U. S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB


 [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
          EXCHANGE ACT OF 1934

                  For the quarterly period ended: June 30, 2001


 [ ]      QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES AND
          EXCHANGE ACT OF 1934

        For the transition period from ______________ to _______________


                        Commission File Number: 001-12671


                          The Hartcourt Companies, Inc.
        (Exact name of small business issuer as specified in its charter)

                                      Utah
         (State or other jurisdiction of incorporation or organization)

                                   87-0400541
                        (IRS Employer Identification No.)

          9800 Sepulveda Blvd., Suite 818, Los Angeles California 90045
                    (Address of principal executive offices)

                                 (310) 410-7290
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days: Yes [ X ] No [ ].

As of June 30, 2001,  The Hartcourt  Companies,  Inc. had  72,493,766  shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                                            Yes [  ]                 No [ X ]







                                       F-1


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                              Report on Form 10-QSB
                                For quarter ended
                                  June 30, 2001
                                                                         Page
                                                                         ----
PAET 1   FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets at June 30, 2001
         (Unaudited) and December 31, 2000                                F-3

         Consolidated Statements of Operations for the
         Three Months and Six Months ended June 30, 2001
         and 2000 (Unaudited)                                             F-5

         Consolidated Statements of Shareholders' Equity
         for the Six Months ended June 30, 2001 (Unaudited)               F-6

         Consolidated Statements of Cash Flows for the Six
         Months ended June 30, 2001 and 2000 (Unaudited)                  F-7

         Notes to the Consolidated Financial Statements                   F-8

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                             F-28


PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                               F-31

Item 2.  Changes in Securities                                           F-32

Item 3.  Defaults upon Senior Securities                                 F-32

Item 4.  Submission of Matters to Vote of Security Holders               F-32

Item 5.  Other Information                                               F-32

Item 6.  Exhibits and Reports on Form 8-K                                F-32

Signatures                                                               F-33








                                       F-2


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

Part I
Item 1
                                         June 30, 2001         December 31,
                                          (Unaudited)              2000
                                     ------------------     ------------------
ASSETS

Current assets:
   Cash and cash equivalents        $           727,073    $           402,993
   Accounts receivable, net                   1,746,655                146,891
   Inventory                                    168,416                 66,331
   Note receivable                                    -                 70,000
   Prepaid expenses and other                 1,364,998                 56,378
   Due from related parties                   1,156,827                176,697
                                     ------------------     ------------------

Total current assets                          5,163,969                919,290
                                     ------------------     ------------------

Property and equipment, net                   3,292,881                736,259

Investments, net                                617,760              1,258,050

Other Assets
   Advances pursuant to mergers                       -              3,019,884
   Goodwill, net                              6,636,223              2,856,786
   Computer software costs, net               2,254,150                970,172
                                     ------------------     ------------------

Total other assets                            8,890,373              6,846,842
                                     ------------------     ------------------
Total assets                        $        17,964,983    $         9,760,441
                                     ==================     ==================
















          See accompanying notes to consolidated financial statements.

                                       F-3


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                         June 30, 2001         December 31,
                                          (Unaudited)              2000
                                      ------------------    ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Cash overdraft                        $      558,176    $                 -
   Accounts payable                           3,373,470                723,647
   Deferred revenue                             547,070                112,456
   Notes payable, current portion             1,666,637                 33,788
   Accrued expenses and other
    current liabilities                         225,030                130,632
   Payables to related parties                  424,001              2,146,454
                                         --------------     ------------------
Total current liabilities                     6,794,384              3,146,977

Notes payable, net of current portion         2,217,063                609,867
                                         --------------     ------------------
Total liabilities                             9,011,447              3,756,844
                                         --------------     ------------------
Contingencies

Minority interest                             2,675,751                757,475

Shareholders' Equity
 Preferred stock:
 Original preferred stock, $0.01 par value
  1,000 authorized, issued and outstanding           10                     10
 Common stock, $0.001 par value,
  100,000,000 shares authorized;
  70,493,766 shares and 62,176,044 shares
  issued and outstanding at June 30, 2001
  and December 31, 2000                          70,494                 62,176
Common stock to be issued 4,000,000 shares
  at June 30, 2001 and December 31, 2000          4,000                  4,000
Stock subscriptions receivable              (11,627,178)           (12,192,094)
Treasury stock, at cost, 3,557,832 shares
  at June 30, 2001 and December 31, 2000     (3,037,634)            (1,918,634)
Additional paid-in capital                   66,247,144             62,464,649
Accumulated deficit                         (45,379,051)           (43,173,985)
                                         --------------     ------------------
Total shareholders' equity                    6,277,785              5,246,122
                                         --------------     ------------------
Total liabilities and shareholders'
   equity                                $   17,964,983    $         9,760,441
                                         ==============    ===================



          See accompanying notes to consolidated financial statements.

                                       F-4


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S>                                  <C>             <C>            <C>             <C>
                                          Three Months Ended             Six Months Ended
                                                 June 30,                      June 30,
                                     -----------------------------  ------------------------------
                                          2001             2000            2001          2000
                                     --------------  -------------  -------------   --------------
Net sales                            $   1,877,865   $     342,213  $   2,131,226   $      690,441

Cost of sales                            1,294,404         115,531      1,299,244          232,072
                                      ------------    ------------  -------------   --------------
Gross profit                               583,461         226,682        831,982          458,369
                                      ------------    ------------  -------------   --------------
Operating expenses:
   Selling, general and administrative   1,926,549       1,091,997      3,113,657        2,896,234
   Depreciation and amortization           268,722         102,258        459,987          207,486
                                      ------------    ------------  -------------   --------------
Total operating expenses                 2,195,271       1,194,255      3,573,644        3,103,720
                                      ------------    ------------  -------------   --------------
Loss from continuing operations         (1,611,810)       (967,573)    (2,741,662)      (2,645,351)

Other income (expense):
   Equity in loss of affiliate                   -           8,734       (183,536)         (32,918)
   Interest expense                        (38,145)        (43,705)       (78,656)         (81,954)
   Interest income                          22,100          13,724         28,079           21,955
   Other                                   367,205           5,480        381,501           14,488
                                      ------------    ------------  -------------   --------------
Total other income (expense)               351,160         (15,767)       147,388          (78,429)
                                      ------------    ------------  -------------   --------------
Loss from continuing operations
  before minority interest              (1,260,650)       (983,340)    (2,594,274)      (2,723,780)

Less:  loss in subsidiary attributed
  to minority interest                     281,415         102,968        389,208          172,270
                                      ------------    ------------  -------------   --------------
Loss before income taxes                  (979,235)       (880,372)    (2,205,066)      (2,551,510)
Income taxes                                     -               -              -                -
                                      ------------    ------------  -------------   --------------
Net loss                             $    (979,235)  $    (880,372) $  (2,205,066)  $   (2,551,510)
                                      ------------    ------------  -------------   --------------
Basic and fully diluted loss per
  common share                       $       (0.01)  $       (0.02) $       (0.03)  $        (0.05)
                                      ------------    ------------  -------------   --------------
Weighted average number of shares
   outstanding
  - Basic and fully diluted             67,214,678      55,880,162     65,163,663       54,268,534
                                      ============    ============  =============   ==============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-5


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<S>                                   <C>         <C>      <C>     <C>     <C>           <C>
                                                                                         Common
                                            Common Stock  Preferred Stock Additional     Stock
                                          --------------- ---------------  Paid-In     Subscriptions
              Description                 Shares   Amount  Shares  Amount   Capital      Receivable
------------------------------------- ----------  -------  ------  ------  -----------   ------------
Balance - December 31, 2000           66,176,044  $66,176   1,000  $   10  $62,464,649   $(12,192,094)

Shares issued for consulting services     86,054       86       -       -      152,087              -
Stock subscriptions received                            -       -       -            -        564,916
Shares issued to investors             1,966,092    1,966       -       -       (1,966)             -
Shares issued in connection with
  acquisitions                         5,561,860    5,562       -       -    3,438,438              -
Shares issued to directors in lieu
  of compensation and for services       303,716      304       -       -      194,336              -
Shares issued in connection with
  cashless exercise of warrants in
  settlement of litigation               400,000      400       -       -         (400)             -
Net loss                                       -        -       -       -            -              -
                                      ----------  -------  ------  ------  -----------   ------------
Balance - June 30, 2001               74,493,766  $74,494   1,000  $   10  $66,247,144   $(11,627,178)
                                      ==========  =======  ======  ======  ===========   ============
</TABLE>
<TABLE>
<S>                                   <C>        <C>           <C>              <C>
                                          Treasury Stock                            Total
                                      ----------------------    Accumulated      Shareholders'
              Description              Shares       Amount        Deficit           Equity
------------------------------------- ---------  -----------   -------------    -------------
Balance - December 31, 2000           3,557,832  $(1,918,634)  $ (43,173,985)   $   5,246,122

Shares issued for consulting services         -            -               -          152,173
Stock subscriptions received                  -            -               -          564,916
Shares issued to investors                    -            -               -                -
Shares issued in connection with
  acquisitions                        1,805,802   (1,119,000)              -        2,325,000
Shares issued to directors in lieu
  of compensation and for services            -            -               -          194,640
Shares issued in connection with
  cashless exercise of warrants in
  settlement of litigation                    -            -               -
Net loss                                      -            -      (2,205,066)      (2,205,066)
                                      ---------  -----------   -------------    -------------
Balance - June 30, 2001               5,363,634  $(3,037,634)  $ (45,379,051)   $   6,277,785
                                      =========  ===========   =============    =============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       F-6


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                     Six Months Ended June 30,
                                                    --------------------------
                                                          2001          2000
                                                    ------------    ------------

