash equivalents                      $89,859          $102,085
    Accounts receivable                          1,561,316           863,244
    Loans receivable                               944,570           822,551
    Prepaid expenses                                19,737             5,792
    Total current assets                         2,615,482         1,793,672

    Property and equipment, net                     45,898            57,640
    Intangible assets, net                       3,821,992         3,923,356

                                                $6,483,372        $5,774,668

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
    Accounts payable                                   $--           141,331
    Accrued expenses and other current
     liabilities                                 1,690,923         1,337,571
    Loan payable                                   274,429                --
    Due to related parties                         185,211           246,862
    Total current liabilities                    2,150,563         1,725,764


    Stockholders' Equity
    Original preferred stock $(0.01 par
     value, 1,000 shares authorized, none
     issued and outstanding)                            --                --

    Class A preferred stock(10,000,000
     shares authorized, none issued and
     outstanding)                                       --                --

    Common stock ($0.001 par value,
     424,999,000 shares authorized,
     389,015,544 and 386,966,816 issued
     and outstanding, respectively)                386,967           386,967

    Additional paid-in capital                  77,238,990        77,156,131
    Treasury stock, at cost, 2,048,728
     shares                                        (48,728)          (48,728)
    Other comprehensive loss                      (152,142)         (143,579)
    Noncontrolling interest                        394,288           152,261
    Accumulated deficit                        (73,486,566)      (73,454,148)
    Total stockholders' equity                   4,332,809         4,048,904

                                                $6,483,372        $5,774,668



                 The Hartcourt Companies, Inc. and Subsidiaries
                 Unaudited Consolidated Statements of Cash Flows

                                               Six Months Ended November 30,
                                                   2009              2008
                                                (Unaudited)       (Unaudited)
    Cash flows from operating activities
    Net Income                                    $(32,417)         $251,571
    Adjustments to reconcile net cash
     provided by
     operating activities
    Depreciation and amortization                  113,148             8,249
    Noncontrolling Interest                        242,025           255,470
    Stock options issued for service                82,859            79,709
    Stock issued for services and
     compensations                                      --            58,922
    Gain on settlement of debt                          --          (188,848)
    Net change in assets and liabilities
    Accounts receivables and other
     receivables                                  (699,208)         (593,742)
    Inventories                                         --             6,630
    Prepaid expenses                               (13,162)         (187,571)
    Accounts payable                               141,331          (131,570)
    Accrued expenses and other current
     liabilities                                    69,784           238,452
    Net cash used in operating activities          (95,640)         (202,728)

    Cash flows from investing activities
    Loan receivable                               (121,695)               --
    Cash received on acquisition of
     Subsidiary                                         --             6,117
    Net cash used in investing activities         (121,695)            6,117

    Cash flows from financing activities
    Due to related parties                         (61,651)               --
    Loan payable                                   274,429                --
    Issuance of shares for cash                         --           400,000
    Proceeds from (payments to) related
     parties-net                                        --          (133,597)
    Net cash provided by (used in)
     financing activities                          212,778           266,403

    Effect of exchange rate changes on
     cash and cash equivalents                      (7,669)          (57,532)

    Net increase (decrease) in cash                (12,226)           12,260

    Cash and cash equivalents at
     beginning of period                           102,085             4,907

    Cash and cash equivalents at end of
     period                                        $89,859           $17,167

SOURCE Hartcourt Companies, Inc.