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, 1998

[    ]       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 87-0400541
              (State or other jurisdiction of (IRS Employer Identification No.)
                           incorporation or organization)



                          19104 S. Norwalk Boulevard, Artesia California 90701
                                   (Address of principal executive offices)


                                                            (562) 403-1126
                           (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 restraint 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, 1998, The Hartcourt Companies, Inc. had 16,441,739 shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one ):

              Yes [  ]                 No [ X ]











                                TABLE OF CONTENTS
                    THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES

                                                          Report on Form 10-QSB
                                For quarter ended
                                 March 31, 1998
Page

PART 1            FINANCIAL INFORMATION

                Item 1.  Financial Statements (Unaudited )

             Consolidated Balance Sheets - March 31, 1998 and December 31, 1997
                                                                   3 - 4

             Consolidated Statements of Operations - Three months ended March
                                                                      31, 1998
                                                                      and 1997
                                         
                                            5

             Consolidated Statements of Shareholders' Equity - Three Months
                                                          ended March 31, 1998 
                                                                            6

                     Consolidated Statements of Cash Flows - Three months ended
                                                            March 31, 1998  and
                                                                      1997   7

                                Notes  to the Consolidated Financial
Statements                                                         8 - 11

      Item 2.  Management's Discussion and Analysis of Financial Condition
                                And    results of
Operations                                                          12 - 13



PART II               OTHER INFORMATION

                   Item 1.  Legal
Proceedings                                                                 14

                   Item 2.  Changes in
Securities                                                                  14

                   Item 3.  Defaults upon Senior
Securities                                                                 14

               Item 4.  Submission of Matters to Vote of Security Holders   14

                   Item 5.  Other
Information                                                                 14

                   Item 6.  Exhibits and Reports on Form
8-K                                                                        14


Signatures
15












<TABLE>
<CAPTION>


Part I                           THE HARTCOURT COMPAMIES INC. AND SUBSIDIARIES
Item 1.                                            CONSOLIDATED BALANCE SHEETS



ASSETS
                                                           March 31, 1998               December 31, 1997


                 
CURRENT ASSETS     

<S>                                                       <C>              <C>
       Cash                                               $ 184,871        $        77,688
       Marketable Securities  (Note 3)                    4,951,063              5,474,966
       Accounts receivable, net of allowance for
 doubtful accounts of $76,477, in 1998 and 1997 
respectively                                              2,500,404              2,332,977
       Trade dollar receivable                               15,086                 22,670
       Notes receivable, current portion                    111,523                293,673
       Inventory                                          2,959,961              3,541,321
       Prepaid expenses                                     130,554                130,554
       Prepaid consulting fees                              664,770                664,770
       Due from related parties                             166,209                131,398

--------------            ----------------

               TOTAL CURRENT ASSETS                       11,684,441            12,670,017

PROPERTY AND EQUIPMENT, net                                3,578,817            3,568,507

INVESTMENTS                                               17,906,520           17,906,520

NOTES RECEIVABLE,  net of current portion                  1,211,705            1,058,267

OTHER ASSETS                                                 575,751              552,289

INTANGIBLES                                                9,267,045            9,365,000

                                                       ---------------          --------------
               TOTAL ASSETS                               $4,224,279          $45,120,600

                                                                           ==========        ==========

                LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
       Accounts payable                                   1,976,180             2,824,419
        Accrued expenses and other current
liabilities                                               1,438,258             1,046,881
        Payable to Mexican affiliate                        368,708               352,942
        Line of credit                                           -               200,000
        Notes payable, related parties-current
portion                                                     292,904              295,000
        Notes payable-current
portion                                                     208,917              205,245
        Capital lease obligation-current 
portion                                                     206,771              200,222

Debentures                                                   50,000               50,000
        Subscription deposits received                           -                15,000

---------------            -----------------
                  TOTAL CURRENT LIABILITIES               4,541,738            5,189,709


</TABLE>

<PAGE>

<TABLE>
<CAPTION>




Item  1.                      THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                                  CONSOLIDATED BALANCE SHEETS

(CONTINUED)
                                                      March 31, 1998               December 31, 1997


                 
     
 LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                       <C>          <C>

          
(cont.)