Cash flows from operating activities:
   Net loss                                          $(2,205,066)   $(2,551,510)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                       459,987        207,486
     Gain on debt extinguishment                         355,777              -
     Minority interest in loss of subsidiaries          (389,208)      (172,270)
     Equity in loss of affiliate                         183,536         32,918
     Shares issued in lieu of compensation and services  346,813      1,024,695
     Changes in operating assets and liabilities:
       (Increase) decrease in:
       Accounts receivable                              (337,722)       (21,048)
       Inventory                                          (3,463)       (10,052)
       Prepaid expenses and other                        (80,100)        50,090
       Cash Overdraft                                    344,401              -
       Accounts payable                                   56,523        304,640
       Accrued expenses and other current liabilities     94,398        316,091
       Net changes in due from related parties                 -        (64,984)
       Deferred revenue                                   29,602         10,072
                                                      ----------    -----------
Net cash provided by (used in) operating activities   (1,144,522)      (873,872)
                                                      ----------    -----------
Cash flows from investing activities:
   Advance towards investments                                 -     (2,426,440)
   Purchase of property and equipment                     (3,465)       (70,982)
   Cash acquired in acquisitions                         690,202              -
                                                      ----------    -----------
Net cash used in investing activities                    686,737     (2,497,422)
                                                      ----------    -----------
Cash flows from financing activities:
   Proceeds on sale of common stock                            -      3,273,000
   Proceeds on exercise of options and warrants                -      1,301,870
   Proceeds on stock subscriptions                       564,916              -
   Proceeds on loans and lines of credit                  (5,098)        88,853
   Proceeds from (payments to) related parties           629,424       (449,808)
   Payments on note payable                             (407,377)      (594,882)
   Payments on loans from shareholders                         -         (9,393)
                                                      ----------    -----------
Net cash provided by financing activities                781,865      3,609,640

Net increase (decrease) in cash                          324,080        238,346

Cash and cash equivalents, beginning of period           402,993        331,057
                                                      ----------    -----------
Cash and cash equivalents, end of period              $  727,073    $   569,403
                                                      ==========    ===========

          See accompanying notes to consolidated financial statements.

                                       F-7
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Item 1

Note 1:  Organization and Nature of Operations:

The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is a holding and  development  enterprise  that is  building a broad  network of
Internet,   media,  and   telecommunication   companies  in  Greater  China.  In
partnership  with  leading  Chinese   entrepreneurs   and   government-sponsored
entities,  Hartcourt is developing and investing in emerging  technologies while
building an  integrated  commercial  framework  for its  subsidiaries  and their
partners.  Hartcourt's  operative  business  strategy is  designed to  establish
market leading position and facilitate a series of venture  divestitures via IPO
or public mergers in its four main business divisions to fully realize the value
of these assets for its investors.  The four business divisions are The Sinobull
Financial Group,  Media Services Group,  Broadband/Telecommunications  Group and
The E-learning Group.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified and profitable revenue base throughout its operations. The
company is aggressively identifying and pursuing the best business opportunities
available.  Through a continued  refinement  of  operational  efficiencies,  and
increasing   revenue  margins,   the  Company  is  providing  a  clear  path  to
profitability for its current and future businesses.

Hartcourt is developing  extensive business operations  throughout Greater China
to  position  itself to take full  advantage  of the  substantial  opportunities
presented by the emergence of the worlds largest consumer and business  markets,
and  China's  upcoming  entry  into  the  WTO.  Hartcourt's  ability  to  obtain
government  approved  licenses and its wide array of well  established  business
relationships  is  greatly  facilitating  these  goals and making  Hartcourt  an
attractive  entry point for many  corporations  seeking access to these markets.
Current  government  customers and partnerships of its subsidiaries and business
investments include: China Bank of Communications, China Central TV, Beijing TV,
Guangdong TV, Phoenix TV, Shenzhen  Radio,  Zhejiang  CableTV,  Innostar Hi Tech
Enterprises,  Northern Jiaotong University,  China Securities  (Huaxia),  Guosen
Securities,  Xiangcai Securities,  Anshan Securities, Huaan Securities,  Peoples
Daily, and China Telecom;  for the Hong Kong Government:  Stock Exchange of Hong
Kong (SEHK),  Hong Kong Exchanges and Clearing  Limited  (HKEx),  Securities and
Futures Commission, and Department of Printing. Other business partners include;
Yahoo!, Equis/Reuters,  Legend, IBM, Sifft/Nokia,  YesMobile,  Comstock/Standard
and Poor's, and the University of California/Fullerton.

The Sinobull  Financial Group: This group consists of Financial Telecom Limited,
Sinobull  Information  Company  Limited  (formerly  Shanghai  Guo Mao  Science &
Technology Co. Ltd.),  Sinobull  Network  Technology  Company Limited  (formally



                                       F-8


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Beijing Shangdi Net  Technologies  Center Company,  Ltd.),  and UAC Stock Online
Company  Limited,  and  Hartcourt's  investments  in Shanghai  Wind  Information
Company Limited.  The Sinobull Group is a leading  financial  content  provider,
develops  technologically  advanced financial services platforms, and operates a
financial Internet portal.  Sinobull provides mainland  brokerages and financial
institutions  the  hardware,  software  and  Internet  platforms to enable their
customers' access to a comprehensive suite of quality financial news,  real-time
market data, financial analysis and professional market commentary. Sinobull.com
its  financial  services and  information  portal is one of China's most popular
portals. The company's E-Finance platform is an integration of the most advanced
Internet,  telecommunication and wireless access systems available on the market
today. The service  platform and collateral  content is offered via subscription
to leading securities  brokerages,  investment firms, banks, and media companies
throughout Greater China.

Broadband/Telecommunications Group: This group is centered around its subsidiary
Elephant Talk Limited and a future venture with Innostar Hi-Tech  Enterprises of
China.  The group is focused on the  development  and delivery of  comprehensive
telecommunication services, broadband content, broadband enabling technology and
the  management  of services on broadband  infrastructure.  In  addition,  these
broadband  efforts are being designed to provide  expanded  revenue  sources for
Hartcourt's existing subsidiary's products and services. Hartcourt is continuing
Its efforts to identify and actuate strategic  investments in the development of
web hosting and data warehouse solutions; providing secure Internet services for
China businesses in e-commerce,  IP telephony,  Internet exchange centers,  high
speed wireless platforms, and ISP/content services.

Media   Services   Group:   The  operating   companies  in  this  group  include
StreamingAsia  Limited,  Logicspace  Limited and Syndicate  Asia Limited with an
investment in Beijing Total System  Solutions  Ltd.  (TSS).  The group  provides
comprehensive  real-time audio and video delivery  (Streaming  Media)  solutions
along with Internet  consulting and web application  development for businesses,
professionals,  organizations,  web sites and content publishers.  The Streaming
Media Group's network  infrastructure  enables the streaming of superior-quality
multimedia  advertising,  live event  broadcasting and on-demand audio and video
content over the Internet to target audiences throughout Asia and globally.

E-learning  Group:  This  group  was  formed  in  a  partnership   agreement  in
cooperation  with Northern  Jiaotong  University and California State University
Fullerton to jointly develop  education  projects and introduce  American career
training courses and post-graduate  business programs in China. The project will
offer prestigious  American  education  programs in China,  utilizing one of the
first online education  licenses  awarded by China's Ministry of Education.  The
project


                                       F-9


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

is offering  both  certificate  and degree  programs  with courses  designed for
relevance in today's business world. Coursework will initially be offered in the
classroom and later expanded  online.  Hartcourt  plans to extend its program to
other potential partners and institutions in the future.

History of the Company:

Stardust,  Inc.-  Production-recording-Promotion   ("Stardust"),  a  corporation
organized under the laws of the State of Utah in September 1983, acquired all of
the  outstanding  shares of Hartcourt  Investments,  a Nevada  corporation,  for
6,110,337  shares of Stardust  common stock (after taking into account a reverse
stock  split  and  stock  dividend)   pursuant  to  an  Agreement  and  Plan  of
Reorganization dated November 5, 1994. At the time of this acquisition, Stardust
was a "shell" entity with no assets,  business or operations.  Subsequent to the
acquisition of Hartcourt Investments, Stardust changed its name to The Hartcourt
Companies, Inc.

On February 1, 1999, pursuant to a Share Purchase Agreement,  Hartcourt acquired
one (1)  share of  common  stock  of Enova  Holdings  Inc.  ("Enova"),  a Nevada
corporation  representing 100% of the total issued and outstanding capital stock
of Enova,  making  Enova a  wholly-owned  subsidiary.  Effective  March 1, 1999,
Hartcourt  and Enova  executed an  Exchange  Agreement  (the "Enova  Agreement")
whereby   Hartcourt   exchanged  all  of  its  ownership  in  two   wholly-owned
subsidiaries,  Pego  Systems,  Inc.  ("Pego")  and  Electronics  Components  and
Systems, Inc. ("ECS"), for 5,213,594 additional shares of common stock of Enova.
On March 24, 1999,  Hartcourt entered into a Distribution  Agreement pursuant to
which Hartcourt  agreed to distribute to all the shareholders of record on March
31, 1999,  the 5,213,595  shares of common stock of Enova and to file,  within a
reasonable period of time following such distribution,  a Registration Statement
on Form 10-SB to cause the  distributed  shares of Enova to be registered  under
the  Securities  Exchange Act of 1934.  Enova's  Registration  Statement on Form
10-SB was filed under the  Securities  Exchange Act of 1934 on January 24, 2000.
As a result  of the  Share  Purchase  Agreement,  the  Enova  Agreement  and the
Distribution  Agreement,  each  shareholder  of record of Hartcourt on March 31,
1999  received  one (1)  share of Enova  for  every  four  (4)  shares  owned of
Hartcourt.  Following the  distribution of the Enova shares,  both Hartcourt and
Enova continued to operate as separate companies.

OPERATIONS BY BUSINESS DIVISIONS

THE SINOBULL GROUP:

The Sinobull  Group  ("Group") was formed in November 1999 with the intention to
consolidate  various related  businesses  acquired or expected to be acquired by
Hartcourt or  Sinobull.com  Inc.  ("Sinobull").  For the purposes of  presenting
these businesses under a unified structure and strong brand name, a


                                      F-10


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

restructuring  of the Group resulted in  consolidating  these  businesses  under
Sinobull,  the  holding  company of the Group  incorporated  in  British  Virgin
Islands.  On April 2, 2001,  Sinobull's one share issued and outstanding held by
Mr. Tang Wing On was formally transferred to Hartcourt, and, therefore, Sinobull
became  a  wholly-owned   subsidiary  of  Hartcourt  effective  April  2,  2001.
Hartcourt,  Sinobull and Mr. Tang have  confirmed  that  Hartcourt  had advanced
funds to Sinobull for various acquisitions made by Sinobull since its formation.
Hartcourt  plans to develop this  investment to a leading  position in financial
content, content delivery, financial services, and technology development.

