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Hartcourt Acquires ZhongNan Group, a Major PC Distributor in Wenzhou Four Recent Acquisitions Had Total Revenue of $181 Million and Net Profit of $3.1 Million in 2002
LOS ANGELES, Jul 7, 2003 /PRNewswire-FirstCall via COMTEX/ -- 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.
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.
SOURCE The Hartcourt Companies, Inc.
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