HARTCOURT COMPANIES INC Files SEC form 8-K, Non-Reliance on Previous Financials, Audits or Interim Review, Financial
Form 8-K for HARTCOURT COMPANIES INC
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5-Sep-2006
Non-Reliance on Previous Financials, Audits or Interim Review, Financial
Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On August 9, 2006, the Company filed the 10KSB/A for the year ended Dec 31, 2003. Subsequent to the change of financials for the year ended Dec 31, 2003, the previously filed financials statements for the year ended Dec 31, 2004 and transitional period ended May 31, 2005 should no longer be relied upon. As such, the Company's independent accountant restated the financial statements and independent auditor report for the year ended Dec 31, 2004 and transitional period May 31, 2005.
The restated financial statements and independent audit report for the year ended Dec 31, 2004 is furnished herewith.
Item 9.01. Financial Statements and Exhibits.
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Report on the Financial Statements
Of
The Hartcourt Companies, Inc.
And Subsidiaries
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The Hartcourt Companies, Inc. And Subsidiaries
Audited Consolidated Financial Statements
For the Years Ended December 31, 2004 and 2003
Contents Pages
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
Consolidated Balance Sheet - Restated 2-4
Consolidated Statements of Operations - Restated 4-5
Consolidated Statement of Changes in Stockholders' Equity - Restated 6-7
Consolidated Statements of Cash Flows - Restated 8-9
Notes to Financial Statements 10-37
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors The Hartcourt Companies, Inc.
We have audited the accompanying consolidated balance sheet of The Hartcourt Companies, Inc., a Utah Corporation (the "Company") as of December 31, 2004 and the related consolidated statements of operations, consolidated stockholders' equity and comprehensive income and consolidated statements of cash flows for the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Hartcourt Companies, Inc as of December 31, 2004 and the results of its operations and its cash flows for the years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America.
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficit of $64,997,496 including net loss of $13,373,212 for the year ended December 31, 2004. These factors as discussed in Note 2 to the financial statements, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 26, the financial statements for the year ended December 31, 2004 have been restated.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Huntington Beach, California
April 2, 2005 except for note 2, 9, 13, 14, 16, 18, 19, 21, 24 and 26 which are as of August 21, 2006
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (RESTATED)
DECEMBER 31, 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,744,852
Accounts receivable, net 5,141,892
Inventories, net 1,229,971
Notes receivable, net 1,376,916
Trade deposits 3,791,927
Prepaid expenses and other assets 1,470,508
Assets pending for sales, net 2,204,260
Due from related parties 436,155
TOTAL CURRENT ASSETS 17,396,481
PROPERTY & EQUIPMENT - NET 363,849
INVESTMENTS, NET 60,412
INTANGIBLE ASSET
Goodwill, net 1,911,466
$ 19,732,208
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 632,528
Deferred revenue 8,522,065
Due to shareholders 260,807
Accrued expenses and other current liabilities 4,398,812
Staffs loan 1,052,427
TOTAL CURRENT LIABILITIES 14,866,639
MINORITY INTERESTS 193,722
The accompanying notes form an integral part of the consolidated financial statements.
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (RESTATED)
DECEMBER 31, 2004
(-Continued-)
SHAREHOLDERS' EQUITY
Preferred Stock:
Original preferred stock, $0.01 par value, 1,000 shares authorized, issued and cancelled at December 31, 2004 - Class A, 10,000,000 shares authorized, none issued and outstanding at December 31, 2004 - Series A, $1,000 stated value, 4,000 shares authorized, none issued and outstanding at December 31, 2004 - Series B, $1,000 stated value, 2,000 shares authorized, none issued and outstanding at December 31, 2004 -
Series C, $1,000 stated value, 1,500 shares authorized,
none
issued and outstanding at December 31, 2004 -
Series D, $1,000 stated value, 10,000 shares authorized,
none
issued and outstanding at December 31, 2004 -
Series AB, $100 stated value, 25,000 shares authorized,
none
issued and outstanding at December 31, 2004 -
Total Preferred Stock -
Common stock, $0.001 par value, 250,000,000 authorised,
171,658,757 common shares issued and outstanding 171,659
Additional paid in capital 69,631,389
Treasury stock, at cost, 48,728 shares (48,728 )
Other comprehensive income (84,977 )
Accumulated deficit (64,997,496 )
TOTAL SHAREHOLDERS' EQUITY 4,671,847
$ 19,732,208
The accompanying notes form an integral part of the consolidated financial statements.
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)
For the years ended December 31,
2004 2003
NET SALES $ 74,563,459 $ 51,397,117
COST OF SALES 72,847,501 48,996,403
GROSS PROFIT 1,715,958 2,400,714
OPERATING EXPENSES
Selling, general and administrative 1,672,346 2,121,878
Depreciation and amortization 57,996 122,403
Impairments 4,307,692 509,525
TOTAL OPERATING EXPENSES 6,038,034 2,753,806
LOSS FROM CONTINUING OPERATIONS BEFORE
OTHER INCOME (EXPENSES) & MINORITY
INTEREST (4,322,076 ) (353,092 )
OTHER INCOME (EXPENSES)
Interest expense (552,547 ) (53,102 )
Interest income 238,282 188,947
Litigation accrual (100,000 ) (1,300,000 )
Investment income - -
Gain on disposal of property and equipment 97,888 -
Other income 215,154 -
TOTAL OTHER INCOME (EXPENSES) (101,223 ) (1,164,173 )
LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST (4,423,299 ) (1,517,265 )
Less: Minority Interest (559,342 ) (73,677 )
LOSS BEFORE DISCONTINUED OPERATIONS & INCOME TAX (4,982,641 ) (1,590,942 )
The accompanying notes form an integral part of the consolidated financial statements.