Financial Telecom Limited (FTL): FTL was established in 1983 as a financial data
bank  providing  real-time  stock quotes and financial  information of Hong Kong
listed companies as well as information on other  international  stock exchanges
in the U.S. and Europe to institutional and retail investors. FTL is also acting
as the  marketing  agent for  Standard & Poor's  Comstock,  a division of McGraw
Hill, in Hong Kong. FTL was the first company in Hong Kong to transmit real-time
financial  services via a network of wireless system for  dissemination of data.
This was considered as a major breakthrough in the information and communication
industry  in Hong  Kong.  Investors  were no  longer  restricted  to fixed  line
terminals and could use a wireless  network,  such as financial pager, to access
real-time financial  information.  At present,  FTL maintains a financial portal
featuring stock trading,  real-time  quotes and company data banks for investors
in China and Hong Kong. These investors include major investment houses,  banks,
securities firms and mutual fund houses.

On August 17, 1999,  Hartcourt  entered  into a stock  purchase  agreement  with
Financial  Telecom  Limited  ("FTL"),  a  Hong  Kong  corporation,  to  purchase
4,964,990 shares of common stock,  representing 58.53% of the total common stock
outstanding. The purchase price was agreed to be HK $4.713 (US$ 0.604) per share
for a total  of  HK$25,563,842  or  US$3,277,412,  payable  50% in cash  and the
remaining  balance in Hartcourt common shares.  The acquisition was completed on
October 4, 1999.  Hartcourt  made total cash payments of  $1,638,706  and issued
1,754,552  shares of its common  stock to FTL.  The  3,509,104  shares of common
stock  issued  to FTL are  reflected  as  treasury  shares  in the  accompanying
financial statements since FTL became a subsidiary of Hartcourt.

On March 27, 2000, FTL entered into a Memorandum of Understanding with NiceVoice
Investment  Holdings  Limited  (NiceVoice)  to form a joint venture named Fintel
Wireless  Internet Limited (FWL) for the purpose of establishing and operating a
financial paging service network in Hong Kong on the FLEX transmission  protocol
on a PDA receiver device. FTL agreed to invest cash by phases, to the amount not
to exceed HK$4,000,000 (approximately US$512,800) in exchange for a total of 51%
ownership interest in the joint venture.  After the completion of due diligence,
the parties signed the formal joint venture  agreement on April 28, 2000 and FWL
became a subsidiary of FTL. Although NiceVoice has contributed certain assets in
the FWL, due to the method of funding these assets NiceVoice does not presently



                                      F-11


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

have legal  ownership  title to such assets until the final  dollar  payment has
been made on these assets. The accompanying  financial statements as of June 30,
2001 reflect FTL's investment of 51% ownership interest in FWL. As of August 10,
2001,  FTL had  advanced  approximately  HK$2,572,295  (US$329,781)  towards its
investment in FWL.

Sinobull Network Technology Company Limited (Sinobull  Network):  Formally known
as  Beijing  Shangdi  Net  Technologies  Center  Company,  Ltd.  ("Shangdi")  is
principally  engaged in the  business of data  broadcasting  in China.  Its main
activities include research,  development and sale of data broadcasting hardware
and software. Shandgi is a major shareholder of Hua Xia Info, the financial data
provider of Hua Xia  Securities,  the second  largest  stock  brokerage  firm in
China.  Hua Xia Info has its own financial  reporters for its data  broadcasting
network via cable TV and  magazine.  Through this  relationship,  Sinobull  will
operate accounts through Hua Xia Securities Brokerages  nationwide.  Shangdi has
recently  completed  a software  program for cable set top boxes,  which  enable
users to trade stock online from their home television  sets.  Shangdi is also a
major  shareholder  of Orient  Research,  a well  respected  stock  research and
analysis firm in Shanghai.

On December 18, 1999,  Sinobull  signed a Term Sheet  Agreement  with Shangdi to
form a new corporation in Beijing.  Sinobull shall have 40% interest and Shangdi
shall have 60%  interest in the new  corporation.  On April 12,  2000,  Sinobull
signed a Term Sheet Agreement with Shangdi  revising the terms of the Term Sheet
Agreement signed on December 18, 1999. The terms of the revised agreement stated
Sinobull  and Tiandi  Hulian  Technologies  Limited  ("Tiandi"),  an  investment
holding company incorporated in the British Virgin Islands, holding the interest
of the shareholders of Shangdi, will acquire through its wholly-owned subsidiary
Sinobull  Network  Technology  Company Limited  (Sinobull  Network"),  a company
registered in Beijing,  all of the operating assets and business of Shangdi.  To
finance this acquisition,  Tiandi will issue new shares to Sinobull equal to 40%
of the expanded capital of Tiandi.  The terms of the revised agreement  required
Sinobull to pay Shangdi  US$670,000 being the  consideration of all tangible and
intangible assets in relation to Shangdi's computer network information services
excluding  cash and debts;  invest  US$1,000,000  in  Sinobull  Network  for its
working capital needs;  issue 140,000  restricted  common shares of Hartcourt to
Shangdi and 60,000 restricted common shares of Hartcourt to Sinobull Network for
its working capital needs. In exchange,  Shangdi agreed to transfer  without any
pledge and debt,  all  tangible  and  intangible  assets in relation to computer
network information  services to Sinobull Network, and transfer to Hartcourt 40%
of the ownership  interest in Tiandi.  On December 28, 2000,  Sinobull,  Tiandi,
Shangdi  and Li Chun Ying  (representative  of the owners of  Shangdi)  signed a
Share Subscription and Sale and Purchase  Agreement  whereby,  Sinobull will own
51% of  Tiandi  and Li  Chun  Ying  will  own 49% of  Tiandi  after  payment  of
consideration to Shangdi for purchase of all tangible and intangible  assets. As
of June 30, 2001, Sinobull through an advance from Hartcourt, has paid



                                      F-12


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

$1,000,000  in cash  towards  the  purchase  of  Shangdi of which  $670,000  was
distributed  to the owners of Shangdi and the  remaining  $330,000 was deemed as
capital contribution in Sinobull Network.

Shanghai Sinobull Information Company Limited (Sinobull  Information):  formally
known as Shanghai Guo Mao Science & Technology  Co. Ltd.  ("Guo Mao") is a major
real-time  financial  data  provider in Shanghai,  using a satellite  network to
transmit data specializes in stock quotes, futures, indexes and commodities data
that  compliments  the  financial  information  database of Hua Xia Info and the
financial data delivery systems of FTL.  Association with Guo Mao gives Sinobull
a distinct edge over any competitive financial portals in China.

On December 1, 1999, Sinobull signed a Term Sheet Agreement with Guo Mao whereby
Guo Mao agreed to issue new shares for a total proceeds of $1,000,000 which will
represent 50% of the expanded  capital of Guo Mao.  Sinobull agreed to subscribe
for all the new shares issued by Guo Mao. On May 16, 2000,  Sinobull and Hopeful
Internet  Technologies  Limited  ("Hopeful")  entered into an agreement  whereby
Hopeful,  an  investment  holding  company  incorporated  in the British  Virgin
Islands,  will acquire through its  wholly-owned  subsidiary  Shanghai  Sinobull
Information  Company  Limited  ("Sinobull  Information"),  all of the  operating
assets and business of Guo Mao. To finance this acquisition,  Hopeful will issue
new shares to  Sinobull  equal to 40% of the  expanded  capital of Hopeful for a
total  consideration  of  $1,000,000.  The terms of payment by Sinobull  for the
purchase of new shares will be:  $200,000 in cash upon signing of the agreement;
$150,000  in cash within 30 days of signing of the  agreement;  $150,000 in cash
within 60 days of signing of the  agreement;  and $500,000  within 30 days after
signing of the  agreement  in shares of Hartcourt  based on the average  closing
price in the last 7 trading days before payment,  or in shares of Sinobull based
upon the  valuation  to be agreed  on by the  parties.  On  December  28,  2000,
Sinobull,  Hopeful, Guo Mao and Lee Lu Ping (representative of the owners of Guo
Mao)  signed  a Share  Subscription  Agreement  whereby,  Sinobull  will own 51%
ownership in Hopeful and Lee Lu Ping will own 49% of ownership in Hopeful  after
payment of  consideration to Guo Mao for purchase of all tangible and intangible
assets.  Sinobull has paid $500,000 in cash received from Hartcourt  towards the
purchase of new shares of Hopeful and issued  805,802 shares of its common stock
valued at $500,000 to Sinobull  Information in February 2001. The 805,802 common
shares issued to Sinobull  Information  are reflected as treasury  shares in the
accompanying financial statements since Sinobull Information became a subsidiary
of Hartcourt.

Ton  Bo  Software:   specializes  in  custom-made  software  solutions  for  the
securities market,  especially in commodity and currency trading. On November 6,
2000, Sinobull Information and Ningbo Shiji TongBao Software Limited ("TongBao")
agreed to form an alliance in creating  software  solutions  for the  securities
industry.  The parties agreed to a stock swap whereby TongBao agreed to issue an
additional 150% of its existing share capital to Sinobull Information  resulting
in Sinobull Information  becoming a 60% owner of TongBao. In exchange,  Sinobull
Information agreed to exchange RMB100,000 worth of its shares valued at the


                                      F-13


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

share price at the time when Sinobull Information goes for public listing to the
remaining  40% original  shareholders  of TongBao.  Upon  issuance of RMB100,000
worth of its shares,  Tongbo will become a  wholly-owned  subsidiary of Sinobull
Information.  As of August 10,  2001,  TongBao  has honored  its  commitment  by
issuing 150% of its then existing  share  capital.  The  transaction is awaiting
registration  approval and is expecting to receive the approval from the Chinese
authorities by September 15, 2001.

