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: March 31, 2002


     [ ]      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.)

           19222 Pioneer Blvd., Suite 100, Cerritos, California 90703
                    (Address of principal executive offices)

                                 (562) 653-0400
                           (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 March 31, 2002, The Hartcourt  Companies,  Inc. had  74,640,835  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
                                 March 31, 2002
                                                                     Page
                                                                     ----
PART 1    FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets at March 31, 2002
          (Unaudited) and December 31, 2001                       F-3 - F-4

          Consolidated Statements of Operations for the Three
          Months ended March 31, 2002 and 2001 (Unaudited)        F-5 - F-6

          Consolidated Statements of Shareholders' Equity for
          the Three Months ended March 31, 2002 (Unaudited)          F-7

          Consolidated Statements of Cash Flows for the Three
          Months ended March 31, 2002 and 2001 (Unaudited)           F-8

          Notes to the Consolidated Financial Statements             F-9

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                        F-30


PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                          F-33

Item 2.   Changes in Securities                                      F-35

Item 3.   Defaults upon Senior Securities                            F-35

Item 4.   Submission of Matters to Vote of Security Holders          F-35

Item 5.   Other Information                                          F-35

Item 6.   Exhibits and Reports on Form 8-K                           F-35

Signatures                                                           F-36












                                      F-2
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


Part I
Item 1

                                             March 31, 2002      December 31,
                                              (Unaudited)          2001
                                             --------------     --------------
ASSETS

Current assets:
   Cash and cash equivalents                 $      184,726     $      281,563
   Accounts receivable, net                       1,462,426          1,443,673
   Inventory                                         15,887             15,882
   Notes receivable                                 896,874            896,874
   Prepaid expenses and other                       708,410            734,598
   Due from related parties                       1,441,451          1,494,730
                                             --------------     --------------
Total current assets                              4,709,774          4,867,320
                                             --------------     --------------
Property and equipment, net                       2,071,653          2,445,432

Investments, net                                    410,835            400,000

Other Assets
   Goodwill, net                                  5,392,719          5,257,649
   Intangibles, net                               1,113,841          1,191,959
   Investment in ETNS Singapore Pte., Ltd.          216,530            209,490
   Notes receivable                               2,511,494          2,698,286
                                             --------------     --------------
Total other assets                                9,234,584          9,267,384
                                             --------------     --------------
Total assets                                 $   16,426,846     $   16,980,136
                                             ==============     ==============



















          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                 March 31, 2002   December 31,
                                                  (Unaudited)         2001
                                                 --------------   -------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Cash overdraft                                $      95,742    $      82,030
   Accounts payable                                  4,635,985        4,607,238
   Deferred revenue                                    496,955          616,254
   Notes payable, current portion                    1,566,749        1,339,517
   Capital lease liability                              77,618           84,642
   Due to factor                                       198,205          198,205
   Due to related parties                            1,036,869        1,350,997
   Accrued expenses and other current liabilities      569,029          478,216
                                                 -------------    -------------
Total current liabilities                            8,677,152        8,757,099

Long term Liabilities:
   Notes payable, net of current portion               450,801          433,299
   Capital lease liability                              19,143           28,596
                                                 -------------    -------------
Total liabilities                                    9,147,096        9,218,994
                                                 -------------    -------------
Contingencies

Minority interests                                   2,073,319        2,280,199

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; 74,640,835 shares and
     73,885,656 shares issued and outstanding
     at March 31, 2002 and December 31, 2001            74,641           73,886
   Common stock, $0.001 par value, 5,000,000
     shares to be issued                                 5,000                -
   Stock subscriptions receivable                     (475,957)        (139,865)
   Treasury stock, at cost, 2,211,303 and
     2,418,367 shares at March 31, 2002 and
     December 31, 2001                              (1,565,536)      (1,662,233)
   Additional paid-in capital                       56,501,876       55,774,225
   Other comprehensive loss                            (48,381)         (61,687)
   Accumulated deficit                             (49,285,222)     (48,503,393)
                                                 -------------    -------------
Total shareholders' equity                           5,206,431        5,480,933
                                                 -------------    -------------
Total liabilities and shareholders' equity       $  16,426,846    $  16,980,136
                                                 =============    =============



          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                        Three Months Ended
                                                             March 31,
                                                  ----------------------------
                                                      2002            2001
                                                  -------------  -------------
Net sales                                         $   3,547,599  $     253,361

Cost of sales                                         3,022,964          4,040
                                                  -------------  -------------
Gross profit                                            524,635        248,521
                                                  -------------  -------------
Operating expenses:
   Selling, general and administrative                1,079,593        935,612
   Depreciation and amortization                        362,307         88,152
                                                  -------------  -------------
Total operating expenses                              1,441,900      1,023,764
                                                  -------------  -------------
Loss from continuing operations                        (917,265)      (775,243)

Other income (expense):
   Equity in earnings (loss) of affiliate                 7,040       (183,536)
   Loss on abandonment of property and equipment       (114,891)             -
   Interest expense                                     (32,926)       (40,511)
   Interest income                                       53,618          3,161
   Other                                                      -          3,561
                                                  -------------  -------------
Total other income (expense)                            (87,159)      (217,325)
                                                  -------------  -------------
Loss from continuing operations before
         minority interest                           (1,004,424)      (992,568)

Less:  loss in subsidiary attributed to
         minority interest                              222,595         21,898
                                                  -------------  -------------
Loss before discontinued operations                    (781,829)      (970,670)

Discontinued operations:
   Loss from discontinued operations                          -       (255,161)
                                                  -------------  -------------
Net loss                                          $    (781,829) $  (1,225,831)
                                                  -------------  -------------
Other comprehensive loss:
   Foreign currency translation gain                     13,306              -
                                                  -------------  -------------
Comprehensive loss                                $    (768,523) $  (1,225,831)
                                                  =============  =============






          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                        Three Months Ended
                                                             March 31,
                                                  ----------------------------
                                                      2002            2001
                                                  -------------  -------------

Basic and fully diluted loss per common share:
   Loss from continuing operations                $       (0.01) $       (0.02)
   Loss from discontinued operations                          -              -
                                                  -------------  -------------
   Loss per share                                 $       (0.01)         (0.02)
                                                  -------------  -------------
Weighted average number of shares outstanding
  - Basic and fully diluted                          74,150,428     63,086,642
                                                  =============  =============





































          See accompanying notes to consolidated financial statements.