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)
(-Continued-)
For the years ended December 31,
2004 2003
DISCONTINUED OPERATIONS:
Gain (losses) from discontinued operations 368,715 (130,832 )
Provision for loss on assets pending for sale (5,914,848 ) -
Gain (losses) on disposal of discontinued operations (2,628,859 ) 1,213,559
LOSS BEFORE INCOME TAX (13,157,633 ) (508,215 )
Income tax (215,579 ) (62,674 )
NET LOSS (13,373,212 ) (570,889 )
OTHER COMPREHENSIVE LOSS
Foreign currency translation loss 605 (14,488 )
COMPREHENSIVE LOSS $ (13,372,607 ) $ (585,377 )
BASIC AND DILUTED LOSS PER COMMON SHARE
Loss from continuing operations $ (0.03 ) $ (0.012 )
Loss from discontinued operations $ (0.05 ) $ 0.008
Loss per share $ (0.08 ) $ (0.004 )
- basic and diluted (weighted average) 175,645,723 135,564,580
The accompanying notes form an integral part of the consolidated financial statements.
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (RESTATED)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Common
Additional Stock Other Total
Common Stock Preferred Stock Paid-In Subscriptions Treasury Stock Comprehensive Accumulated Shareholders'
Description Shares Amount Shares Amount Capital Receivable Shares Amount Loss Deficit Equity
Balance - December 31,
2002 88,518,023 $ 88,518 1,000 $ 10 $ 55,669,100 $ - 5,610,588 $ (3,723,928 ) $ (71,094 ) $ (51,053,395 ) $ 909,211
Shares issued for
consulting services 2,174,667 2,175 - - 160,246 - 162,421
Shares issued to
executive and staffs
in lieu of
compensation and
services 1,268,440 1,268 - - 196,127 - 197,395
Shares issued to
directors in lieu of
compensation &
services 589,460 589 64,161 64,750
Shares issued for
executions of cashless
option 1,000,000 1,000 - - 99,000 100,000
Cancel of treasury
stocks (4,756,058 ) (4,756 ) (3,170,444 ) (4,756,058 ) 3,175,200 -
Shares issued in
connection of
acquisition 50,349,243 50,349 - - 13,151,814 - - - - - 13,202,163
Share issued for
execution of cashless
warrants 714,794 715 - - (715 ) - - - - - -
Subscriptions
receivable 31,298,535 31,299 - - 2,620,195 (1,842,326 ) - - - - 809,168
Sale of treasury
stocks - - - - (451,187 ) (805,802 ) 500,000 48,813
Unralised loss on
disposal of FTL - - - - - - - - (14,488 ) - (14,488 )
Net loss - - (570,889 ) (570,889 )
Balance -December 31,
2003 171,157,104 $ 171,157 1,000 $ 10 $ 68,338,297 $ (1,842,326 ) 48,728 $ (48,728 ) $ (85,582 ) $ (51,624,284 ) $ 14,908,544
The accompanying notes form an integral part of the consolidated financial statements.
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THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (RESTATED)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(-Continued-)
Common
Paid-In Stock Other Total
Common Stock Preferred Stock Additional Subscriptions Treasury Stock Comprehensive Accumulated Shareholders'
Description Shares Amount Shares Amount Capital Receivable Shares Amount Loss Deficit Equity
Balance - December 31,
2003 171,157,104 $ 171,157 1,000 $ 10 $ 68,338,297 $ (1,842,326 ) 48,728 $ (48,728 ) $ (85,582 ) $ (51,624,284 ) $ 14,908,544
Shares issued for
consulting services 249,640 250 - - 91,465 - 91,715
Shares issued for
compensation 286,156 286 - - 150,964 - 151,250
Shares issued for
executions of cashless
option 696,342 696 - - (100,696 ) (100,000 )
Shares issued for
acquisition of
Challenger Group 6,824,748 6,825 - - 3,787,735 - - - - - 3,794,560
Share cancelled for
rescind acquisition of
Zhongnan Group (8,415,370 ) (8,415 ) - - (2,179,582 ) - - - - - (2,187,997 )
Subscriptions
receivable (1,139,863 ) (1,140 ) - - (454,804 ) 1,842,326 - - - - 1,386,382
Exchange fluctuation
reserve - - - - - - - - 605 - 605
Share issued for
conversion of
preferred stocks 2,000,000 2,000 (1000 ) (10 ) (1,990 ) - - - - - -
Net loss - - (13,373,212 ) (13,373,212 )
Balance -December 31,
2004 171,658,757 $ 171,659 - $ - $ 69,631,389 $ - 48,728 $ (48,728 ) $ (84,977 ) $ (64,997,496 ) $ 4,671,847
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