Beijing UAC Stock Trading  Online Co. Ltd. (UAC Trading):  UAC Trading  operates
one of the leading  nationwide online securities  trading network called UAC 162
Network,  connecting investors with their stock brokerage offices via China Pac.
China Pac is the  nationwide  packet  switched  network in China  owned by China
Telecom  since  1991.  In May 1999,  UAC  Trading  was  granted a license by the
Chinese  government  and signed a contract with China Telecom to start  building
the network.  However,  in June 2000, the Chinese  government allowed all online
transactions  to be conducted via  Internet.  It caused UAC Exchange to lose its
competitiveness  as the  efficiencies  of 162 Network is not  compatible  to the
Internet. Therefore, UAC Exchange is converting its operations to Internet based
operations.

On June 20, 1999, Hartcourt entered into an agreement with UAC Trading to form a
joint venture  company named Beijing UAC Stock Exchange  Online Company  Limited
("UAC Exchange"),  a company registered in Beijing. Under the terms of the joint
venture  agreement  and a series of  subsequent  agreements,  Hartcourt  and UAC
Trading transferred all of their ownership interest in UAC Exchange to UAC Stock
Online  Company  Limited ("UAC BVI"), a company  incorporated  in British Virgin
Islands.  Hartcourt agreed to own 51% of the UAC BVI and K. C. Tan agreed to own
49% of UAC BVI after all tangible and intangible  assets had been transferred by
UAC Trading into UAC Exchange.  The accompanying  financial  statements  reflect
Hartcourt's  investment in UAC BVI at 51% as of June 30, 2001. On July 16, 2001,
Hartcourt and UAC Trading, by mutual consent,  agreed to rescind the contractual
joint venture agreement named UAC Exchange. As part of the rescission, Hartcourt
agreed to accept a  promissory  note for the  amount  of its  investment  in UAC
Exchange  amounting to $2,858,286,  bearing interest at six (6) per cent payable
over a thirty-six months period. The parties mutually agreed to forego all other
rights  and  benefits   provided   under  the   contractual   joint  venture  as
consideration  for the  rescission  of the  contract.  On August 9,  2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  expressed its
interest to take over all existing tangible and intangible assets of UAC Trading
for the amount of  Hartcourt's  original  investment in UAC Trading,  subject to
ratification  by the Board of Edda Limited.  Hartcourt is currently  negotiating
the details on the assumption of the promissory note in the amount of $2,858,286
and expects to complete its due diligence and close the transaction by September
15, 2001.

Shanghai Wind Information Company, Limited ("WindInfo"):  WindInfo is China's #1
financial  research content  provider,  developing  original content through its



                                      F-14


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

nationwide  network.  WindInfo's  flagship  product  is widely  used by  China's
investment  banking and  securities  brokerage  firms.  The  Shanghai  Municipal
Government awarded WindInfo "The High-Tech Model Company" in 1999.  WindInfo has
over 1,000 registered  corporate clients,  including all major investment banks,
securities brokerage firms, and media companies.

On September 18, 2000,  Hartcourt and WindInfo signed a Term Sheet Agreement and
agreed to form a  Joint-Venture  Company  (JVC) to  expand  the  financial  data
service  business in China.  WindInfo agreed to transfer its entire fixed assets
excluding cash and marketable securities held at July 31, 2000 and the insurance
advisory business and related assets,  and is entitled an ownership  interest of
sixty-six  point sixty seven percent  (66.67%) in the JVC.  Hartcourt  agreed to
invest $3.0 million  that  represented  thirty three point thirty three  percent
(33.33%)  ownership in the JVC. Upon  successful  completion of due diligence by
Hartcourt,  WindInfo  will  transfer  all its  assets  except  cash,  marketable
securities  and  insurance  advisory  business  and  related  assets in the JVC.
WindInfo  will  be  responsible  to  obtain  all  relevant  approvals  from  all
governmental  authorities  and  agencies  required to  facilitate  the new share
structure and expanded capitalization.  WindInfo will be responsible to have the
JVC  listed  in the  public  stock  market  within  15  months  from the date of
establishment  of the JVC. It is mutually  agreed that if WindInfo fails to list
the JVC on or before  such a time  frame,  Hartcourt  shall have the  management
right for listing of the company in the public market.

The investment  from Hartcourt to WindInfo was agreed to be paid as follows:  a)
upon  completion of the Agreement of JVC by both parties within 15 days from the
date of the Term Sheet  Agreement  signed,  Hartcourt shall arrange a payment to
from Guo Mao as a loan to WindInfo in the amount of $500,000;  b) pay $1,500,000
in the  temporary  JVC  account  within  15  days  of the  establishment  of the
temporary JVC bank account;  c) pay $1,500,000  into the JVC no later than three
months from the date of  establishment of the JVC. Upon receipt of all committed
capital from  Hartcourt,  WindInfo  agreed to immediately  pay back the $500,000
loan to Guo  Mao.  Hartcourt  has  completed  its due  diligence  review  on the
operations of WindInfo. On September 18, 2000, Sinobull advanced $500,000 to Guo
Mao who loaned the same amount to WindInfo on behalf of  Hartcourt.  Pursuant to
the addendum to the Term Sheet  Agreement,  on January 10, 2001,  Hartcourt  and
WindInfo  signed a direct  investment  agreement  whereby  Hartcourt  agreed  to
convert the loan from Guo Mao of $500,000 to a 5% equity ownership in the JVC to
be formed.  The accompanying  financial  statements as of June 30, 2001, reflect
Hartcourt's  advance of $500,000 for 5%  ownership  interest in the JVC. The JVC
has not been  formed  as of August  10,  2001.  In  addition,  both the  parties
mutually  agreed to extend by twelve months all defined  effective dates per the
Term Sheet Agreement of September 18, 2000.

Equis  International  Inc.(R),  a wholly owned subsidiary of Reuters  Limited(R)
signed on June 1, 2001,  an International Distribution Agreement  with Hartcourt



                                      F-15


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

including  Sinobull  Group in Shanghai,  Beijing and Hong Kong, a  non-exclusive
distributor  of licensed  products  within the People's  Republic of China (PRC)
except in Hong Kong and Taiwan,  and grants to Hartcourt a  non-exclusive  right
and license to market,  promote and distribute the licensed  products in the PRC
to  sub-distributors,  resellers and end users to localize Equis'  award-winning
family of MetaStock(R)  products and market them to over 10 million investors in
the Greater  China area.  The initial term of the  agreement is for three years.
Under the terms of the agreement Equis International also granted Sinobull Group
conditional  territory exclusivity for a period of twelve months for the Chinese
versions of MetaStock  products  within the Greater  China  market.  Hartcourt's
remuneration  for the sale of licensed  products will be the difference  between
the selling price to its customers and Hartcourt's  discounted purchase price as
agreed between Hartcourt and Equis.  Hartcourt is currently strategizing various
alternatives to market Equis's products and services in China. Hartcourt and its
affiliates have not sold any of the Equis's licensed  products since the date of
this agreement.

YesMobile  Inc.  incorporated  in Hong Kong, is currently a leading  Chinese WAP
portal with open-standard and multi-platform compatibility in Asia. Sinobull.com
HK Ltd. has signed a revenue sharing agreement with YesMobile whereby,  Sinobull
agreed to  provide  financial  contents  to  YesMobile  in China.  The data will
include real time stock quotes,  commodities and currencies contracts,  economic
news, commentaries and research reports. Pursuant to the terms of the agreement,
Sinobull  will share 70% and  YesMobile  will share 30% of the revenue  received
from the users of the Wireless  Application  Protocol (WAP) portal and the Short
Message  Service (SMS) of YesMobile.  Users will access these contents via their
mobile  phones,  as  well as PDAs  and  other  wireless  devices.  YesMobile  is
currently providing these services to 105 million users of China Mobile.

BROADBAND/TELECOM GROUP:

The  broadband/telecom  group is centered  around its  subsidiary  Elephant Talk
Limited and a future venture with Beijing Innostar Hi-Tech Enterprises of China.
The  group  is  focused  on  the  development  and  delivery  of   comprehensive
telecommunication services, broadband content, broadband enabling technology and
the  management  of services on broadband  infrastructure.  In  addition,  these
broadband  efforts are being designed to provide  expanded  revenue  sources for
Hartcourt's existing subsidiary's products and services. Hartcourt is continuing
its efforts to identify and actuate strategic  investments in the development of
web hosting and data warehouse solutions; providing secure internet services for
China businesses in e-commerce,  IP telephony,  internet exchange centers,  high
speed wireless platforms, and ISP/Content services.

Elephant  Talk  Limited  ("ET"):  Elephant  Talk  is a  brand-name  provider  of
long-distance telecom services in China and Hong Kong commenced its operation in
March 1995. ET is licensed with US FCC 214, HK ETS and HK ISR with facilities in


                                      F-16


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Hong Kong and the United  States.  Having had carrier  interconnection,  special
termination arrangements and existing circuits between US and Hong Kong, ET aims
to  provide  the  best  price  and  first-mover  advantages  to  customers.   By
integrating the most advanced and sophisticated  telecommunication  technologies
from  USA,  ET  brings  to  Hong  Kong a  wide  variety  of and a more  complete
international telecommunication services.

On May 16, 2001, Hartcourt and ET executed a Sale and Purchase Agreement whereby
Hartcourt acquired 51% of the ownership interest in ET for a total consideration
of $4,194,000. The terms of the agreement required ET to increase its authorized
capital from 25,000,000 shares to 30,000,000  shares.  Hartcourt  subscribed the
block of 5,000,000 new shares for a total  consideration  of $1,500,000,  issued
1,000,000 Hartcourt shares under Rule 144 or Regulation S of the SEC regulation,
valued at 61.9 cents per share and executed a  promissory  note payable to ET in
the amount of  $1,250,000  due on February  16,  2002.  In  addition,  Hartcourt
subscribed  another  block of  10,300,000  ET shares from  private  owners for a
consideration of $2,325,000 and issued 3,756,058 Hartcourt shares under Rule 144
for a combined total of 51% ownership  interest.  The 1,000,000 shares of common
stock  issued  to ET are  reflected  as  treasury  shares  in  the  accompanying
financial statements at June 30, 2001 since the results of operations of ET were
consolidated with Hartcourt from May 16, 2001.

Beijing Innostar Hi-Tech  Enterprises,  Ltd.  ("Innostar") -. Innostar  provides
wireless ISP network and IP phone service in Beijing in cooperation with Chinese
telecom companies. It provides high-speed Internet connections to hotels, office
buildings and apartment  complexes using a Chinese satellite with bi-directional
data  transmission to these  commercial  users. The joint venture with Hartcourt
and Innostar's  license for nationwide ISP service will allow  expansion to many
other cities and individual users eventually reaching users throughout China.

