SOURCE: The Hartcourt Companies, Inc.

October 12, 2006 06:30 ET

Hartcourt Announces Signing Memorandum of Understanding to Acquire 100% Equity Interest in China Princely Education Technology Development Company Limited

SHANGHAI, CHINA -- (MARKET WIRE) -- October 12, 2006 -- The Hartcourt Companies, Inc. (OTCBB: HRCT) (FRANKFURT: 900009) (the "Company") today announced that it has entered into a non-binding Memorandum of Understanding ("MOU") with China Princely Education Technology Development Company Limited ("China Princely") to acquire a 100% equity interest in China Princely. The transaction is expected to be completed before the end of the year and is subject to completion of due diligence by the Company and execution of the definitive agreement.

The proposed consideration to be paid by the Company for the acquisition is US$300,000 cash and 5,400,000 shares of the Company's restricted common stock, China Princely has agreed to guarantee its net revenue at not less than RMB 16 million (US$ 2 million) and profit after tax of not less than RMB 3.86 million (US$488 thousand) each year for the three years following closing (2007-2009).

Founded in December 2004 in Beijing, China Princely provides internet-based distance vocational education and technical training services, approved by the Central Institute of Vocational and Technical Education ("CIVTE") of the Ministry of Education ("MOE") of China. CIVTE also has granted to China Princely the authority to conduct vocational ability tests and to grant certificates to students, therefore making China Princely an authorized accrediting organization for China vocational education.

CIVTE is a department of the Ministry of Education. Established in 1990, CIVTE is a vocational education research and development institution at the national level. CIVTE's main responsibilities include researching the reform and development of China's vocational and technical education, providing advice to the Ministry of Education with respect to relevant policy determinations, providing information and consultation services to the various vocational education institutions nationwide and publishing relevant data and information regarding vocational education in China. CIVTE is the China representative of the UNISCO Technical and Vocational Education Projects.

China Princely owns 51% of Beijing Shiyan Foreign Language School ("BSFLS"). BSFLS has approximately 550 students, producing approximately RMB 7 million (US$880,000) revenue and approximately RMB2.5 million (US$316,400) in net profit in 2005. China Princely is launching BSFLS branch schools in other provinces in China.

Mr. Haisheng Zhou, founder and President of China Princely, who has a long track record in the China education industry by serving as a government official at the Ministry of Education and as an entrepreneur in creating China Princely stated, "I am excited about the business combination between China Princely and Hartcourt. My former colleagues at MOE have indicated to me that there are more than 8 million vocational school graduates every year but that many of them graduate from non-accredited institutions. Consequently, they face a more difficult time trying to find post-graduate employment as prospective employers are not certain of the quality of their training. China Princely has a demonstrated track record of being a highly qualified vocational training and education institute with a high degree of excellence in its teaching and training faculty and curriculum. Accordingly, employers have a greater degree of confidence in our graduates' abilities. We believe there is great synergy between China Princely and Hartcourt as both are in the vocational education area and each one has its own strengths. I am glad to be part of the Hartcourt family."

Dr. Yungeng Hu, President and CFO of the Company, commented on the potential acquisition, "Hartcourt decided to conduct its business as an active educator, which means that we not only invest in schools in an active manner, but we are building a standard vocational education system in the country. In order to make sure our students are grasping real techniques in their professional areas, we have to have an accrediting system. The signing of the MOU with China Princely shows our determination and commitment in making the Company a top education group in China by building its own accrediting system.

Mr. Victor Zhou, CEO of the Company, stated, "We believe that China Princely will become an important platform of Hartcourt, and an important bridge between MOE and us. Hartcourt plans to build an R&D center within China Princely, to utilize its strong research team and the direct relationship with MOE and CITVE. This R&D center, among other functions, will help build a comprehensive curriculum program for all the Hartcourt portfolio schools."

More information about China Princely and BSFLS can be found in their respective web sites: and

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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. Forward-looking statements are identified by words such as "expects," "believes," " anticipates," and words of similar import. 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, including those risks identified in the company's filings with the U.S. Securities and Exchange Commission, 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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