NOTES PAYABLE, RELATED PARTIES, net of current portion    125,000          125,000

NOTES PAYABLE, net of current portion                   1,301,087        1,334,327

CAPITAL LEASE OBLIGATIONS, net of current portion         562,595          612,477

--------------           -------------
             TOTAL LIABILITIES                          6,530,420        7,261,513

COMMITMENT AND
CONTINGENCIES                              
              -

SHAREHOLDERS' EQUITY
     Preferred Stock
          Original preferred stock, $0.01 par value, 
1,000
shares                                                        10               10
              
authorized, issued and outstanding
         
Series A, $1,000 stated value, 4,000 shares 
authorized, issued and
outstanding                                             4,000,000       4,000,000
          
Series B, $1,000 stated value, 2,000 
shares authorized,  issued and outstanding              2,000,000       2,000,000
         
 Series C, $1,000 par value, 1,500
 shares authorized, issued and outstanding             1,250,000        1,500,000
          
Series D, $1,000 stated value, 10,000
 shares authorized, 3,400 shares issued and            3,400,000        3,400,000
 outstanding         
Series AB, $1,000 stated value, 25,000
 shares authorized, 270 shares issued and    
outstanding                                              270,000                -
          
Class A, no par, 10,000,000 shares authorized,
               none issued and
outstanding                                                   -                 -

-----------------        ----------------
               TOTAL PREFERRED STOCK                  10,920,010       10,900,010

          
 Common stock, $0.01 par value, 50,000,000
               shares authorized; 16,441,739 
shares issued and outstanding at
               March 31, 1998 and December 31,
1997                                                     16,442            16,442
           Stock subscription receivable                 (1,000)          (26,000)
           Treasury stock, at cost (24,364 shares
 in 1998 and 1997)                                     (279,928)         (279,928)
           Additional paid-in capital                31,083,604        31,083,604
           Accumulated deficit                       (4,045,269)       (3,835,041)
                                             ----------------        ---------------
                TOTAL SHAREHOLDERS' EQUITY           37,693,859        37,859,087

        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $44,224,279     $45,120,600

                                                       ==========     ==========
</TABLE>










Item 1.                         THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                                   (UNAUDITED)




                                                            Three months ended

                                                                 March 31, 
                                                      1998                1997

-------------------------------------
REVENUES
     Product Sales                           $   5,102,999       $     4,106

--------------             --------------
             TOTAL REVENUE                       5,102,999             4,106

COST OF SALES                                    3,746,447             4,399

--------------             --------------

       Gross profit                              1,356,552             (293)

OPERATING EXPENSES
       Selling, general and
administrative                                    1,189,788         102,657
       Depreciation and
amortization                                        188,282           4,725

-------------              --------------
               TOTAL OPERATING EXPENSES           1,378,070         107,382

-------------              --------------
LOSS FROM OPERATIONS                                (21,518)       (107,675)


OTHER INCOME (EXPENSES)
       Interest expense                             (62,023)         (2,241)
       Interest income                                9,588           8,744

--------------             ---------------
                 TOTAL OTHER INCOME (EXPENSE)       (52,435)          6,503

--------------             ---------------
NET LOSS BEFORE INCOME TAXES                        (73,953)       (101,172)
       Income taxes                                   1,275             377

---- ----------             ---------------
 
NET LOSS                                        $   (75,228)       (101,549)

                                                    ========        =========


BASIC AND FULLY DILUTED LOSS PER SHARE   $          (.01)   $         (.01)
WEIGHTED AVERAGE NUMBER OF SHARES 
OUTSTANDING                                     16,417,375        10,827,412









<PAGE>


<TABLE>
<CAPTION>



Item 1.                         THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                         CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
                                  FOR THE THREE MONTHS ENDED MARCH 31, 1998
                                                 (UNAUDITED)