On October 20, 1999, Hartcourt signed a Joint Venture Agreement with Innostar to
establish a wireless  nationwide  Internet service provider network and IP phone
services in China via a Chinese satellite. The total amount of investment in the
joint  venture  company  will be $24.0  million of which $14.0  million  will be
contributed  by  Innostar  for 65%  ownership  interest  and  $10.0  million  by
Hartcourt for 35% ownership  interest.  The national license will also allow the
joint venture to engage in e-commerce  activities and other  Internet  services.
Hartcourt and Innostar have agreed to expand the scope of business  model of the
Joint Venture and have re-applied for the grant of business license. The license
is pending government and regulation approval.

Shenzhen Rayes Group Limited ("Shenzhen"): On April 27, 2000, Hartcourt signed a
Stock Purchase  Agreement Term Sheet with Shenzhen to form a new entity of which
Hartcourt desired to purchase  fifty-one percent (51%) of the outstanding shares
of the capital  stock and  Shenzhen  agreed to retain the  remaining  forty-nine
percent (49%) of the outstanding  shares.  The purchase price was not to be less
than $50,000,000 in cash and not exceeding $76,000,000 (including $50,000,000 in



                                      F-17


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

cash together with marketable  shares of up to $26,000,000 in value).  The terms
of the  Agreement  required:  a) Hartcourt to deposit  $10,000,000  in an escrow
account no later than April 28, 2000 upon complete  execution of the  Agreement;
b) upon completion of all of its due diligence,  including  evaluation by Morgan
Stanley and confirmation by legal counsel as to acceptable structure,  Hartcourt
shall  deposit  such  additional  funds as shall be  determined  as  required in
conformity  with the value  established  by Morgan  Stanley.  On April 28, 2000,
Hartcourt entered into an agreement with another third party who provided a bank
guarantee  for  $10,000,000  on  behalf  of  Hartcourt.  The  terms  of the bank
guarantee have  subsequently  expired and the parties mutually agreed to have no
obligation  to each other  should each of the parties  decide to  terminate  the
Agreement.  The parties  agreed to further  negotiate and extend the term of the
Agreement and complete the  transaction to each other's  satisfaction by October
15, 2001.  After  extensive due diligence  Hartcourt has determined that at this
time the completion of this deal would not be advantageous to the company or its
shareholders  and the terms of the  agreement,  including the amounts  involved,
will have to be  significantly  modified.  Hartcourt  will  maintain a "pending"
status on this  transaction  in the  event  there are  material  changes  in the
current situation which would merit a re-opening of the due diligence process.

MEDIA SERVICES GROUP:

The Media Services  Group  consists of  StreamingAsia  Holdings  Limited,  which
consists of the  operations of  StreamingAsia  Limited,  LogicSpace  Limited and
SyndicateAsia  Limited and an investment in Beijing Total System Solutions  Ltd.
The Media  Services  Group provides a  comprehensive  real-time  audio and video
delivery  (Streaming  Media)  solutions  along with Internet  consulting and web
application development to businesses,  professionals,  organizations, web sites
and content  publishers.  The  Streaming  Media Group's  network  infrastructure
enables the streaming of  superior-quality  multimedia  advertising,  live event
broadcasting  and on-demand  audio and video content over the Internet to target
audiences throughout Asia and Globally.

StreamingAsia Holdings Limited  ("StreamingAsia  Group"):  StreamingAsia Limited
provides  Internet-related  software  development  service  with an expertise in
audio and video  delivery or  streaming  solutions  to a variety of business and
industry,  including major financial institutions.  On April 14, 2000, Hartcourt
announced  that  Sinobull  signed a  Subscription  and  Shareholders'  Agreement
("Agreement")  relating to StreamingAsia  Limited,  whereby Sinobull  subscribed
1,200,000  newly  issued  and  outstanding  fully paid  shares of  StreamingAsia
Limited for HK$7,000,000 (approximately US$897,500) on behalf of Hartcourt. Upon
subscription  of such  shares,  Sinobull  acquired  50%  ownership  interest  in
StreamingAsia Limited and contributed $897,500 towards its purchase.  Such funds
were advanced by Hartcourt to Sinobull for StreamingAsia Limited acquisition. In
addition, both Sinobull and Hartcourt agreed and confirmed that as part of the



                                      F-18


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

financing  arrangements  Sinobull held the  subscribed  shares in  StreamingAsia
Limited on behalf of Hartcourt and those shares were transferred to Hartcourt on
December 29, 2000.  On December 30, 2000, as part of the  reorganization  of the
StreamingAsia   Holdings   Limited,   the  beneficial   ownership   interest  in
StreamingAsia  Limited was transferred to Asia Top Finance Limited ("Asia Top"),
a company organized under the laws of British Virgin Islands. As a result of the
above  transfer,  Hartcourt  owned  50% of the  Asia Top and the  remaining  50%
ownership was held by the selling shareholders of StreamingAsia Limited.

LogicSpace  Limited:  LogicSpace,  a  wholly-owned  subsidiary of  StreamingAsia
Limited, is an Internet consulting and web application  development company that
provides a wide range of Internet  services  including  web page design,  system
architecture and solution  implementation.  LogicSpace offers cost-effective and
one-stop shop Internet solutions that enable companies to achieve smooth results
in doing  business on the  Internet.  Solutions  include  top-notch  eBusiness &
Internet consultation, B2B/B2C Portal Development & Implementation,  Web-Based &
Wireless application design and "know-how" implementation. The operating results
of LogicSpace are consolidated  with  StreamingAsia  Limited in the accompanying
financial statements as of June 30, 2001.

SyndicateAsia  Limited:  SyndicateAsia,  is  pioneer  in  content  distribution,
providing the  marketplace  for exchanging,  managing and  distributing  content
media across the Asian region. The revolutionary  SyndicateAsia  platform offers
flexibility  to providers and content  buyers to transform  formats (Web to WAP)
and exchange content,  including text, graphical, audio and video, across a wide
range of sources in the Asia region.  SyndicateAsia's mission is to serve as the
bridge  between the content  providers  and end users by providing  the foremost
syndication  solution for delivery of  multi-media  content on cross devices and
platforms,  including  the World Wide Web,  wireless,  and streaming  media.  In
December 2000, the StreamingAsia  Group issued 50% of the enlarged share capital
of  SyndicateAsia   to  Hartcourt.   On  December  30,  2000,  as  part  of  the
reorganization  of the StreamingAsia  Group, the entire beneficial  ownership in
the share  capital  of  SyndicateAsia  was  transferred  to China Top  Worldwide
Limited ("China Top"), a company  incorporated in the British Virgin Islands. As
a result of the transfer  Hartcourt owned 50% of the ownership interest in China
Top.

On May 16, 2001  Hartcourt  took control over the  management  and operations of
Asia Top and  China  Top,  and  signed a Term  Sheet  Agreement  to  acquire  an
additional  35%  ownership  in Asia  Top and  China  Top for  HK$2,200,000.  The
agreement  required for  Hartcourt to place a down payment of  HK$500,000  in an
escrow  account,  pay  HK$300,000  in thirty  days and place  seven  post  dated
installment  checks of  HK$200,000  each,  payable  each month upon close of the
escrow.  Hartcourt  placed the HK$500,000 in the escrow account and renegotiated
the purchase  price and payment terms pursuant to the Term Sheet  Agreement.  On
August 9, 2001,  Hartcourt  closed the escrow and completed the  acquisition for
the  additional  35%  ownership  interest  in Asia Top and China Top for a total
purchase  consideration  of HK$800,000.  The accompanying  financial  statements
reflect  that  the  results  of  operations  of  China  Top  and  Asia  Top  are
consolidated with Hartcourt as of June 30, 2001.


                                      F-19
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Beijing Total Solution System,  Ltd. ("TSS"):  On September 15, 2000,  Hartcourt
and TSS signed a Term Sheet  Agreement  to form a Joint  Venture  Company  (JVC)
called TSS Streaming,  Ltd to develop broadband enabling technology for internet
broadcasting  market and develop world leading  web-casting  solution and global
market.  Hartcourt agreed to contribute $2.4 million for 60% ownership  interest
in the JVC and TSS  agreed to  contribute  all of its  tangible  and  intangible
assets of its existing operations in China for its 40% ownership interest in the
JVC.  On  December  1,  2000,  Hartcourt  and TSS  signed a loan  agreement  and
Hartcourt  advanced  $70,000 as a loan to support  TSS's  2000  marketing  plan,
convertible into for the ownership of 5% shares of TSS. Upon contribution of the
remaining  $2,330,000,  Hartcourt could acquire the additional 55% shares of the
JVC. Hartcourt has converted its loan into an investment of 5% in TSS. Hartcourt
has not exercised its right to subscribe for the additional 55% of the ownership
interest  in  the  JVC  and  such  right  has  subsequently  been  lapsed.   The
accompanying  financial statements reflect Hartcourt's  investment of $70,000 in
the JVC as of June 30, 2001. Hartcourt does not intend to acquire any additional
ownership interest in TSS at this time.

E-LEARNING GROUP:

On June 18, 2001, Hartcourt executed a partnership agreement in cooperation with
Northern  Jiaotong  University  and  California  State  University-Fullerton  to
jointly  develop  education  projects and  introduce  American  career  training
courses and  post-graduate  business  programs in China.  The project will offer
prestigious  American  education  programs in China,  utilizing one of the first
online education licenses awarded by China's Ministry of Education.  The project
is offering  both  certificate  and degree  programs  with courses  designed for
relevance in today's business world. Coursework will initially be offered in the
classroom and later expanded  online.  Hartcourt  plans to extend its program to
other potential partners and institutions in the future.  Hartcourt has advanced
$100,000  towards the working  capital for its  investment in this project as of
June 30, 2001. The $100,000 was loaned to Hartcourt by Sino Harvest  Limited,  a
company  registered in Hong Kong. The  accompanying  financial  statements as of
June 30, 2001  reflect  Hartcourt's  investment  of  $100,000  in the  education
project and a  corresponding  payable to Sino Harvest for the same  amount.  The
total  financial  commitments  of Hartcourt and terms of payment on this project
are being currently finalized as of August 10, 2001.

