Email from Dr.Phan
June 16th, 2001
Dear Friends:
It’s strange but I feel disappointed and frustrated
while Hartcourt operations are moving smoothly ahead
with speed, efficiency and boldness. Maybe the
terrible share price has caused everyone, including
myself, to lose our perspective and started to believe
in the constant negative remarks of our worst enemies.
So here I am , on a beautiful Saturday afternoon in
the LA-LA land, alone in the office doing a bit of
soul searching to share some thoughts with you.
Two repetitive criticism which I have often received
are: one, Hartcourt kept projecting the optimistic
timeline which it was unable to achieve; and two,
Hartcourt has not accomplished the transactions
announced in the press releases.
I have no excuse for the first part: it is plain
stupid to think that the turbulent business climate,
especially in China and under the present high-tech
recession, would allow Hartcourt to complete the task
without any delay or modification. I sincerely
apologize for the mistake. I have kept my mouth shut
and from now on, will let the events speak for
themselves.
On the second criticism, I went back into all the
press releases issued in 1999, 2000 and 2001. Taking
out the minor releases on the subsidiaries’
achievements like Davnet’s contract with
StreamingAsia, books published by Sinobull etc.., I
counted 39 important announcements on Hartcourt’s
acquisitions, merger, partnerships and milestones. Of
these, we have 26 successful completions, 7 still
pending and 6 failures. That is the true final score,
as of today. Comparing to other small development
companies, we deserve cheers and congratulations, not
the self-beatings we subject ourselves daily for the
last few months. Even the failures are blessings in
disguise and all of them are created by factors beyond
our control.
For those skeptical critics, I will go over each
matter one by one so the TRUTH can be verified and
validated.
The failures:
1. Mahadev: This software company withdrew from the US
and international markets due to the high-tech bust
and went back to India. There is not much we can do
about their decision.
2. China On Line (COL): We asked Ernst & Young to
conduct the due diligence after signing the agreement
to determine the fair market value of COL. E&Y could
not complete the task because the legal and accounting
records of COL were in disarray. We recently
terminated the deal.
3. The CD distribution by China Telecom: We had
counted on the 30 Million CD’s distributed by CT to
boost the dominance of our Sinobull Web site thanks to
the link. However, the Chinese government stopped CT’s
effort for fear of creating a monopoly in ISP
business.
4. The Nasdaq application: We did apply for Nasdaq NMS
as announced. However, we decided to pull the
application once we were not certain of our approval
chance. We will apply again as soon as we feel we are
ready.
5. Esat: We took Esat technical team to Beijing to
meet with Innostar, but Innostar rejected Esat
solution. As we also had doubt, we pulled out of the
Esat deal.
6. China Infohighway: The new management came in and
they decided not to honor the agreement we signed with
the old management team. It is futile to sue a
government-owned entity, so we walked. After merging
with a Hong Kong-listed company, China Infohighway was
in financial trouble and they are being liquidated.
The still-pending transactions:
1. Thinkers Group: We have submitted their products to
a technical panel of China Mobile. If they are
approved, we should have good business. If not, we
will not lose anything.
2. Koffman Securities: There is a delay due to the low
share price of HRCT. We should be able to resolve it
soon to complete the deal.
3. Financial TV: The studio has been set up and the
demonstration tapes were produced. However, we cannot
operate it until WTO is signed.
4. Family@Home: The Shanghai company is supposed to
get an exclusive contract with the government-owned
broadband fiber network to provide the last mile
solution for a major portion of the city. As their
temporary contract is limited in scope and operational
area, Hartcourt decided to wait.
5. China Legal On Line: Our Hong Kong partner still
has the exclusive contract with the China’s Supreme
Court to publish legal documents on line. However, the
billionaire Stanley Ho hijacked this project and
pumped in $5 Million to take charge. The money has run
out, and Mr. Ho won’t invest any more. The
re-structure deal would be much more beneficial for
Hartcourt.
6. Equity Credit Line From Swartz: As our share price
has plummeted, we cannot afford to obtain funding this
way. We just have to wait for better timing.
7. Innostar ISP and IP Phone: Elephant Talk has taken
over our position of this joint venture. However, due
to recent change in regulation, we cannot start this
project until WTO is signed.
The completed transactions (there is no need for
explanations):
1. Equis-Reuters partnership.
2. E-Education program with Cal State Fullerton and
Northern Jiaotong University.
3. Elephant Talk acquisition.
4. Fintel Wireless partnership to distribute financial
PDA’s.
5. Sinobul.com being the most popular financial portal
in China.
6. Total Solution System acquisition (TSS): 10 percent
instead of 60 percent.
7. Wind Info investment.
8. ChinaInfo.com: Exchanging contents, links and
revenue sharing.
9. Yahoo!China: Providing financial contents, links
and sharing revenue.
10. SyndicateAsia acquisition.
11. People’s Daily: Providing contents for financial
section.
12. China Securities: Exchange financial data and
sharing revenue.
13. Logic Space acquisition.
14. Legend: Providing software for trading stocks
online via set-top boxes.
15. Nokia: Providing stock trading software and
financial data for WAP users.
16. Microsoft: Developing E-finance and stock trading
software for brokerage houses.
17. Hewlett-Packard: Developing stock trading and
financial data software for Jordana PDA users.
18. IBM: Developing voice-recognition software to
trade stocks.
19. Guo Mao acquisition.
20. StreamingAsia acquisition.
21. Empact Technolgy investment.
22. Shangdi Network acquisition.
23. China Telecom: Exclusive use of 162 Network for
stock trading.
24. Listing on Frankfurt stock exchange.
25. UAC Stock Online acquisition.
26. Financial Telecom acquisition.
Again, the final score is 26 successes, 7 outstanding
and 6 failures (thank God, we were lucky on these
so-called failures). You draw your own conclusion.
As I said earlier, I am quite frustrated and
disappointed at the terrible share price. Of course,
you, the shareholders, are only interested in making
money with a higher share price. It won’t make any
difference if Hartcourt can be successful in 26 more
transactions and the share price remains the same. I
understand this sentiment and that is why I am so
frustrated and disappointed, after working so hard for
so long for the elusive goal. I take full
responsibility for this challenge, even if it’s beyond
my control.
I am as proud as ever on our achievements. I am as
determined as ever on our effort to complete our
mission. I am a soldier and I think I am the best
soldier for this job. I can assure you that we will
arrive at our destination. There is no doubt
whatsoever in my mind. However, will the share price
ever reflect the true value of Hartcourt? I still
believe it will, but after so many disappointments,
you have to make the call. If you decide to walk out
of this long journey now, I will understand and wish
you the best of luck with your investment. If you
stay, let us pray that you will have the patience and
Providence will side with the good guys in the end.
I wish you a great Father’s Day; that your family will
appreciate deeply the hard work and the sacrifice you
have given them. I am grateful for all the support you
have expressed and I promise I won’t fail you.
Keep the faith. “The intensity of our desire will
govern the power with which the force is directed. And
in order to succeed, we must first believe that we
can.” (John McDonald).
Best,
Alan
=====
Dr. Alan V. Phan, Chairman
The Hartcourt Companies, Inc.
9800 Sepulveda Blvd. Suite 818
Los Angeles, CA. 90045 USA
Tel: 310 410 7290 Ext 209
Fax 310 410 7297
Web: www.hartcourt.com
AI
