General Update: June 21st, 2002
Dear Shareholders,
I would personally like to thank each and every one of you for your continued support of Hartcourt during these challenging times and let you know we are working non-stop to build the company both financially and competitively to become the success we all believe it can be.
We continue to make hard decisions in our efforts to reduce costs across the organization and shorten Hartcourt's path to profitability. It is apparent that the markets are punishing companies with negative cash flow and we are doing everything within our power to eliminate excess cost centers and run as efficiently as possible, while taking extreme care not to negatively impact our basic operations or unduly limit our ability to expand our businesses or affect their transition into higher margin markets. Our core operations continue to develop and are performing well.
I have reduced all marginal personnel and the management team has opted to accept reduced salaries with incentive bonuses to help the company meet its near term cost reduction goals. Every one on the team understands the importance in sharing the sacrifice in tough times and is pulling together to move the company forward. This has been a painful process but one I felt was necessary if the company is to survive and prosper in this harsh environment. I am a firm believer that those at the top of an organization are ultimately responsible, regardless of the external circumstances, and are obligated to share the burden.
There are other developments I would like to share with you. We have decided to take AI-Asia public ahead of SinoBull. AI-Asia is a more attractive candidate, given current market conditions, due to its stronger financials, higher revenue base, and profitability. We are currently exploring alternatives for SinoBull that include injecting additional assets into the company to better position it for listing in this environment. Specific details will be available soon and will be disseminated in press releases.
The favorable disposition of the Hogue case was a positive. The company no longer has any exposure to the disproportionate temporary judgment and now that the judgment in this case has been overturned it allows us to act on the issue of stock dividends of ElephantTalk for our shareholders. Obviously there have been dramatic changes in the markets since our initial policy was conceived and the issuance of a significant portion of Hartcourt's equity position in ElephantTalk to its shareholders is no longer a viable or fiscally responsible alternative. However, I feel it is important for the company to reward its investors for their loyalty, even if on a smaller scale. Details will be released shortly. We are also exploring our ability to have all outstanding shares of Hrct accounted for as a step in this process in an effort to provide transparency and accountability of any unusual short activity.
We have already had discussions with our Accounting and Legal departments regarding the upcoming transition of all stocks on the OTC board to the new BBX and are beginning the compliance process. The regulations of the BBX will go a long way in lifting the profile of smaller cap stocks as they eliminate many of the uncertainties associated with the OTC for funds and investors. In addition, the BBX will require that all short positions are reported and accounted for by market makers.
To conclude, we have accomplished much but there is much left to do. We do not expect this road to be short or easy. Everything that can be done will be done and we have every intention of emerging as a stronger, more competitive, and profitable operation. Again, thank you for your support and I will be in touch again very soon to update you on our continued progress.