OTHER  VENTURES:

eMPACT Solutions, Inc. ("eMPACT") - eMPACT, an e-commerce systems management and
consulting  company,  specializes in providing  back-office  infrastructure  for
Internet companies. The services include technology selection, system design and
management,  transaction performance  monitoring,  resource utilization tracking
and security  monitoring.  On April 30, 2000,  Harcourt  executed a Subscription
Agreement  and  Investment  Representation  and agreed to subscribe and purchase
three hundred (300) shares of Class B Convertible Preferred Stock, par value



                                      F-20


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

$0.001 per share of eMPACT for $300,000.  Hartcourt had the option until May 30,
2000, to invest an  additional  $1,700,000 in eMPACT at the same per share price
for  additional  Class B Preferred  Stock.  After May 30, 2000, the terms of any
additional investment shall be subject to negotiation between the parties. As of
August 10, 2001,  Hartcourt paid a total  consideration  of $300,000 towards the
purchase of three hundred (300) Class B Preferred Stock of eMPACT. Hartcourt has
determined  that at this time to increase its  investment in eMPACT would not be
advantageous  to the  company or its  shareholders.  Hartcourt  will  maintain a
"pending"  status on this transaction in the event there are material changes in
the current situation.

Koffman Securities Limited ("Koffman"): On June 12, 2000, Hartcourt entered into
a Stock Purchase Agreement Term Sheet with Koffman, a securities brokerage firm,
to purchase  30% of the  expanded  capital  stock of Koffman  for  HK$22,285,000
(approximately US$2,857,050).  The transaction shall close no later than 60 days
following  the  execution of the  Agreement  during which time all due diligence
shall  have  been  completed,  which  shall  include  but not be  limited  to an
evaluation of Koffman by the auditors, appraisers and legal counsel appointed by
Hartcourt  for  this  purpose  and a  legal  opinion  of its  counsel  as to the
acceptability  of the proposed  structure of  Hartcourt's  acquisition of 30% of
Koffman,  financial  reviews,  and other usual and customary due diligence.  The
purchase  price shall be payable as follows:  25% of the purchase price shall be
payable upon  execution  of a definitive  agreement to purchase and sell by both
parties based upon completion of all of its due diligence,  including evaluation
and appraisal and  confirmation by legal counsel as to the  acceptability of the
proposed structure of Hartcourt's  acquisition of 30% of Koffman; and 75% of the
purchase price payable in three successive equal monthly installments.

Hartcourt  has  completed  its due  diligence  review and both the parties  have
mutually agreed to revise the purchase price and execute the purchase  agreement
prior to October 15, 2001. As of August 10, 2001, Hartcourt has not entered into
any formal  purchase  agreement with Koffman and has not made any  contributions
towards the purchase of Koffman.  Hartcourt has determined  that at this time to
complete  the  transaction  would  not be  advantageous  to the  company  or its
shareholders.  Hartcourt will maintain a "pending" status on this transaction in
the event there are material changes in the current situation.

China  E-Laws:  On April 8, 2000,  Hartcourt  entered into an agreement  with DF
Ltd.,  Loughborough  Ltd., and Express Internet  Investment Ltd.  (collectively,
"the  Management") and a fourth investor to form a joint venture company for the
commercial exploitation of the Publication Rights of the internet and production
of the content of the website in respect of the laws of China.  Per the terms of
the agreement, both Hartcourt and the fourth investor's obligation are to invest
$2,000,000  each,  in the joint venture  company for 25% ownership  interest and
share  the  responsibility  in  providing  funding,  finance  and  technological
support. The obligation of Hartcourt and the fourth investor is to provide



                                      F-21


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

funding  as  working  capital  for the  joint  venture  company  subject  to the
conditions  precedent that the joint venture  company shall have entered into an
agreement with the relevant parties in China for the commercial  exploitation of
the Publication  Rights on the Internet and the website.  As of August 10, 2001,
the joint venture  company was still  negotiating  agreements  with the relevant
parties  in  China  and  has  not  been  granted  approval  for  the  commercial
exploitation  of  the  Publication  Rights  on the  Internet  and  the  website.
Therefore, as of August 10, 2001 Hartcourt has no payment obligations under this
agreement.

Haike  Caijin TV ("HCTV"):  HCTV is a joint  venture that calls for a multi-year
effort to jointly develop and deploy a financial TV channel to be marketed to 80
million  Chinese cable TV subscribers  across all Chinese  provinces and cities.
The  agreement  calls for  China  Cable  Networks  to  utilize  its  leading  TV
broadcasting expertise and integrated technologies and services for broadcasting
cable  channel  signals to market the "CCN  Financial  TV Channel"  with content
developed  by Shanghai  Guo Mao  Financial  Corporation.  The  content  would be
transmitted via satellite and ground transceiver  systems optimized for cable TV
networks.  The  financial  content will include  real-time  market data,  market
commentary, financial news and analysis, interviews, paid programming as well as
advertisements.

On September 7, 2000,  Hartcourt  signed a joint venture  agreement with Hopeman
Computer  Services  Corporation  Limited  (Hopeman")  to form a joint venture in
Shanghai and jointly develop and market a 24-hour financial  television  program
and/or provide  financial  data services to  existing/new  financial  television
programs for China  market.  The new joint  venture is named  "Haike  Caijin TV"
(HCTV) means  Hartcourt  Financial  Television  (HCTV) in English.  HCTV will be
registered in Shanghai with a funding of $1.0 million. The agreement defines the
first phase joint venture investment terms for the period from September 2000 to
December  2000.  Hartcourt  invested  $50,000 to receive an initial 66.7% of the
HCTV equity  ownership  and Hopeman has not  contributed  any funds  towards its
investment of for the remaining 33.3% of the HCTV equity  ownership.  The amount
$16,667 representing 33.3% ownership of Hopeman was recorded as Receivable as of
June 30, 2001. In February  2001,  HCTV Joint  Venture  Company was formed and a
temporary  license was  obtained to conduct  the  business of the joint  venture
pending  issuance  of a new  license  upon  China's  entry  into the  WTO.  HCTV
operating results are consolidated with Hartcourt in the accompanying  financial
statements as of June 30, 2001. As of August 10, 2001, no additional  funds were
contributed by either of the parties.

Acquisitions and Partnerships Disclaimer:

Hartcourt's  partners  in the  joint  ventures  discussed  above  are  expecting



                                      F-22


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Hartcourt to provide key elements in these joint ventures:  Internet  technology
and  investment  capital.   Hartcourt  management  has  hired  individuals  with
extensive  experience and expertise in relevant industry sectors, and intends to
provide  Internet  technology  by merging  with or acquiring  companies  already
active in these  businesses.  On the financial  side,  Hartcourt  plans to raise
substantial  funds  necessary to carry out the plans of its venture  partners by
selling its own common  shares to selected  investors/partners  and  bringing in
partners  whose  contributions  to each joint venture will include the necessary
cash  contributions.  If  Hartcourt  is not able to raise  the  necessary  funds
indicated  in  the  agreements,  the  agreements  may  need  to be  modified  or
cancelled.

No assurance can be given that all  agreements  discussed  herein will result in
actual  agreements or that the terms of the agreements will not be significantly
changed,  or that  all of the  financing  needs  to  consummate  the  agreements
discussed below will be successfully completed.  Furthermore,  approval from the
Chinese regulatory authorities may be required to consummate some agreements.

Funding:

Swartz Private Equity,  LLC ("Swartz") - Swartz is an investment  entity focused
on equity  investments  in  Internet  and other high  technology  companies.  On
November 3, 1999, Hartcourt signed an Investment  Agreement with Swartz.  Swartz
agreed to purchase  from  Hartcourt,  from time to time,  shares of  Hartcourt's
common stock, as part of an offering of common stock by Hartcourt to Swartz, for
a maximum aggregate offering amount of $25,000,000.  These funds will be used to
satisfy  Hartcourt's working capital  requirements and complete  acquisitions of
Internet related operations.  On January 5, 2000, Hartcourt and Swartz agreed to
increase the equity line funding to $35,000,000 due to the planned  acquisitions
of Internet  operations in China.  Hartcourt has filed a form SB-2  Registration
document  with SEC on August 24, 2000 to register  additional  common shares for
issuance to Swartz.  Once approved by SEC, Swartz has the obligation to purchase
these  shares at the market  price less 10 percent  discount  during the next 24
months. The Registration document is still under the review of SEC.

PYR Management LLC ("PYR") - On January 26, 2000,  Hartcourt completed a private
placement of 227,445  Units,  each unit  consisting  of a Class I and a Class II
Warrant,  to  PYR  for  $3,000,000  pursuant  to  a  Regulation  D  Subscription
Agreement.  On January 27, 2000,  Hartcourt  received  $2,743,000 from PYR to be
used for  working  capital  requirements  of  Hartcourt.  On  February  4,  2000
Hartcourt filed a Form 8-K with the SEC. On February 21, 2001, Hartcourt and PYR
Management  entered into a Letter  Agreement  whereby the parties  agreed on the
maximum  number of Units PYR can  receive  under  the  reset  provisions  of the
Subscription Agreement.  Pursuant to the terms of the agreement, the quantity of
Units and the exercise  price of the warrants  will no longer  reset.  The final
amount of Units that can be issued shall be 4,000,000 shares of common stock and



                                      F-23


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

4,000,000 Class I Warrants.  The cap amount shall be 8,000,000  shares of common
stock (on a "post-split"  basis)  including Class I and Class II warrants.  As a
result of reset  calculations,  Hartcourt has issued as of June 30, 2001 a total
4,000,000  shares  of its  common  stock,  2,509,802  of  Class I  warrants  and
1,035,308  of Class II  warrants  exercisable  at  $0.69375  per share of common
stock.