                                      F-6
<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, 2001  73,885,656 $ 73,886  1,000  $   10  $ 55,774,225 $   (139,865)
Shares issued for
  consulting services           379,429      379      -       -        75,121            -
Stock subscriptions received                   -      -       -             -      139,865
Shares issued to directors
  in lieu of compensation
  and for services              375,750      376      -       -        94,424            -
Sale of treasury stock                -        -      -       -       (36,894)
Shares issued for
  subscriptions receivable    5,000,000    5,000      -       -       595,000     (475,957)
Other comprehensive gain              -        -      -       -             -            -
Net loss                              -        -      -       -             -            -
                             ---------- -------- ------  ------  ------------  -----------
Balance - March 31, 2002     79,640,835 $ 79,641  1,000  $   10  $ 56,501,876  $  (475,957)
                             ========== ======== ======  ======  ============  ===========
</TABLE>


<TABLE>
<S>                          <C>        <C>            <C>            <C>            <C>
                                 Treasury Stock            Other                        Total
                             ------------------------  Comprehensive   Accumulated   Shareholders
        Description            Shares      Amount          Loss          Deficit        Equity
---------------------------  ---------  -------------  -------------  -------------  ------------
Balance - December 31, 2001  2,418,367  $ (1,662,233)  $    (61,687)  $(48,503,393)  $  5,480,943
Shares issued for
  consulting services                -             -                             -         75,500
Stock subscriptions received                                                              139,865
Shares issued to directors
  in lieu of compensation
  and for services                   -             -                             -         94,800
Sale of treasury stock        (207,064)       96,697                             -         59,803
Shares issued for
  subscriptions receivable           -             -                             -        124,043
Other comprehensive gain             -             -         13,306              -         13,306
Net loss                             -             -                      (781,829)      (781,829)
                             ---------  ------------  -------------   ------------   ------------
Balance - March 31, 2002     2,211,303  $ (1,565,536) $     (48,381)  $(49,285,222)  $  5,206,431
                             =========  ============  =============   ============   ============
</TABLE>












          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                        2002           2001
                                                    ------------  -------------
Cash flows from operating activities:
  Net loss                                           $  (781,829)   (1,225,831)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Loss on abandonment of property and equipment        114,891             -
    Depreciation and amortization                        362,307       191,265
    Minority interest in loss of subsidiaries           (201,571)     (107,793)
    Equity in (income) loss of affiliate                  (7,040)      183,536
    Shares issued in lieu of compensation and services   170,300       257,172
    Changes in operating assets and liabilities:
     (Increase) decrease in:
     Accounts receivable                                 (18,753)      (51,482)
     Inventory                                                (5)        6,172
     Prepaid expenses and other                           26,188       (60,314)
     Cash overdraft                                       13,712             -
     Accounts payable                                    (11,037)      (53,758)
     Accrued expenses and other current liabilities      130,813        (8,990)
     Deferred revenue                                   (119,299)      107,822
                                                     -----------   -----------
Net cash used in operating activities                   (321,323)     (762,201)
                                                     -----------   -----------
Cash flows from investing activities:
   Advance towards investment                                  -      (201,284)
   Proceeds on notes receivable                           96,792             -
   Purchase of property and equipment                    (25,301)       (3,465)
                                                     -----------   -----------
Net cash provided by (used in) investing activities       71,491      (204,749)
                                                     -----------   -----------
Cash flows from financing activities:
   Proceeds on stock subscriptions                       312,876       504,916
   Payments to related parties, net                     (260,849)      223,854
   Proceeds from note payable, net                       104,139       (10,011)
   Payments on capital leases                            (16,477)            -
                                                     -----------   -----------
Net cash provided by financing activities                139,689       718,759
                                                     -----------   -----------
Foreign currency translation                              13,306             -

Net decrease in cash                                     (96,837)     (248,191)

Cash and cash equivalents, beginning of period           281,563       402,993
                                                     -----------   -----------
Cash and cash equivalents, end of period             $   184,726   $   154,802
                                                     -----------   -----------



          See accompanying notes to consolidated financial statements.

                                      F-8

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (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 five main business divisions to fully realize the value
of these assets for its  investors.  The five  business  divisions  are Sinobull
Financial  Group,  Media  Services  Group,  Broadband/Telecommunications  Group,
E-learning Group and Hartcourt Capital.

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.

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
Beijing Net  Technologies  Center  Company,  Ltd.),  Tongbo  Software Ltd., HCTV
Financial TV Ltd., Sinobull Magazine Ltd. and





                                      F-9
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)


Hartcourt's  investments  in Shanghai  Wind  Information  Company  Limited.  The
Sinobull  Financial  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  Communications, Inc. 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:  AI-Asia  Inc.  is a  holding  and  development  company
established  by Hartcourt  to acquire  assets and  companies in the  multi-media
technology  and services  sector.  Its  objective is to identify,  develop,  and
maintain  first-mover  technologies,  products and services  for  corporate  and
consumer  Internet  deployment.  AI-Asia plans to provide its  clientele  with a
comprehensive   range  of  Internet  enabling   solutions,   preparing  them  to
participate  in the rapidly  emerging  streaming  and  broadband  communications
revolution. The operating companies in this group include StreamingAsia Limited,
LogicSpace Limited and  Syndicate Asia Limited.. 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




                                      F-10
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)


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  Capital  Group:  Hartcourt  recently  formed  under  this group a new
company  Hartcourt  Capital Inc., an  investment-banking  arm to act as a bridge
between high-growth Chinese companies and the U.S. capital markets.  The company
will provide a wide range of strategic and financial  advisory services covering
mergers and acquisitions,  fund raising, private placement,  restructuring,  and
public market listings.

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.

OPERATIONS BY BUSINESS DIVISIONS

SINOBULL FINANCIAL GROUP:

The Sinobull  Financial  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"),  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 Sinobull  became a  wholly-owned  subsidiary of
Hartcourt.  On October 2, 2001 Hartcourt announced its intent to publicly divest
the Sinobull Group in a merger with Global  Telephone  Communications  Inc. (OTC
Bulletin Board:  GTCI). The reverse merger will allow Sinobull to actively trade
on the equity markets and unlock its value for Hartcourt  investors.  The merger
has been approved by GTCI  shareholders and is awaiting approval by the SEC. The
merger is expected to be completed by May 31, 2002.

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.




                                      F-11

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 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.  During the  quarter  ended  March 31,  2002,  FTL sold  207,064  shares of
Hartcourt common stock for approximately  $59,800 to satisfy certain obligations
and to raise working capital for its operations. The remaining 356,773 shares of
common stock held by FTL at March 31, 2002 are  reflected as treasury  shares in
the accompanying financial statements at March 31, 2002.

