Hartcourt Companies (fka HRCT)

[daddycool100]

September 26, 2001 from Alan Phan

Dear Shareholders:

It has been a Hartcourt tradition to provide our
shareholders frequent updates. In these uncertain
times it is important for you to know that the
Hartcourt Companies are continuing to execute their
business plans as promised.

It has been a very difficult year in the tech sector
and the recent terrorist attacks have magnified the
impact of the economic slowdown, creating additional
turbulence in the markets. This combination of events
has had an adverse effect on our share price, as it
has for thousands of other companies. However, in
addition to the growing achievement of our
organization, many positive factors are taking shape
in the markets, in the global economy and in China,
which should provide substantial stimulus to our
efforts as Hartcourt continues to march forward on its
mission.

THE ENVIRONMENTAL FACTORS

The Fed has lowered the interest rates for an eighth
time and there is anticipation of another cut in
October. This will not only make capital spending more
attractive, but will also create incentive for the
huge cash reserves currently on the sidelines to move
into the equity markets. The finalization of China¡¯s
WTO entry will open the enormous consumer and business
markets of China and open the doors to a broad range
of opportunities for Hartcourt. There will be
increased cooperation between our businesses and many
U.S. and Asian corporations that have been waiting for
this event. The WTO should favorably impact all of our
operating entities; as telecommunications, financial
services, internet technology, and E-education are all
sectors expected to benefit and Hartcourt divisions
are well positioned in these sectors. In addition; the
economic downturn has made available many valuable
assets from distressed companies, it is much easier to
find highly qualified IT personnel, and upward
pressure on wage and infrastructure expenses has
abated. Finally, our structure and direct chain of
command allows our companies to respond rapidly to
changing market conditions to pursue market share and
new business opportunities.

TAKING OUR COMPANIES PUBLIC

This week we initiated the listing of our first
spin-off, ElephantTalk, on the US markets. This is the
completion of step one of our goal to have all
Hartcourt divisions in a position to publicly trade
and have established market values by year-end. We
will continue to add acquisitions and investments in
all four divisions so we can increase their value to
investors and facilitate the divestiture process. In
2002, we will have major equity stakes in four
companies trading on multiple world markets with
shareholders participating in the value of each
spin-off. In addition, the dividend strategy will be
structured to reward long-term shareholders and to
create a high level of risk and accountability in the
borrowing of shares and naked-shorting.

Furthermore, each division¡¯s business model will
incorporate measures to meet all necessary
requirements to move onto the larger exchanges. While
there is no specific timeline established at this
point, achieving this goal will be a major factor in
our operational strategy. We understand we have not
succeeded in our previous effort at a listing on the
Nasdaq NMS, but we will use the lessons learned from
this attempt to avoid mistakes, and to obtain the
planned result.

THE FINANCIAL CONDITION

Last month we announced a dramatic increase in
revenues due to the financial consolidation of our
ElephantTalk, Media services and Sinobull units. We
expect continued improvement in both top and bottom
lines in the third quarter through strong revenue
growth in our existing businesses, and substantial
revenue expansion from acquisitions going forward. We
fully expect to meet the $3.5 Million in revenue
projection for Q3 despite the recent slowdown of the
global economy. We have streamlined operations,
reduced overhead, and have sufficient cash resources
to accomplish our stated goals.
With current revenues from eight operations,
Hartcourt¡¯s share price represents less than 1 times
forward sales. Considering the following factors:
additional acquisitions on stream, Hartcourt¡¯s
favorable market positions in China, the positive
impact of the WTO, the technology edge of our
companies, and the profit-driven business models of
our operations, it appears our share price is
fundamentally undervalued. We believe, as the
divestiture process unlocks the true value of our
assets, the investment community will recognize the
market value we deserve and reflect it in the share
price.

THE MANAGEMENT

Hartcourt¡¯s recent reorganization was just the first
step in a company wide review of personnel and
business operations to guarantee the appropriate
managers and strategies are in place to bring each
operational unit to the next level of sustained
revenues, brand recognition, market penetration and
technological/competitive advantage.

The management teams of Hartcourt¡¯s four divisions
are already taking charge of their daily operations;
with Mr. Stephen Tang ¨C CEO of Sinobull, Mr. Russelle
Choi -CEO of ElephantTalk, and Mr. Alan Chow- CEO of
AI-Asia. Hartcourt will appoint the CEO of the
E-education division in the near future.

These CEO¡¯s represent a ¡°changing of the guard¡± as
we move our operational focus to the consolidation
phase of our accomplishments. I have total confidence
in these executives and their ability to guide their
operations to the next level of success. My role in
all company operations will be significantly reduced
once the divisions are on their own.