Fee Agreement for Introduction  Services:  On April 19, 2000,  Hartcourt entered
into a Fee Agreement for Introduction Services ("Agreement") with Tang Wai Leong
and Thomas Kwok,  (collectively  referred to as the  "Introducers")  whereby the
Introducers  will use their best efforts to search for,  identify and make known
to  Hartcourt   Internet-related   business  and   opportunities  for  potential
acquisition by Hartcourt.  Hartcourt agrees to satisfy the Introducers' time and
expense  incurred,  up to and including the first acquisition by Hartcourt of an
opportunity  introduced  or  arranged  by the  Introducers,  by  granting to the
Introducers options to purchase up to 2,500,000 shares of Hartcourt common stock
at a price of $5.50 per share.  Upon  consummation  of the  introduction  by the
Introducers  and  Hartcourt  completing  the  acquisition,  Hartcourt  agreed to
register  with the SEC under a Form S-8 such  shares  granted  under the  option
agreement,  and shall cause such  registration  statement to remain effective at
all times while the Introducers holds the options.

The Introducers have introduced to Hartcourt a potential acquisition opportunity
and on April 27, 2000,  Hartcourt  signed the necessary  documents to consummate
the purchase of an entity  (Shenzhen Rayes Group Limited).  The Introducers have
subsequently  exercised  their option to acquire  2,500,000  shares of Hartcourt
common stock.  On May 8, 2000, in  accordance  with the terms of the  Agreement,
Hartcourt  filed  a Form  S-8 to  register  with  the  Securities  and  Exchange
Commission the 2,500,000 options granted to the Introducers under the Agreement.
As of June 30, 2001, Hartcourt received $2,750,000 towards exercise of 2,500,000
options  into shares  exercised by the  Introducers.  The  remaining  balance of
$11,000,000  is recorded  as  subscriptions  receivable  at June 30, 2001 in the
accompanying financial statements.

Edda Limited ("Edda"):  On December 26, 2000,  Hartcourt and Edda signed a Stock
Sale Agreement (Agreement) whereby Hartcourt agreed to sell 4,000,000 restricted
shares of its common stock as a block to Edda at the agreed price of fifty cents
($0.50)  per  share.  Pursuant  to the terms of the  Agreement,  Hartcourt  will
deliver to Edda the requisite number of common shares  restricted under the Rule
144 of SEC regulations  upon receipt of the full and complete  purchase price in
the amount of $2,000,000.  The accompanying  financial  statements  reflect that
Hartcourt has received  $1,435,084  from Edda as of June 30, 2001. The remaining
balance  of  $564,916  has been  recorded  as  subscriptions  receivable  in the
accompanying  financial  statements  as of June 30, 2001. As of August 10, 2001,
Hartcourt  has not  issued  any  shares to Edda  under  this  Agreement  and has
received an additional $10,000 in remittances subsequent to June 30, 2001.




                                      F-24


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Hartcourt's future business,  including  expansion of its current operations and
acquisition plans requires  additional  equity and/or debt financing,  which may
not be  available  in a  timely  manner  or on  commercially  reasonable  terms.
Currently,  Hartcourt's  primary objective is to acquire  established  operating
companies with histories of growth and profitability,  in order to diversify and
create a multi-dimensional Internet service related company.

Note 2.    Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions  to Form 10-QSB.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted  accounting  principles for complete  financial  statements and related
notes included in the Company's 2000 Form 10-KSB.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present  fairly the Balance  Sheets of The  Hartcourt
Companies,  Inc. and its subsidiaries as of June 30, 2001 and December 31, 2000,
and the results of their  operations  and their cash flows for the three  months
and six months ended June 30, 2001 and 2000.  The financial  statements  for the
three months ended June 30, 2001 are consolidated to include the accounts of The
Hartcourt Companies Inc., its 58.53% owned subsidiary Financial Telecom Limited,
its 51% owned subsidiary UAC Exchange,  its 50% owned  subsidiaries Asia Top and
China Top of  StreamingAsia  Limited Group,  its 51% owned  subsidiary  Elephant
Talk,  its  wholly  owned  subsidiary  Sinobull.com  Inc.,  and its 66.7%  owned
subsidiary  HCTV.  The financial  statements for the three months ended June 30,
2000 are  consolidated to include only the accounts of The Hartcourt  Companies,
Inc., its 58.53% owned subsidiary  Financial Telecom Limited, and its 35% equity
investment in UAC Exchange.

The  results of  operations  for the three  months  ended June 30,  2001 are not
necessarily indicative of the results to be expected for the entire year.

Certain  2000  amounts  have been  reclassified  to conform  to  current  period
presentation.  These reclassifications have no effect on previously reported net
income.

The accounting  policies  followed by the Company are set forth in Note A to the
Company's  financial  statements  as stated in its report on Form 10-KSB for the
fiscal year ended December 31, 2000.








                                      F-25


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Note 3.    Supplemental Disclosure of Non-Cash Financing Activities

                                                      Six Months    Six Months
                                                        Ended          Ended
                                                    June 30, 2001  June 30, 2000
                                                    -------------  -------------
Cash paid for:
   Interest                                           $    78,656  $     43,705
   Taxes                                                        -             -
                                                      ===========  ============

Non-cash operating and financing activities:
 Shares issued to directors for services              $   194,640  $          -
 Shares issued to director in liquidation of payable            -     3,509,954
 Shares issued for consulting services                    152,173             -
 Shares issued in connection with acquisitions          2,325,000             -

Note 4.    Loss per Share
<TABLE>
<S>                                    <C>           <C>           <C>           <C>
                                       Three Months  Three Months   Six Months   Six Months
                                           Ended        Ended         Ended        Ended
                                          June 30,     June 30,      June 30,     June 30,
                                            2001         2000          2001         2000
                                       ------------  ------------  -----------   ------------
 Net loss                              $    979,235  $   880,372   $ 2,205,066   $  2,551,510
 Effects of dilutive securities                   -            -             -              -
                                       ------------  -----------   -----------   ------------
 Weighted average shares outstanding     67,214,678   55,880,162    65,163,663     54,268,534
                                       ============  ===========   ===========   ============
 Basic and dilutive earnings per share $       (.01) $      (.02)  $      (.03)  $       (.05)
                                       ============  ===========   ===========   ============
</TABLE>
At June 30, 2001 and 2000,  the Company had 4,528,640  and 483,530  warrants and
options  outstanding,  each  exercisable  into one share of common stock.  These
instruments  were not included in the computation of diluted  earnings per share
for any of the periods presented,  due to their  anti-dilutive  effects based on
the net loss reported for each period.

On  September  14,  2000,  the  Board  of  Directors  of  Hartcourt  approved  a
two-for-one split of the company's common stock to be distributed in the form of
a stock dividend,  payable on October 23, 2000 to the  shareholders of record at
the close of business on October 16, 2000.  All  references in the  consolidated
financial  statements  to shares,  share prices and per share  amounts have been
adjusted retroactively for the split.



                                      F-26


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2001 (UNAUDITED)

Note 5.  Litigations

ComericaBank of California ("Comerica") vs. Pego Systems, Inc., et al. ("Pego"),
Los Angeles Superior Court Case No. NC 027 075:

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of another  entity's  ("Pego")  alleged  obligation on a promissory note that is
asserted to be in non-financial  default.  The complaint  alleges that Hartcourt
executed  a  guarantee  of  obligation  of  Pego  which   obligation  went  into
non-financial default. Comerica entered the stipulation for entry of judgment to
enforce the settlement  agreement,  which stipulation calls for certain payments
and transfers of funds by Pego, and a judgement of approximately $650,000 exists
of which  Hartcourt is a  co-guarantor.  The assets of Pego  including  accounts
receivable will be liquidated to pay down the debt.

Charles  Hogue vs. The  Hartcourt  Companies,  Inc.,  Circuit Court of the Ninth
Judicial Circuit, Orange County, Florida. Circuit Court Case No. CI00-002190:

Charles  Hogue filed a complaint on or about March 22, 2000, to claim a finder's
fee for introducing Hartcourt to a potential acquisition target.  Hartcourt sent
the payment to Mr.  Hogue via check in the amount of $40,500  for such  finder's
fee, but Mr.  Hogue  demanded  that he be paid in shares of  Hartcourt  with the
amount of shares in  dispute.  Hartcourt's  counsel in Florida  failed to timely
file an  Answer  to the  Complaint,  and a  default  judgment  in the  amount of
$2,901,752  was entered on January 31, 2001.  Hartcourt  brought a motion to set
aside the default,  which was denied.  Hartcourt plans to vigorously  appeal the
ruling.  On or about March 2, 2001, a Notice of Appeal was filed.  Hartcourt has
retained new appellate counsel to aggressively contest the appeal.

The Company is party to various claims and legal proceedings  arising out of the
normal  course  of its  business.  These  claims  and legal  proceedings  relate
primarily to contractual rights and obligations,  and employment matters.  While
there can be no  assurance  that an adverse  determination  of any such  matters
could not have a material  adverse impact in any future period,  management does
not believe,  based upon  information  known to it, that the final resolution of
any of these  matters  will have a material  adverse  effect upon the  Company's
consolidated financial position and annual results of operations and cash flows.












                                      F-27


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2001 (UNAUDITED)
Part I

Item 2

The Hartcourt  Companies,  Inc. is a holding and development  enterprise that is
building a broad network of internet, media, and telecommunication  companies in
Greater  China.   In  partnership   with  leading  Chinese   entrepreneurs   and
government-sponsored entities, Hartcourt is developing and investing in emerging
technologies  while  building  an  integrated   commercial   framework  for  its
subsidiaries  and their partners.  Hartcourt's  operative  business  strategy is
designed to establish market leading position and facilitate a series of venture
divestitures  via IPO or public  merger in its four main  business  divisions to
fully  realize the value of these assets for its  investors.  The four  business
divisions   are  The   Sinobull   Financial   Group,   Media   Services   Group,
Broadband/Telecommunications Group and The E-learning Group.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified  and profitable  revenue base  throughout its  operations.
Hartcourt is developing  extensive business operations  throughout Greater China
to  position  itself to take full  advantage  of the  substantial  opportunities
presented by the emergence of the worlds largest consumer and business  markets,
and  China's  upcoming  entry  into  the  WTO.  Hartcourt's  ability  to  obtain
government  approved  licenses and its wide array of well  established  business
relationships is greatly facilitating these goals and establishing  Hartcourt as
an attractive entry point for corporations seeking access to these markets.

