SOURCE: The Hartcourt Companies, Inc.

October 24, 2006 12:28 ET

Hartcourt Announces Signing of Memorandum of Understanding to Acquire 51% Equity Interest in Hunan Vocational College of Foreign Language

SHANGHAI, CHINA -- (MARKET WIRE) -- October 24, 2006 -- The Hartcourt Companies, Inc. (OTCBB: HRCT) (FRANKFURT: 900009) today announced that it ("the Company") has entered into a non-binding Memorandum of Understanding ("MOU") with Hunan Vocational College of Foreign Languages in Hunan Province, China ("HVCFL") to acquire a 51% equity interest in HVCFL. The transaction is expected to be completed by the end of February next 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$6.5 million cash. HVCFL has agreed to guarantee its net revenue at not less than RMB 65 million (US$ 8.24 million) and profit after tax of not of less than RMB 20 million (US$2.5 million) each year for the five years following closing (2007-2011).

Founded in 1993, HVCFL provides post-high school education and vocational training services to the students in the region of Changsha, the capital city of Hunan Province, China. HVCFL has over 5,000 students and is expected to have approximately 7,000 students in 2007 and 10,000 in 2008. The average tuition fees and boarding cost per student of HVCFL is RMB12,000. There are over 200 members of the faculty at the College.

HVCFL is the sole foreign language school in Hunan province offering academic programs of business English, applied Japanese, applied French and other languages, international economics and trade, marketing and sales, hotel management and logistics management.

Mr. Huang Xu, President of HVCFL, commented, "HVCFL is a foreign language college with over 10 years of history. We are recognized in the region of middle China for curriculum design and development and would like to expand our market to other areas. We are glad that we have the opportunity to work with Hartcourt and to have access to additional sources of capital, program extension as well as management expertise to achieve this goal."

Dr. Yungeng Hu, President and CFO of the Company, commented, "Hunan's location in middle China fits in well with China's implementation of middle-west development strategy, where capital, technologies and talents are needed. With foreign investment increasing in the area, more people with foreign language skills are needed. We believe the needs will continue to grow in the coming years and the acquisition of HVCFL will enhance our earnings once we have completed the acquisition."

Mr. Victor Zhou, CEO of the Company, stated, "The signing of the MOU with HVCFL demonstrates our ongoing strategy to acquire operating education assets throughout China. The academic programs of HVCFL and other schools in consideration are complementary to this strategy. We believe both parties will benefit greatly from joining forces and the combined company will have significant opportunity to grow with greater synergy and lead to success."

More information about HVCFL can be found in its web sites:

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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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