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,  and Nice Voice agreed to  contribute
certain assets in FWL. 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 have legal ownership
title to such  assets  until the  final  dollar  payment  has been made on these
assets. The accompanying financial statements as of March 31, 2002 reflect FTL's
investment of 51% ownership  interest in FWL. FWL ceased  operations on March 1,
2002 after all its customers were sold to a third party. As of May 10, 2002, FTL
had advanced approximately  HK$4,208,840  (US$539,595) 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. Shangdi 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.



                                      F-12
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 shall
have 60% interest in the new corporation.  On April 12, 2000,  Sinobull signed a
Term Sheet Agreement with 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,  acquired 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 issued 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 as the  consideration for 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 transferred without any pledge and debt, all
tangible  and  intangible  assets in relation to  computer  network  information
services to Sinobull Network,  and transferred to Hartcourt 40% of the ownership
interest in Tiandi.  On December 28, 2000,  Sinobull,  Tiandi,  and Li Chun Ying
(representative  of the owners of Shangdi) signed a Share  Subscription and Sale
and Purchase  Agreement  whereby,  Sinobull owned 51% of Tiandi and Li Chun Ying
owned 49% of Tiandi after  payment of  consideration  to Shangdi for purchase of
all tangible and intangible  assets.  As of March 31, 2002,  Sinobull through an
advance  from  Hartcourt,  had paid  $1,000,000  in cash towards the purchase of
which  $670,000  was  distributed  to the  owners of Shangdi  and the  remaining
$330,000  was deemed as  capital  contribution  in  Sinobull  Network.  Sinobull
Network ceased its operations as of May 16, 2001.

Shanghai Sinobull Information Company Limited (Sinobull  Information):  Formally
known as Shanghai Guo Mao Science & Technology  Co. Ltd.  ("Guo Mao").  Sinobull
Information  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

                                      F-13
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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.

Tongbo  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
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,  TongBao will become a wholly owned  subsidiary of Sinobull
Information.  During  2001,  Ningbo Shiji  TongBao  Software  Limited  moved its
operations  to  Shanghai  and merged  all its  assets,  liabilities  and all its
operations in a newly formed  company named  Shanghai  Yuanhe  Computer  Limited
(Tongbo).

On  October 1,  2001,  Tongbo  signed a Letter of  Understanding  with  Sinobull
Information whereby Tongbo assigned to Sinobull  Information all of its revenues
and revenue sources  including past due,  accrued and to be earned in the future
in exchange for  Sinobull  Information  assuming  all  ordinary  and  reasonable
operational  expenses of Tongbo  commencing  October 1, 2001.  The  accompanying
financial  statements of Sinobull Information at March 31, 2002 reflect combined
revenues and expenses of Tongbo.

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.



                                      F-14
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 was named "Haike  Caijin TV"
means  Hartcourt  Financial  Television  (HCTV)  in  English.  HCTV  was  to  be
registered in Shanghai with a funding of $1.0 million. The agreement defined the
first phase joint venture investment terms for the period from September 2000 to
December  2000. 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  and
contribution  of $200,000 as the  subscribed  capital of the HCTV Joint  Venture
Company.  As of March 31,  2002,  Hopeman  has  invested  $50,000  for its 33.3%
investment  and  Hartcourt  has  invested  $100,000  towards  its  66.7%  equity
ownership in the HCTV joint venture. The temporary license issued by the Chinese
authorities  expired on February  14, 2002 pending  injection  of an  additional
$50,000  towards the capital  subscription.  Hopeman and Hartcourt are currently
negotiating  with the Chinese  authorities to renew the temporary  license until
such time as additional  $50,000 is injected in the joint venture company.  HCTV
operating results are consolidated with Hartcourt in the accompanying  financial
statements as of March 31, 2002. As of May 10, 2002,  neither party  contributed
any additional funds towards the registered capital.

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.  On June 20, 1999  Hartcourt  entered  into an  agreement  with UAC
Trading to form a joint venture  company  Beijing UAC Stock Exchange  Online Co.
Ltd. ("UAC Exchange").  Under the terms of the agreement,  Hartcourt invested in
cash and stock  $2,868,000  for the  purchase of 51%  ownership  interest in UAC
Exchange.   In  September  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 was not  compatible to the
Internet.  Therefore, UAC Exchange started converting its operations to Internet
based operations.

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 net  investment  in UAC Exchange as of the date of  rescission  amounting to
$2,858,286,  bearing  interest  at six per cent  (6%) per anum,  payable  over a
thirty-nine  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 September 10, 2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  purchased all
existing  tangible  and  intangible  assets of UAC  Exchange  for the  amount of
Hartcourt's net investment in UAC Exchange,  and signed a promissory note in the
amount of $2,858,286  bearing interest at six per cent (6%) per anum, payable in


                                      F-15
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

quarterly  installments  of $50,000  commencing  November 1, 2001 with a balloon
payment of $2,715,772 due on December 1, 2006. The promissory note is secured by
a security agreement granting to Hartcourt all tangible and intangible  property
of Edda Limited.  As of March 31, 2002,  Edda paid the first two quarterly  note
payments of $50,000 each, and paid an additional $98,962 towards interest due on
the promissory note due to Hartcourt.

Shanghai Wind Information Company, Limited ("WindInfo"):  WindInfo is China's #1
financial  research content  provider,  developing  original content through its
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. On September  18,  2000,  Hartcourt  through its
subsidiary Sinobull loaned $500,000 to WindInfo. 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 of
$500,000  to a 5%  equity  ownership  in the  JVC  to be  formed.  Upon  further
negotiations between the two parties,  Hartcourt and WindInfo mutually agreed to
terminate  the Term Sheet  Agreement of formation of JVC and WindInfo  agreed to
return  Hartcourt's  contribution of $500,000 towards its investment in the JVC.
As of March  31,  2002,  WindInfo  returned  RMB600,000  ($72,289)  to  Sinobull
Information on behalf of Hartcourt.  The accompanying financial statements as of
March 31, 2002 reflect  Hartcourt's loan of $439,759 to WindInfo.  An additional
RMB30,000  was received on April 30, 2002.  Both parties are  negotiating  to an
acceptable  payment  plan for  Hartcourt  to receive the  remainder  of its loan
during the year 2002.