                                                                             Common
                                                              Additional      Stock                                       Total
                           Common Stock     Preferred Stock     Paid       Subscription  Treasury Stock   Accumulated  Shareholders'
                         Shares    Amount   Shares Amount      Capital      Receivable   Shares  Amount     Deficit      Equity
                            -------------   ---------------  -----------   ------------  --------------   -----------  ------------
<S>                      <C>        <C>     <C>    <C>         <C>         <C>           <C>    <C>        <C>          <C>        
Balance,December 31,1997 16,441,739 $16,442 11,900 $10,900,010 $31,083,604 $(26,000)     24,364 $(279,928) $(3,835,041) $37,859,087

Preferred Stock Issued                      270    270,000                                                                 270,000

Preferred Stock Redeemed                    (250)  (250,000)                                                              (250,000)

Preferred Stock Dividend                                                                                   ( 135,000)     (135,000)
 
Stock Subscription Received                                                 25,000                                          25,000

Net Loss                                                                                                   (75,228)        (75,228)
                         -----------------  ---------------  ------------   -----------  --------------   -----------  ------------ 
Balance, March 31, 1998   16,441,739 $16,442 11,900$10,920,010 $31,083,604$(  1,000)      24,364 $(279,928) $(4,045,269)$36,693,859


</TABLE>



<PAGE>





























<TABLE>
<CAPTION>

 Item 1.                                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                                                 CONSOLIDATED STATEMENT OF CASH FLOW
                                                                                               (UNAUDITED)

Three months ended March 31,                                1998                 1997

-------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                    <C>                      <C>       
   Net Loss                                            $  (75,228)              $(101,549)
   Adjustments to reconcile net loss to net cash
         used in operating activities:
             Stock issued for services                           -                294,500
             Accrued interest income                             -                 (3,783)
             Depreciation and amortization                 188,282                  4,500
             Changes in operating assets and liabilities:
                      Accounts receivable                 (159,974)                47,658

                      Inventory                             581,360                  (930)
                      Note loan receivable                       -                 10,929
                      Prepaid expenses and other                 -               (318,042)
                      Accounts payable and accrued expenses(321,863)               25,013
                      Due from related party                (34,811)               (6,778)
                      Payable to Mexican affiliate           15,766                     -

-------------               -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITES           193,532              (43,769)

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property and equipment                      (100,637)                (600)
    Deposits                                                       -             (500,000)
    Proceeds on sale of marketable securities                 523,903                    -
    Payments on notes receivable                                5,382                   -

--------------             --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES           428,648            (500,600)

CASH FLOWS FROM FINANCING ACTIVITIES
     Sale of common stock                                          -              500,000
     Common stock subscriptions                                10,000              55,000
     Bank overdrafts                                               -               (5,691)
     Other Loans                                                   -                 (234)
     Payments on related party payable                        (2,096)                   -
     Payments on long term-debt                              (22,935)                   -
     Payments on capital lease obligation                    (49,966)                   -
     Payments on line of credit                             (200,000)                   -
     Redemption of preferred stock                          (250,000)                   -

--------------             --------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES         (514,997)              549,075

--------------             ------------
NET INCREASE (DECREASE) IN CASH                              107,183                    (7)

CASH, BEGINNING OF PERIOD                                     77,688                    822

--------------             -------------
CASH, END OF PERIOD                                     $     184,871           $       815

=========           ========
</TABLE>

<PAGE>
Item 1.           THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                         
                                    (UNAUDITED)


Note 1.       Organization and Nature of Operations:

              Harcourt  Investments  (USA),  Inc.,  (Harcourt  Investments ) was
              incorporated on April 23, 1993.  Principal business activities are
              the design,  manufacture and sale of writing  instruments.  During
              its first two years of  operations,  Harcourt  Nevada used foreign
              contract  manufacturers  to  produce  various  types  of pens  and
              markers, which were then imported for sale in the U. S. market. In
              August 1994, Harcourt  Investments  acquired a 60% interest in the
              Xinhui Harchy Modern Pens, Ltd. Joint Venture (Xinhui JV) owned by
              a Hong Kong corporation for common stock valued at $2,149,200. The
              Xinhui JV is located in the Guangdong Province of China.  Pursuant
              to an  amendment  to the joint  venture  agreement  governing  the
              Xinhui JV  entered  into in  October  1995,  Harcourt  Investments
              interest  was  reduced  to a 52%  interest  in the  Xinhui  JV. In
              September 1996, Harcourt Investments sold its investment in Xinhui
              JV to CKES, Inc. of Sunnyvale, California.