Results of Operations:

During 2001,  Hartcourt  continued its  previously  implemented  plan to acquire
profitable  companies  that were in  established  industries  with a history  of
growth.  Since mid-1999,  Hartcourt has been focusing on assembling a collection
of  companies  and  services  that  will  provide  citizens  of China  with next
generation  communication  services.  Each of the companies that  constitute the
four operating  business  divisions were  independent  companies  prior to their
affiliation with Hartcourt and were brought into the fold via share acquisitions
by Hartcourt to fulfill  specific niches within  Hartcourt's  current  expansion
plans.   Hartcourt  plans  to  eventually  build  its  current  operations  into
stand-alone  entities  that will be taken  public on US and/or  Asian  Financial
markets.

To stay focused and achieve its mission to become a leading  Internet company in
Asia and China, Hartcourt continued to build a network of internet companies. On
December 28, 2000,  Sinobull completed its acquisition of 51% ownership interest
in  Sinobull  Network  and 51%  ownership  in  Sinobull  Information.  Hartcourt
completed its  acquisition of 100% ownership  interest in  Sinobull.com  Inc. on
April 2, 2001 and 51%  ownership  interest in Elephant  Talk  Limited on May 16,
2001.

The  operations  of Hartcourt for the three months and six months ended June 30,
2001 consisted of Operations of FTL (58.53%  ownership  interest),  UAC Exchange
(51% ownership interest),  Sinobull.com Inc. (100% ownership interest), Elephant
Talk (51% ownership interest),  StreaminingAsia  Holdings Limited (50% ownership

                                      F-28
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2001 (UNAUDITED)


interest),  HCTV (66.67%  ownership  interest) and  Hartcourt's  investment  and
advances to other entities in US, China and Hong Kong.  Operations for the three
months and six months ended June 30, 2000 consisted of operations of FTL (58.53%
ownership  interest)  and  Hartcourt's  35% equity  investment  interest  in UAC
Exchange.

Net sales and cost of sales:  The Company  recorded net sales of $1,877,865  and
$2,131,226 for the three months and six months ended June 30, 2001,  compared to
$342,213  and  $690,441  for the same  periods in 2000.  Net sales in the second
quarter of 2001 primarily  consisted of revenues derived from Elephant Talk , an
international  long distance carrier that provides voice, data transmission like
IDD,  pre-paid  calling  cards and ISP  services  to a wide  range of  customers
including major telecommunication  companies in US and Hong Kong. Net sales also
include sale of wireless pagers,  rental of equipment,  and the related Internet
and  telephone  services as FTL  switched  their  wireless  network to a new and
improved transmission  platform in December 2000. In addition,  during the three
months  ended  June 30,  2001,  Hartcourt  provided  consulting  services  to US
entrepreneurs  and  educated them in ways to do business in China and Hong Kong.
Cost of sales amounted to $1,294,404 and $1,299,244 for the three months and six
months  ended June 30,  2001  compared  to $115,531  and  $232,072  for the same
periods  in  2000.  Cost of sales  for the  three  months  ended  June 30,  2001
primarily included the cost of sales in providing resale  arrangements with long
distance  providers,  cost of  leasing  transmission  facilities,  international
gateway switches voice,  data  transmission and ISP services offered by Elephant
Talk.  In addition,  cost of sales  included  cost of wireless  pagers,  cost of
transmission and Internet services provided to FTL and FWL customers.

Selling,  general and administrative  expenses (SG&A):  SG&A were $1,926,549 and
$3,113,657  for the three months and six months ended June 30, 2001  compared to
$1,091,997  and  $2,896,234  for the same  periods  in  2000.  The  increase  is
primarily  attributed  due to additional  consulting,  legal and  administrative
costs incurred due to the  acquisitions of Elephant Talk and  Sinobull.com  Inc.
during the second  quarter of 2001.  SG&A for the six months ended June 30, 2001
decreased by $101,046  when  compared to the first six months of 2000  primarily
because  of  increased   consulting   and  legal  costs   associated   with  the
restructuring  of  Hartcourt's  business in China during the first six months of
2000, and expenses incurred in brokerage fees in connection with the issuance of
warrants raising working capital.

Other income /expenses:  Total other income net of other  expenses were $351,160
and $147,388 for the three months and six months ended June 30, 2001 compared to
other  expenses  net of other income of $15,767 and $78,429 for the same periods
in 2000. The increase in other income net of expenses resulted  primarily due to
the  gain of  $355,777  recorded  by FTL in the  second  quarter  of 2001 due to
forgiveness of debt as a result of refinancing  their computer and  transmission
equipment.




                                      F-29

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2001 (UNAUDITED)


Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2001 are to fund the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia.  During  the six  months  ended June 30,  2001,  Hartcourt  has raised
necessary funds to carry out its plans of acquisitions by selling its own common
shares  to  selected   investors  and  bringing  in  business   partners   whose
contributions included the necessary cash.

As shown in the accompanying  financial statements,  Hartcourt incurred net loss
of  $2,205,066  for the six months ended June 30, 2001 as compared to a net loss
of $2,551,510  for the same period in 2000.  Additionally,  Hartcourt's  current
liabilities exceeded its current  assets by $1,630,415 at June 30,  2001.  These
factors, as well as negative cash flows from operations,  Hartcourt's  inability
to meet debt  obligations and the need to raise  additional  funds to accomplish
its objectives, create a substantial doubt about Hartcourt's ability to continue
as a going concern.

Hartcourt  has taken  certain  restructuring  steps,  which in the  management's
opinion will provide the  necessary  capital to continue its  operations.  These
steps included: 1) the settlement of certain matters of litigation and disputes;
2) signed a Investment  Agreement with Swartz Private Equity,  LLC, which agreed
to purchase from time to time, up to $35,000,000  of Hartcourt  shares of common
stock. The Investment  Agreement with Swartz is still subject to the approval of
the SEC; 3) raised  $8,484,692 in cash through the issuance of its common shares
since the  beginning of the year 2000  through  June 30,  2001;  4) common stock
subscriptions receivable of $11,627,178 as of June 30, 2001.

Operating  activities.  During the six months ended June 30, 2001, net cash used
by operating activities increased to $1,144,522 during the six months ended June
30, 2001 compared to $873,872  during the same period in 2000.  This increase is
primarily due to the increase in accounts receivable, prepaid expenses, accounts
payable, accrued expenses, cash overdraft and deferred revenue.

Investing  activities.  Net cash provided by investing activities during the six
months  ended June 30, 2001,  was $687,737  compared to $$ 2,497,422 of net cash
used in  investing  activities  for the same period in 2000.  Cash  provided was
primarily due to the acquisitions of ET and StreamingAsia.

Financing  activities.  Net cash provided by financing activities during the six
months ended June 30, 2001 was $781,865  compared to $3,609,640  during the same
period in 2000.  Net cash was provided due to proceeds from sale of common stock
amounting to $564,916, advances from related parties of $629,424 and payments on
note payable of $412,475.

As a result of the above activities,  the company  experienced a net increase in
cash of  $324,080  for the six  months  ended  June 30,  2001.  The  ability  of
Hartcourt  to continue as a going  concern is still  dependent on its success in
obtaining  additional  financing and  fulfilling  its plan of  restructuring  as
outlined above.

                                      F-30
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2001 (UNAUDITED)

Part II

Item 1.    LEGAL PROCEEDINGS

ComericaBank of California ("Comerica") vs. Pego Systems, Inc., et al. ("Pego"),
Los Angeles Superior Court Case No. NC 027 075:

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of another  entity's  ("Pego")  alleged  obligation on a promissory note that is
asserted to be in non-financial  default.  The complaint  alleges that Hartcourt
executed  a  guarantee  of  obligation  of  Pego  which   obligation  went  into
non-financial default. Comerica entered the stipulation for entry of judgment to
enforce the settlement  agreement,  which stipulation calls for certain payments
and transfers of funds by Pego, and a judgment of approximately  $650,000 exists
of which  Hartcourt is a  co-guarantor.  The assets of Pego  including  accounts
receivable will be liquidated to pay down the debt.

Charles  Hogue vs. The  Hartcourt  Companies,  Inc.,  Circuit Court of the Ninth
Judicial Circuit, Orange County, Florida. Circuit Court Case No. CI00-002190:

Charles  Hogue filed a complaint on or about March 22, 2000, to claim a finder's
fee for introducing Hartcourt to a potential acquisition target.  Hartcourt sent
the payment to Mr.  Hogue via check in the amount of $40,500  for such  finder's
fee, but Mr.  Hogue  demanded  that he be paid in shares of  Hartcourt  with the
amount of shares in  dispute.  Hartcourt's  counsel in Florida  failed to timely
file an  Answer  to the  Complaint,  and a  default  judgment  in the  amount of
$2,901,752  was entered on January 31, 2001.  Hartcourt  brought a motion to set
aside the default,  which was denied.  Hartcourt plans to vigorously  appeal the
ruling.  On or about March 2, 2001, a Notice of Appeal was filed.  Hartcourt has
retained new appellate counsel to aggressively contest the appeal.

The Company is party to various claims and legal proceedings  arising out of the
normal  course  of its  business.  These  claims  and legal  proceedings  relate
primarily to contractual rights and obligations,  and employment matters.  While
there can be no  assurance  that an adverse  determination  of any such  matters
could not have a material  adverse impact in any future period,  management does
not believe,  based upon  information  known to it, that the final resolution of
any of these  matters  will have a material  adverse  effect upon the  Company's
consolidated financial position and annual results of operations and cash flows.











                                      F-31


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2001 (UNAUDITED)

Item 2.  CHANGES IN SECURITIES

Not applicable

Item 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable

Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

None

Item 5.  OTHER INFORMATION

None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a) Exhibits
            o   None.

         b) Reports on Form 8-K
            o   On May 16,  2001,  Hartcourt's  acquisition  of 51% of ownership
                interest  in  Elephant  Talk  Limited.  File  Number  001-12671.
                Incorporated herein by reference.


























                                      F-32


<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES

                                OTHER INFORMATION
                            JUNE 30, 2001 (UNAUDITED)

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
 has caused this report signed on its behalf by the undersigned,  thereunto duly
 authorized.


                                        The Hartcourt Companies, Inc.

Date:  August 17, 2001                  By: /s/  Dr. Alan V. Phan
                                        --------------------------------
                                                 Dr. Alan V. Phan
                                                 Chairman






































                                      F-33