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



                                      F-16
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

the selling price to its customers and Hartcourt's  discounted purchase price as
agreed between  Hartcourt and Equis.  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
Wireless Application Protocol (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 over 105 million users of China Mobile. As of May 10, 2002,  Sinobull has not
received any revenues under the revenue sharing agreement.

BROADBAND/TELECOM GROUP:

The  Broadband/Telecom  Group is centered  around its  subsidiary  Elephant Talk
Communications,  Inc.  and  a  future  venture  with  Beijing  Innostar  Hi-Tech
Enterprises  of China.  The group is  focused on  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. On
September  25,  2001  Hartcourt  announced  its  intent  to  merge  ElephantTalk
subsidiary with Staruni  Corporation (OTC Bulletin Board: SRUN), in an effort to
take  Broadband/Telecom  Group public. On January 4, 2002 ElephantTalk completed
the merger with Staruni  Corporation and commenced  trading on OTC:BB on January
22, 2002 under the ticker symbol ETLK.

Elephant  Talk  Communications,  Inc.  (formerly  known as Elephant Talk Limited
"ElephantTalk   or   ET):    ElephantTalk    (OTC:BB   ETLK),   is   a   leading
telecommunications  company  located and  operated in Hong Kong with  offices in
Cerritos,  California and switching facilities in China, Hong Kong, U.S., Taiwan
and Singapore. ElephantTalk operates international long distance service on both
sides of the Pacific to over 220 foreign cities. They enable  telecommunications
carriers and other service providers the ability to offer long distance,  voice,
data/fax,  calling card, and  voice-over-internet-phone  (VOIP) services through
advanced,  scaleable  networks.  ElephantTalk  is expanding its networks and has
international operating agreements with telecommunications  carriers,  including
AT&T Corp.,  Cignal Global Ltd., Frontier Telecom Ltd. and MCI Worldcom Inc. Its
customers include the largest first and second tier telecommunications  carriers
in the U.S. and Asia,  including two of the four fixed network operators in Hong
Kong; New T&T and New World Telephone.


                                      F-17
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

On May 16,  2001,  Hartcourt  and  ElephantTalk  executed  a Sale  and  Purchase
Agreement  whereby  Hartcourt   acquired  51%  of  the  ownership   interest  in
ElephantTalk for a total consideration of $4,194,000.

On October 8, 2001  ElephantTalk  entered into a reseller  agreement with JiTong
Network  Communications  Company  Limited  ("JiTong")  to  provide a variety  of
IP-based telecom services.  JiTong is one of the five  government-owned  telecom
giants in China with their own  communication  infrastructure.  It is the famous
owner and operator of the Golden Bridge fiber optics and Internet services. Both
companies will jointly  develop and market new brands of IP telephony  solutions
in major  countries  worldwide.  Under the terms of the agreement,  ElephantTalk
will  interconnect its global  point-of-presence  (POPs) with JiTong's  network.
ElephantTalk will market and resell JiTong's IP-based services including I-phone
and I-fax services,  while JiTong will be responsible for service  provisioning,
technical  support and  after-sales  services  to  customers.  ElephantTalk  has
expanded their  agreement with JiTong Networks  Communications  Company and also
signed  cross-branding  partnership  agreements  with China  Netcom  Corporation
Limited  and Great Wall  Broadband  Network  detailed in the  subsequent  events
section.

Pursuant to an Agreement of Merger and Plan of Reorganization,  effective August
27, 2001, and through the subsequent transaction that closed on January 4, 2002,
Staruni Corporation, a California corporation merged with Elephant Talk Limited.
Staruni was the surviving corporation and shall continue its corporate existence
under the laws of California. On January 9, 2002, Staruni filed a Certificate of
Amendment of Articles of  Incorporation  to amend its corporate name to Elephant
Talk Communications,  Inc. (ETCI). This name change was done in conjunction with
the merger, and to emphasize that the new focus of the ETCI will be the business
of Elephant  Talk Limited.  Pursuant to the terms of the merger,  each holder of
ordinary shares of ElephantTalk  common stock,  par value of HK$1 (One Hong Kong
Dollar)  immediately  prior to the effective  time of the merger date shall,  by
virtue of the  merger and  without  any  action on the part of such  holder,  be
entitled  to  receive,  as of the merger  date,  such number of shares of common
stock of ETCI,  no par  value,  as the number of shares of  ElephantTalk  common
stock owned by such holder as of the merger date.  Collectively,  following  the
merger, the former holders of ElephantTalk common stock held an aggregate of 90%
of the issued and outstanding  shares of ETCI's common stock.  The merger caused
no change in any of the shares of the ETCI's  common  stock  outstanding  on the
merger date, and no other  securities  were converted as a result of the merger.
Prior to the  completion  of the  merger  with  Staruni,  on  January  2,  2002,
Hartcourt purchased 7,500,000 shares of Elephant Talk Limited from a shareholder
for a note  payable  of  $140,595  bearing  an annual  interest  rate of 8%, due
September  15,  2002.  At the  conclusion  of the  merger on  January  4,  2002,
Hartcourt  retained a 51.7%  ownership in ETCI.  The  accompanying  consolidated
financial statements include the operating results of ETCI from January 4, 2002.

On October 8, 2001 ET entered  into a reseller  agreement  with  JiTong  Network
Communications  Company  Limited  ("JiTong")  to provide a variety  of  IP-based
telecom services.  JiTong is one of the five government-owned  telecom giants in




                                      F-18
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

China with their own  communication  infrastructure.  It is the famous owner and
operator of the Golden Bridge fiber optics and Internet services. Both companies
will jointly  develop and market new brands of IP  telephony  solutions in major
countries worldwide.  Under the terms of the agreement, ET will interconnect its
global point-of-presence (POPs) with JiTong's network. ET will market and resell
JiTong's  IP-based services  including I-phone and I-fax services,  while JiTong
will be responsible for service provisioning,  technical support and after-sales
services  to  customers.   The  agreement  signifies  the  beginning  of  close,
long-term,  working  partnership  between the two companies.  The details of the
reseller  agreement  have   been  negotiated  and  the  terms
finalized.

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 the business  model of
the Joint Venture and have re-applied for the grant of business  license.  As of
May 10, 2002, the license is still pending government and regulation approval.