              In November 1994, Stardust,  Inc.,  Production-Recording-Promotion
              (Stardust)  acquired  100% of the  outstanding  shares of Harcourt
              Investments  for  8,280,000  shares  of  its  common  stock  in  a
              transaction  accounted  for  as  a  recapitalization  of  Harcourt
              Investments  with Harcourt  Investments  as the acquirer  (reverse
              acquisition).   Therefore,   the  historic   cost  of  assets  and
              liabilities  were carried forward to the consolidated  entity.  In
              1995 and 1996,  reverse stock splits  changed the number of shares
              issued  and  outstanding  to  6,110,337,  then to  2,735,952.  The
              consolidated  financial  statements  were restated to reflect this
              capital stock transaction.
              Stardust's name was changed to the "The Hartcourt Companies, Inc."

              Hartcourt Pen Factory,  Inc.  (Hartcourt Pen) was  incorporated in
              October  1993.  Principal  business  activities  are  the  sale of
              writing  instruments.   In  December  1994,  Harcourt  Investments
              acquired  100% of the  outstanding  shares of the common  stock of
              Harcourt  Pen for  52,500  shares  of its  common  stock and 1,000
              shares of its original preferred stock in a transaction  accounted
              for similar to a pooling of interest. In 1995, stock dividends and
              reverse  stock split changed the number of shares issued to 38,625
              to acquire  Harcourt Pen. The  consolidated  financial  statements
              were restated to reflect these capital stock transactions.

              In August 1996, The Hartcourt  Companies,  Inc.  (Company) entered
              into a purchase and sale  agreement  with  NuOasis  International,
              Inc. (NuOasis),  a corporation  incorporated under the laws of the
              Commonwealth of the Bahamas, for the purchase of a commercial real
              estate project, consisting of three 5-7 story apartment buildings,
              commonly  known as the Peony  Gardens  Property  (Peony  Gardens),
              located in the eastern part of Tongxian in Beijing City,  mainland
              China.  The Company  issued  4,000,000  shares of its common stock
              with respect to this purchase.

              In September 1996, the Company entered into a sales agreement with
              Mandarin  Overseas  Investment  Co.,  Ltd.  (Mandarin)  and Promed
              International  Ltd.  (Promed),  both unaffiliated Turks and Caicos
              chartered  companies,  for the  purchase of their 50%  interest in
              sixty-eight mineral lease gold lode claims in the state of Alaska,
              known as Lodestar  claims 1-68 and  consisting  of 320 acres.  All
              claims are located in the Melozitna  mining  district near Tanana,
              Alaska.  The Company issued  1,298,700  shares of its common stock
              with respect to this purchase.







   Item 1.            THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
   (cont.)                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                                         (UNAUDITED)

  Note 1.     Organization and Nature of Operations (cont.):

              In October 1997, the Company  purchased the outstanding  shares of
              Pego  Systems,  Inc.  (Pego)  whereby  Pego became a wholly  owned
              subsidiary of the Company.  Pego, a manufacturer's  representative
              organization  for air and gas  handling  equipment,  offers a full
              line of value added services including  distribution,  service and
              the  manufacturing  of  custom  process  equipment  packages.   In
              connection  with the purchase,  the Company paid $500,000 in cash,
              issued  450,000  shares of common stock,  1,500 shares of series C
              redeemable   preferred  stock,  and  entered  into  a  non-compete
              agreement with Pego's majority shareholders.

              On  October  28,  1997,  the  Company,   through  a  wholly  owned
              subsidiary, acquired Electronic Components and Systems, Inc. (ECS)
              and Pruzin  Technologies,  Inc.  (Pruzin) a related entity of ECS.
              ECS   and   Pruzin   specialize   in  high   technology   contract
              manufacturing  and assembly of printed circuit  boards,  phone and
              cable wires. ECS has three facilities in Arizona and has a service
              contract  with a  maquiladora  in the free  trade  zone in Sonora,
              Mexico.  The Company  issued 3,400 shares of Series D  convertible
              preferred  stock,  2,500,000 shares of the Company's common stock,
              $250,000 in cash and a $250,000 promissory note.