THE NEW HARTCOURT

Hartcourt now has four separate divisions that are
generating revenue. These will become four separately
trading, publicly-listed, companies with their own
market dynamics and exceptional leadership:

1) Sinobull Financial Group: This operating group
consists of Financial Telecom Ltd, SinoBull
Information Company Ltd , SinoBull Network
Technology Company, SinoBull.com, and Hartcourt's
investments in Shanghai Wind Information Company.
SinoBull provides financial news and data to
brokerages, financial institutions, and corporations.
It also delivers these financial information to
individual investors via cable TV, magazines and
Internet-based Web sites. The system was supported by
technological platforms and solutions developed and
maintained by SinoBull¡¯s software and technology
group. If in 2015, China¡¯s economy is as large as the
US at the present time, Sinobull will be a household
word like Bloomberg and CNBC.

2) Elephant Talk Group: This group is centered around
Elephant Talk Limited and future joint-ventures with
other Chinese telecom companies. The group is focused
on the development and delivery of comprehensive
telecommunication services, broadband networks,
technology solution and the management of Internet
services. Its products and services include web
hosting, data warehouse, Internet security, E-commerce
services, IP telephony, and a variety of wireless
platforms and solutions. When the telecom industry in
the US was deregulated in the 80¡¯s , Sprint and MCI
came from nowhere to become two major carriers.
Elephant Talk has all the capability and market
position to repeat this historical feat in China after
WTO.

3) The AI-Asia Media Services Group: The operating
companies in this group include
StreamingAsia, Logicspace, V2Technology and Syndicate
Asia with an investment in Beijing Total System
Solutions Ltd. (TSS). The group provides
comprehensive real-time audio and video delivery
solutions (Streaming Media) along with Internet
consulting and web application development for
businesses, professionals, organizations, web sites
and content publishers. If video and audio streaming
is the trend of the future Internet, AI-Asia will be
the one of the leading technology groups in Asia.

4) The E-learning Group: The operations of this
group were formed in a partnership agreement
between Hartcourt, Northern Jiaotong University and
California State University Fullerton to offer
American career training courses and MBA degree
program in China. The business plan is to organize
additional partnerships with other American and
Chinese universities, utilizing AI-Asia technology and
ET¡¯s infrastructure to facilitate the online
education programs in China. Needless to say, every
study show that revenue and profit from online
education will be the largest sector of the
E-commerce. To have the first-mover advantage in this
market will be our competitive edge.

We are confident that the market capitalization of
each individual company can exceed the total present
value of Hartcourt.

OUR MISSION AND THE ACCOMPLISHMENTS

These investments speak for themselves about the
progress Hartcourt has made over the past 18 months.
And we are not done yet. We will continue to acquire
additional assets to infuse into these divisions. Any
dilution to Hartcourt stock will be minimal, because
these new public entities will take care of
acquisition and operational costs through their own
equity and capital resources.

These new companies will focus on fundamentals,
operations, acquisitions, and shareholder value. They
will follow the Hartcourt path and mission in their
own business sectors. Hopefully, they will build their
own empires and give birth to a new generation of ET,
SB and AI subsidiaries¡­ like Hartcourt did for them.
The journey is endless, but rewarding, and the
excitement is overwhelming. China is on a road to
become one of the world¡¯s largest economies and these
new companies will be household words in their own
industries. We have set a challenging path that we are
committed to follow as we build an organization with a
strong and prosperous future. There will be blood,
sweat and tears as there will be obstacles, delays and
challenges. But nothing can stop an idea whose time
has come.

As the Greek poet Hesiod once said; ¡°Before the gates
of excellence the high gods have placed sweat; long is
the road thereto and rough and steep at first; but
when the heights are reached, then there is ease,
though grievously hard in the winning." 2500 years
later, Samuel Johnson agreed,¡± Life affords no higher
pleasure than that of surmounting difficulties,
passing from one step of success to another, forming
new plans and seeing them gratified. He that labors in
any great undertaking has his fatigues first supported
by hope and afterwards rewarded by joy. To strive with
difficulties, and to conquer them, is the highest of
human felicity.¡±

It¡¯s amazing how little the road to success has
changed.

Sincerely,

Dr. Alan Phan
Chairman

Note: Certain statements in this letter may constitute
``forward looking'' statements within the meaning of
Section 21E of the Securities Exchange Act of 1934.
Such forward looking statements involve risks,
uncertainties and other factors, which may cause the
actual results, performance or achievement expressed
or implied by such forward looking statements to
differ materially from the forward looking statements.


=====
Dr. Alan V. Phan, Chairman
The Hartcourt Companies, Inc.
9800 Sepulveda Blvd. Suite 818
Los Angeles, CA. 90045 USA
Tel: [phone] Ext 209
Fax [phone]
Web: www.hartcourt.com

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