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.  The  Media  Services  Group  provides  a  comprehensive
real-time  audio  and video  delivery  (Streaming  Media)  solution  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.  On
August 20, 2001,  Hartcourt  established a new wholly owned  subsidiary  AI-Asia
Inc. to hold and develop assets of the Media Services Group. AI-Asia's objective
is  identify,  develop,  and  maintain  first-mover  technologies,  products and
services  for  corporate  and consumer  Internet  deployment.  AI-Asia  plans to
provide its clientele with a comprehensive range of Internet enabling solutions,
preparing them to participate  in the rapidly  emerging  streaming and broadband
communications  revolution.  AI-Asia  will  create  synergy  not only  among its
streaming technology companies but will coordinate with other Hartcourt Groups.



                                      F-19
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 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  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.

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. On August 9, 2001, Hartcourt
closed the escrow and completed the  acquisition  of an additional 35% ownership
interest  in Asia  Top and  China  Top for a  total  purchase  consideration  of
HK$800,000 (US$102,564). The accompanying financial statements at March 31, 2002
reflect Hartcourt's  ownership of 85% of the StreamingAsia Group and its results
of operations from the date of acquisition are consolidated with Hartcourt.

LogicSpace  Limited  ("LogicSpace"):  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 March 31,
2002.

SyndicateAsia Limited  ("SyndicateAsia"):  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


                                      F-20
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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. The operating  results of SyndicateAsia
are  consolidated  with  StreamingAsia  Limited  in the  accompanying  financial
statements as of March 31, 2002.

Renew Logistics Ltd. ("Renew  Logistics"):  On August 15, 2001, AI-Asia signed a
Memorandum o Understanding  (MOU) to acquire  one-hundred  percent (100%) of the
ownership  in Renew  Logistics,  a Hong Kong  based  company  which  operates  a
cyber-related  game and  educational  portal  service to children  and  families
(www.abc222.com)  in Asia.  Renew  Logistics  has a 6-year  exclusive  marketing
agreement  with  Toys-R-Us  Asia Ltd.  Toys-R-Us  Asia Ltd.  is a joint  venture
between  Li &  Fung  Company,  a  major  manufacturing,  trading  and  marketing
conglomerate in Hong Kong, and Toys-R-Us,  the international brand-name retailer
of toys and games.  Toys-R-Us  Asia  currently owns and operates 26 retailers in
Hong Kong,  Macau,  Singapore,  Malaysia and Indonesia,  and is planning a major
expansion into China next year.

Harcourt has advanced to Renew Logistics  $185,171 as a loan towards its working
capital  bearing  an annual  interest  rate at six (6) per cent,  secured by all
tangible and intangible assets of Renew Logistics. The terms of the MOU required
the completion of  acquisition of Renew  Logistics and listing of AI-Asia on the
US stock exchange on or before January 31, 2002. After overseeing the operations
of Renew Logistics, Hartcourt determined that it was not in the best interest to
merge Renew Logistics  operations with AI-Asia at the present time. Both parties
agreed to terminate the terms of the MOU and therefore, the acquisition of Renew
Logistics  was  not  completed  with  AI-Asia.  Hartcourt  has  provided  for an
uncollectable amount of $185,171 advanced to Renew Logistics in the accompanying
financial statements at March 31, 2002.

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 not  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 loan of $70,000 to TSS as
of March 30, 2002.  Hartcourt does not intend to acquire any ownership  interest
in TSS at this time.



                                      F-21
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

Beijing Kang Tai Shi Tong  Technology  Development  Ltd.  ("Control  Tech"):  On
December 5, 2001,  AI-Asia signed a Term Sheet  agreement to acquire one hundred
percent  (100%) of Control Tech, a company  registered  in Beijing,  a streaming
technology solutions company specializing in audio and videoconference products.
Control  Tech  is one of the two  exclusive  authorized  dealers  in  China  for
Polycom.   Polycom  is  a  recognized  global  leader  in  multimedia   business
communication tools,  videoconferencing,  audio conferencing,  web conferencing,
and network access appliances.  CTC also represents Enznia,  Radivision,  Accord
and MCU.  Control Tech's customers  include PLA,  Proctor and Gamble,  Hong Kong
Telecom,  Shandong  Power Co. and other major  multinational  companies in China
(www.polycomctc.com).  The parties are completing their due diligence and expect
to complete the transaction by May 31, 2002.

Beijing Kangrunjiayuan  Technology Co., Limited ("Kangrun"):  On March 22, 2002,
AI-Asia entered into an agreement with Kangrun Technology Co., Limited (BVI) and
Control  Techniques,  Limited  (BVI),  herein  collectively  referred  to as the
"subscribers". The subscribers agreed to subscribe for certain shares in AI-Asia
and  AI-Asia  has  agreed to  transfer  to the  subscribers  the said  shares in
consideration for the subscribers  procuring Beijing  Kangrunjiayuan  Technology
Co.,  Limited  ("Kangrun")  (www.kangrun.com)  and  Kangtai  Shitong  Technology
Development  Company Limited ("CTC")  entering into a Revenue Sharing  Agreement
between them and a wholly owned  subsidiary of AI-Asia.  Kangrun provides system
integration, networking solutions, modular networking products, computer systems
and storage  devices to  corporate  enterprises  in China.  Two major  strategic
partnerships   of   Kangrun   are   IBM-China    (www.ibm.com)   and   Ortronics
(www.ortronics.com).  The company is also a distributor  for Hewlett Packard and
Cisco Systems  products.  The  agreement is subject to certain  conditions to be
fulfilled  by the  relevant  parties and is expected to be  completed by May 31,
2002.

E-LEARNING GROUP:

On June 18, 2001,  Hartcourt executed a Revenue Sharing 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  offers
prestigious  American  education  programs in China,  utilizing one of the first
online education licenses awarded by China's Ministry of Education.  The project
offers both  certificate and degree programs with courses designed for relevance
in today's business world. Coursework will be offered initially 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
March 31,  2002.  The  accompanying  financial  statements  as of March 31, 2002
reflect Hartcourt's  investment of $100,000 in the education project.  The total
financial  commitments  of  Hartcourt  and terms of payment on this  project are
currently being negotiated between the parties and expect to be finalized by May
30, 2002.

OTHER VENTURES:

eMPACT Solutions,  Inc.  ("eMPACT") - eMPACT,  development stage enterprise,  an
e-commerce systems management and consulting  company,  specializes in providing

                                      F-22
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 $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  were  subject to
negotiation  between the parties.  Hartcourt has determined that at this time to
increase its  investment in eMPACT would not be  advantageous  to the company or
its  shareholders.  The  accompanying  financial  statements  at March 31,  2002
reflect  Hartcourt's  investment in eMPACT of $300,000 for the purchase of three
hundred  (300) Class B  Preferred  Stock of eMPACT.  On January 7, 2002,  eMPACT
received  $7,500,000  as the second  round of funding  from the venture  capital
partners for further expansion of the company's Internet related business.

