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Press Release Source: The Hartcourt Companies, Inc.
Hartcourt Acquires ZhongNan Group, a Major PC Distributor in Wenzhou
Monday July 7, 5:59 am ET
Four Recent Acquisitions Had Total Revenue of $181 Million and Net Profit of $3.1 Million in 2002
LOS ANGELES, July 7 /PRNewswire-FirstCall/ -- The Hartcourt Companies, Inc. (OTC Bulletin Board: HRCT, Frankfurt: 900009), www.hartcourt.com , today announced that it has signed a definitive agreement to purchase 51 percent of Wenzhou ZhongNan Computer Group ("ZhongNan"), www.zncomputer.com.cn , a major PC distributor and retailer based in Wenzhou, China.
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The purchase price for the 51 percent acquisition is RMB34.46 Million (US$4.18 Million) payable in 7,013,951 restricted common shares of Hartcourt priced at US$0.5955 per share.
In 2002, ZhongNan recorded sale revenue of RMB 297 Million (US$36 Million) and net profit of RMB5 Million (US$0.6 Million). It is one of the top PC distributors in Wenzhou and has the same business model like HuaQing, GuoWei and NewHuaSun. The city of Wenzhou (population: 8 Million) located 300 miles south of Shanghai, has one of the highest GDP per capita in China.
ZhongNan, founded in 1996, has 202 employees. It owns distribution warehouses and operates 16 retail stores in Wenzhou and surrounding areas, completed with service centers. The stores provide customers with latest computer hardware, software, technical services and other digital products.
ZhongNan is the fourth acquisition of Hartcourt in the IT product distribution business. In 2002, the combined revenue of 4 entities was RMB$1,493 Million (US$181 Million) and the net profit was RMB$25 Million (US$3.1 Million). In the first four months of 2003, ZhongNan recorded a sale of US$16.2 Million and net profit of US$0.24 Million.
China has experienced explosive growth in PC sales for the last 10 years from 670,000 PCs sold in 1994 to 7,260,000 in 2001. IDC predicts China's PC sales will grow at 18-22% for the next 5 years, with sales reaching 19,800,000 PCs in 2006 (global PC sales is 131,800,000 in 2002 vs. China's 9,280,000). Experts believe the huge market potential will come from the low PC penetration in home uses (5% in China compared to 49% in the US), as well as demand from technology upgrades and adoption of information technology by SMEs (small medium enterprises) and government sectors.
More details on these subsidiaries and the PC market in China could be obtained from Hartcourt Website, www.hartcourt.com or ZhongNan website, www.zncomputer.com.cn .
Mr. Hu JianGuo, Chairman and President of ZhongNan, comments, "We are glad to follow the footsteps of HuaQing, NewHuaSun and GuoWei to create a major PC distribution network under Hartcourt umbrella. Besides improving our profit margin with the combined purchasing and advertising power, all of us will be able to expand faster thanks to access to international capital sources. As more PC distribution companies are waiting to join us, our onward momentum could bring forth a new force in China PC market."
About Hartcourt
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. Recent acquisitions of Hartcourt included 4 major PC marketers in China that have a combined revenue of US$181 Million and net profit of $US 3.1 Million in 2002. 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.
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Source: The Hartcourt Companies, Inc.
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