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).  Hartcourt has completed its due diligence review
and both the  parties  have  mutually  agreed to revise the  purchase  price and
execute the purchase  agreement.  As of May 10, 2002,  Hartcourt has not entered
into  any  formal  purchase   agreement  with  Koffman  and  has  not  made  any
contributions towards the purchase of Koffman.

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
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 May 10, 2002, 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 May 10,
2002, Hartcourt has no payment obligations under this agreement.

Acquisitions and Partnerships Disclaimer:

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


                                      F-23
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 November 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.  As of May 10, 2002, the Company has not borrowed any funds from Swartz.

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
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 warrants. As a result of reset
calculations, Hartcourt issued on March 6, 2001 an additional 930,784 shares and
on May 18, 2001 an  additional  1,035,308  shares of common stock for a total of
4,000,000  shares as December 31, 2001 and  4,000,000  warrants  exercisable  at
$0.69375 per share of common stock.  No warrants have been  exercised to convert
into common shares as of May 10, 2002.




                                      F-24
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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.  On October 31, 2001,  Hartcourt  issued an additional
1,363,636 common shares valued at $0.22 per share for a subscription  receivable
of  $300,000.  On March 4,  2002,  Hartcourt  and Edda  signed a new Stock  Sale
Agreement  whereby  Hartcourt agreed to sell 5,000,000  restricted shares of its
common stock as a block to Edda at the agreed price of twelve cents  ($0.12) per
share or $600,000.  The accompanying financial statements reflect that Hartcourt
received  $2,124,043 from Edda as of March 31, 2002. The balance of $475,957 has
been  recorded  as  subscriptions   receivable  in  the  accompanying  financial
statements as of March 31, 2002.

Enlight Corporation ("Enlight"):  On May 9, 2002, Hartcourt and Enlight signed a
Stock Sale  Agreement  whereby  Hartcourt  agreed to sell  5,000,000  restricted
shares of its common stock as a block to Edda at the agreed price of eight cents
($0.08)  per  share.  Pursuant  to the terms of the  Agreement,  Hartcourt  will
deliver to Enlight 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 $400,000.  As of May 10, 2002,  no payments  were received from
Enlight and no shares were issued.

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 2001 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 March 31, 2002 and December 31, 2001,
and the results of their  operations  and their cash flows for the three  months
ended March 31, 2002 and 2001.  The  financial  statements  for the three months
ended March 31, 2002 are  consolidated  to include the accounts of The Hartcourt





                                      F-25
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)


Companies Inc., its 58.53% owned subsidiary  Financial Telecom Limited,  its 85%
owned  subsidiaries  Asia Top and China Top of StreamingAsia  Limited Group, its
51.7% owned  subsidiary  Elephant Talk  Communications,  Inc.,  its wholly owned
subsidiary Sinobull.com Inc., and its 66.7% owned subsidiary HCTV. The financial
statements for the three months ended March 31, 2001 are consolidated to include
the accounts of The  Hartcourt  Companies,  Inc.,  its 58.53%  owned  subsidiary
Financial Telecom Limited, and its 50% equity investment in StreamingAsia Group.

The  results of  operations  for the three  months  ended March 31, 2002 are not
necessarily indicative of the results to be expected for the entire year.

Certain  2001  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, 2001.

Note 3.  Supplemental Disclosure of Non-Cash Financing Activities

                                               Three Months      Three Months
                                                   Ended            Ended
                                              March 31, 2002    March 31, 2001
                                              --------------    --------------
Cash paid for:
  Interest                                      $     32,926      $     40,511
  Taxes                                                    -                 -
                                                ============      ============
Non-cash operating and financing activities:
  Shares issued to director in liquidation
                of payable                      $          -      $    152,172
  Shares issued to directors for compensation
                and services                          94,800           105,000
  Shares issued for consulting services               75,500                 -
  Shares issued in connection with acquisitions            -           500,000

Note 4.  Loss per Share
                                                 Three Months    Three Months
                                                    Ended           Ended
                                                March 31, 2002  March 31, 2001
                                                --------------  --------------
Net loss                                        $      781,829  $    1,225,831
Effects of dilutive securities                               -               -
                                                --------------  --------------
Weighted average shares outstanding                 74,150,428      53,086,642
                                                ==============  ==============
Basic and dilutive earnings per share           $        (0.01) $        (0.02)
                                                ==============  ==============



                                      F-26
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)


At March 31, 2002 and 2001, the Company had 4,733,530 and 4,376,640 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.

Note 5.  Accounting change - Goodwill amortization

Effective January 1, 2002,  Hartcourt adopted SFAS No. 142,  "Goodwill and Other
Intangible Assets", under which goodwill is no longer amortized.  Following is a
reconciliation  of previously  reported net loss to pro forma net loss excluding
goodwill amortization for the quarter ended March 31, 2001:

                                                   2002           2001
                                              -------------   ------------
Net loss as reported                          $    (781,829)  $ (1,225,831)
Goodwill amortization, net of tax                         -         76,278
                                              -------------   ------------
Pro forma net loss                            $    (781,829)  $ (1,149,553)
                                              =============   ============
Note 6.  Segment and related information:

The Company has four reportable  segments.  Each segment is a strategic business
that the Company  manages  separately  because each business  develops and sells
products  to  a  specific  market.  The  reportable  segments  are  as  follows:
Telecommunications,    provides   comprehensive   telecommunications   services;
Financial Services, provides financial content through various sources including
television,  internet and wireless access  systems;  Streaming  Media,  provides
internet  related software  development  services with an expertise in audio and
video  streaming to businesses.  The  Consulting,  E-learning  Group and Capital
Groups  operating  segments  do  not  meet  the  quantitative  thresholds  for a
reportable  segment and are  therefore  included in the  "Other"  category.  The
principal market for the Company's products is China.  Foreign sales,  primarily
in China  amounted to  $3,496,448  during the three months ended March 31, 2002.
The Chinese  operations  account for $16,126,332 of consolidated total assets as
of March 31,  2002.  The  accounting  policies of the  segments  are the same as
described  in the  summary  of  significant  accounting  policies.  The  Company
evaluates segment performance based on income from prospective  operations.  All
inter company transactions  between segments have been eliminated.  As a result,
the  components  of  operating  loss for one  segment may not be  comparable  to
another  segment.  Segment results for the three months ended March 31, 2002 and
2001 are as follows:










                                      F-27
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)
<TABLE>
<S>                            <C>             <C>           <C>         <C>          <C>
                                    Tele-       Financial    Streaming
                               Communications   Services       Media        Other        Total
                               --------------  ------------  ----------  -----------  -----------
2002
----
Net sales                      $    2,947,878  $    373,880  $   76,115  $   149,726  $ 3,547,599

Loss from operations                 (223,370)     (337,835)    (69,366)    (373,853)  (1,004,424)

Depreciation and amortization         148,807       192,899      18,473        1,128      361,307

Assets                              7,929,177     4,375,132     404,151    3,718,385   16,426,845

Capital expenditures                        -       (25,301)          -            -      (25,301)
                               --------------  ------------  ----------  -----------  -----------
2001
----
Net sales                      $            -  $     253,361 $        -  $         -  $   253,361

Loss from operations                        -       (246,515)         -     (872,609)  (1,119,117)

Depreciation and amortization               -         46,547          -       86,586      133,133

Assets                                      -      1,931,851          -    7,996,675    9,928,526

Capital expenditures                        -         (3,465)         -            -       (3,465)
                               --------------  ------------- ----------  -----------  -----------
</TABLE>

Note 7.  Litigations

Comerica Bank of California ("Comerica") v. 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 Pego's  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 a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated  to pay down the debt.  The case is ongoing  and the  Company has not
accrued any of the guaranteed  payments in its financial  statements as of March
31, 2002.

Charles  Hogue v. The Hartcourt  Companies,  Inc.  Orange Court  Circuit  Court,
Florida Case No. CIO 00-2190, filed on or about March 22, 2000:

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.



                                      F-28
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2002 (UNAUDITED)

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 default judgment in the amount of  $2,901,752.39  was entered in
the  trial  court on  January  31,  2001  without a trial  and  despite  serious
questions   raised  by  Hartcourt  as  to  the  propriety  of  the  exercise  of
jurisdiction over it by a Florida court. Hartcourt brought a motion to set aside
the default,  which was denied.  Hartcourt has appealed the judgment  entered by
the trial court on multiple grounds,  each of which has substantial  independent
merit.  Oral arguments were presented to the appellate  court by both parties of
the action on October 1, 2001,  at which time the court seemed to indicate  that
it seriously  questioned  the legal  propriety  of several of the trial  court's
rulings.  Hartcourt and its Florida  counsel are very  optimistic that Hartcourt
will  prevail  on its  appeal,  especially  given  the  default  nature  and the
excessiveness  of the  damages.  As of March 31,  2002,  the Company has accrued
$40,500 in its financial statements.

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-29
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                           MARCH 31, 2002 (UNAUDITED)

Part I

Item 2  Management's Discussion and Analysis or Plan of Operation

General

The following is a summary of certain  information  contained in this report and
is  qualified  in  its  entirety  by  the  detailed  information  and  financial
statements that appear elsewhere herein.  Except for the historical  information
contained herein,  the matters set forth in this report include  forward-looking
statements  within the meaning of the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995. These  forward-looking  statements are
subject  to risks and  uncertainties  that may cause  actual  results  to differ
materially. These risks and uncertainties are detailed throughout the report and
will be further  discussed  from time to time in  Hartcourt's  periodic  reports
filed with the commission. The forward-looking statements included in the report
speak only as of the date hereof.

Plan of Operation

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  mergers in its five main business  divisions to
fully  realize the value of these assets for its  investors.  The five  business
divisions   are   Sinobull    Financial    Group,    Media    Services    Group,
Broadband/Telecommunications Group, E-learning Group and Hartcourt Capital.

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."

Results of Operations

During 2002,  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,  including China-focused Internet access and
financial  portals,  online  share  trading  services,  data  broadcasting,  and
financial services.  The Company signed underwriting  agreements for the initial
public offerings of shares of its two most developed investments,  both of which
were planned in the year 2001.  On January 4, 2002,  pursuant to an Agreement of


                                      F-30
<PAGE>
Merger and Plan of Reorganization,  Hartcourt's subsidiary Elephant Talk Limited
merged with Staruni Corporation,  a California corporation,  organized under the
laws of  California  and  listed on the over the  counter on  bulletin  board of
NASDAQ exchange.  After the conclusion of the merger Hartcourt  retained a 51.7%
ownership in ETCI. Hartcourt's division Sinobull Group anticipates completion of
its merger  with  Global  Telephone  Communications,  Inc.  ("GTCI") in May 2002
pending  approval  from  SEC.  Hartcourt  plans to  eventually  build all of its
current  operations into stand-alone  entities that will also 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 in
partnership  with  young  Chinese  enterprenuers  as  well as  government  owned
entities. On May 16, 2001, Hartcourt acquired 51% ownership interest in Elephant
Talk Limited.  On July 16, 2001  Hartcourt  entered into a rescission  agreement
with UAC Trading and sold its 51%  ownership  interest in UAC  Exchange  for its
original  investment of  $2,858,286.  On August 9, 2001,  Hartcourt  acquired an
additional 35% ownership  interest in  StreamingAsia  Ltd. and its  subsidiaries
increasing its ownership interest to 85%.

The  operations of Hartcourt for the three months ended March 31, 2002 consisted
of the operations of FTL (58.53%  ownership  interest),  Sinobull.com Inc. (100%
ownership  interest),  Elephant  Talk  Communications,   Inc.  (51.7%  ownership
interest),  StreamingAsia Holdings Limited (85% ownership interest), HCTV (66.7%
ownership interest) and Hartcourt's investment and advances to other entities in
US,  China and Hong Kong.  Operations  for the three months ended March 31, 2001
consisted of operations  of FTL (58.53%  ownership  interest) and  StreamingAsia
Holdings Limited (50% equity investment  interest),  and Hartcourt's  investment
and advances to Sinobull for acquisitions in China and Hong Kong. The operations
of UAC Exchange  were  discontinued  and disposed off and  therefore,  are shown
separately  under   discontinued   operations  in  the  accompanying   financial
statements..

Net sales and cost of sales:  The Company  recorded net sales of $3,547,599  for
the three months ended March 31, 2002, compared to $253,361 for the same periods
in 2001.  Net sales  during the three  months  ended  March 31,  2002  primarily
consisted of revenues derived from providing telecommunication services relating
to 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  provided by FTL;  real-time
financial  data  services  provided by Sinobull  Financial  Information  using a
satellite network to transmit data specializes in stock quotes, futures, indexes
and  commodities  to its  customers in China;  and  StreamingAsia  providing web
hosting  and  software  development  services  in audio  and video  delivery  or
streaming  solutions.  Net sales  for the  three  months  ended  March 31,  2001
consisted  of the sale of  wireless  pagers,  rental of  equipment  and  related
Internet and telephone  services as FTL switched their wireless network to a new
and improved  transmission  platform in December 2000. Cost of sales amounted to
$3,022,964  for the three months ended March 31, 2002 compared to $4,840 for the
same  period in 2001.  Cost of sales for the three  months  ended March 31, 2002
primarily included the costs 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;
cost of wireless pagers,  cost of transmission and Internet services provided to
FTL and FWL customers;  costs  incurred in providing  financial data services in

                                      F-31
<PAGE>
stock  quotes,  futures  and  commodities  by  Sinobull;  and costs  incurred in
providing  audio and video  delivery and streaming  solutions by  StreamingAsia.
Operational  margins continued to show sustained  improvements  during the first
quarter of 2001 when compared to the third and fourth  quarters of 2001. Cost of
sales for the three months ended March 31, 2001  consisted of cost of sales of a
very small  number of wireless  pagers in  circulation  since FTL  switched  its
wireless network to a new transmission platform.

Selling,  general and administrative  expenses (SG&A):  SG&A were $1,079,593 for
the three months  ended March 31, 2002  compared to $935,612 for the same period
in 2001.  The increase of $143,981 is  primarily  attributed  due to  additional
consulting,  legal and  administrative  costs  incurred due to the completion of
acquisition  of  Elephant  Talk  Limited by  Staruni  Corporation,  increase  in
compensation  expenses  due to  increased  number  of  employees  as a result of
acquisitions  compared  to  same  period  in  2001  and  excluding  the  cost of
amortization of goodwill which the Company stopped amortizing  goodwill in 2002.
Hartcourt  continued to eliminate less productive units,  reduced consulting and
legal costs associated due to  restructuring  of the Company's  business in Hong
Kong and China.

Other  expenses:  Total other  expenses net of other income were $87,159 for the
three  months  ended March 31, 2002  compared to $217,325 for the same period in
2001. The decrease in other expenses net of other income during the three months
ended March 31, 2002 resulted  primarily due to the equity in earnings of $7,040
in ETNS Singapore,  Pte., Ltd.  affiliate compared to Hartcourt's equity in loss
of affiliate  of $183,536  for the same period in 2001.  During the three months
ended March 31, 2002,  Hartcourt  recorded a loss on abandonment of property and
equipment  in the amount of $114,891  due to the  relocation  of  ElephantTalk's
office.

Discontinued  operations:  Hartcourt  rescinded its joint venture agreement with
Beijing  UAC  Trading  during  July 2001.  Loss from the  discontinuance  of UAC
Exchange joint venture  operations  during the three months ended March 31, 2001
were $255,161.  The Company did not have any discontinued  operations during the
three months ended March 31, 2002.

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2002 are to fund the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia.  During the three months ended March 31,  2002,  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 a net loss
of $781,829  for the three months ended March 31, 2002 as compared to a net loss
of $1,225,831  for the same period in 2001.  Additionally,  Hartcourt's  current
liabilities  exceeded its current assets by $3,967,378 at March 31, 2002.  These
factors and Hartcourt's inability to meet current 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;

                                      F-32
<PAGE>
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 SEC
approval;  3) signed stock sale agreements with accredited investors to raise in
excess of $1,000,000 over the next nine months.

Operating  activities.  During the three months  ended March 31, 2002,  net cash
used by operating  activities  decreased to $321,323 compared to $762,201 during
the same period in 2001. The decrease in operating activities resulted primarily
due to the  reduction in loss of $444,002,  due to the write down of $114,891 of
property and equipment,  increase in depreciation and amortization  expenses due
to reduction in the amortization  period of software  development costs from ten
years to six years,  increase in accrued expenses and other current  liabilities
offset by reduction in Accounts payable and deferred revenues.

Investing activities. Net cash provided by investing activities during the three
months ended March 31, 2002, was $71,491  compared to net cash used in investing
activities  was $204,749 for the same period in 2001.  Cash provided  during the
three months  ended March 31, 2002  amounting  to $96,792 was  primarily  due to
payments  received on note receivables from third parties on sale of Hartcourt's
ownership interest in UAC Exchange

Financing activities. Net cash provided by financing activities during the three
months  ended March 31, 2002 was $139,689  compared to $718,759  during the same
period in 2001.  Net cash was provided due to proceeds from sale of common stock
and  treasury  stock  amounting  to  $312,876,  payments  to related  parties of
$260,849 and net proceeds on note payable of $104,139.

As a result of the above activities,  the company  experienced a net decrease in
cash of $96,837  for the three  months  ended  March 31,  2002.  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.

Part II

Item 1.  LEGAL PROCEEDINGS

Comerica Bank of California ("Comerica")v.  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 Pego's  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 a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated to pay down the debt. The case is ongoing.


Charles  Hogue v. The Hartcourt  Companies,  Inc.  Orange Court  Circuit  Court,
Florida Case No. CIO 00-2190, filed on or about March 22, 2000:



                                      F-33
<PAGE>
Charles  Hogue  filed a  complaint  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 default judgment in the amount of  $2,901,752.39  was entered in
the  trial  court on  January  31,  2001  without a trial  and  despite  serious
questions   raised  by  Hartcourt  as  to  the  propriety  of  the  exercise  of
jurisdiction over it by a Florida court. Hartcourt brought a motion to set aside
the default,  which was denied.  Hartcourt has appealed the judgment  entered by
the trial court on multiple grounds,  each of which has substantial  independent
merit.  Oral arguments were presented to the appellate  court by both parties of
the action on October 1, 2001,  at which time the court seemed to indicate  that
it seriously  questioned  the legal  propriety  of several of the trial  court's
rulings.  Hartcourt and its Florida  counsel are very  optimistic that Hartcourt
will  prevail  on its  appeal,  especially  given  the  default  nature  and the
excessiveness of the damages.

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-34
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2002 (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
        None.

    b) Reports on Form 8-K
        None





























                                      F-35
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2002 (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:  May 14, 2002                       By: /s/ Alan V. Phan
                                          --------------------------------
                                          Dr. Alan V. Phan
                                          Chairman







































                                      F-36