              ECS   maintains   manufacturing   operations   under   maquiladora
              agreements  in  Nogales,  Mexico.  The  100%  shareholder  of  the
              maquiladora is also the President of ECS. A substantial  amount of
              ECS's  cables  and  electronic  components  are  manufactured  and
              assembled   at  the  Mexico   facility.   ECS  also  has   smaller
              manufacturing  facilities  in Tucson and  Chandler,  Arizona and a
              distribution facility in Nogales, Arizona.

Note 2.       Basis of Presentation:

               The  accompanying   unaudited  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 1997 Form 10-KSB.

               In  the  opinion  of  management,   the  accompanying   unaudited
              financial  statements  contain all adjustments (which include only
              normal  recurring  adjustments)  necessary  to present  fairly the
              balance sheet of The Hartcourt Companies, Inc. and Subsidiaries as
              of March  31,1998  and the results of their  operations  and their
              cash flows for the three  months  ended  March 31,  1998 and 1997,
              respectively. The financial statements are consolidated to include
              the  accounts  of The  Hartcourt  Companies  and its  subsidiaries
              Harcourt  Investments,  USA,  including  the accounts of Hartcourt
              Pen, Pego Systems,  Inc. and  Electronic  Components  and Systems,
              Inc. (together "the Company").

               Certain 1997 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, 1997.








Item 1.                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    
                                                          (UNAUDITED)


 Note 3.      Marketable Securities:

              In July 1997,  the Company  entered into an agreement with Capital
              Commerce,  Ltd.  (Capital)  (an Isle of man  Corporation)  whereby
              Capital  agreed to provide the Company  $6,000,000 in free trading
              securities  for  the  purchase  of  Pego  Systems,  Inc.  and  the
              formation of  Electronic  Components  and Systems,  Inc., a Nevada
              corporation.  In  consideration  for the $6,000,000 in securities,
              the  Company  issued  to  Capital   $4,000,000  in  Series  A  and
              $2,000,000  in  Series  B, both 9%  convertible  preferred  stock.
              Dividends  are  declared  and paid  monthly at 9% per  annum.  The
              Company  pays the  dividends  through  the  issuance  of Series AB
              convertible preferred stock (Note 5).

              As of March 31, 1998, the Company had sold $1,048,937 worth of its
              securities,  and has available  $4,951,063.  Marketable Securities
              are reported at the guaranteed value of the contract.

Note 4.       Supplemental Disclosure of Non-Cash Financing Activities:

                                                    Quarter  Ended
              Quarter Ended                         March  31,  1998
              March 31, 1997

              ---------------------                       ---------------------

              (unaudited)                                 (unaudited)
              
Cash paid for 
interest and
 income taxes:
     Interest  $      62,023                                  $2,241
                                           
Taxes                        -                                    -

              
Non-cash investing and financing activities:
                         
Preferred stock
 issued for dividends   $135,000                                  -
                         
Preferred stock 
issued for accrued
   Liabilities          $135,000                                  -


Note 5.       Capital Stock:

                    In October  1997,  the  Company's  Articles  were amended to
              authorize  the issuance of AB  preferred  stock.  As amended,  the
              Articles  provide  that the  total  number  of shares of Series AB
              preferred are 25,000 with a stated value of $1,000 per share.  The
              Series AB  preferred  shares may be redeemed by the Company at any
              time at a  redemption  value  equal to $1,000  per share  plus any
              accrued  and  unpaid  dividends  to the  date  of  redemption.  In
              addition,  at the option of the holder of the Series AB  preferred
              shares,  the shares  may be  converted  into  1,334  shares of the
              Company's common stock (conversion rate).


              In February  1998, the Company  redeemed  $250,000 (250 shares) of
              the Company's Series C redeemable preferred stock, pursuant to the
              Pego Stock Purchase Agreement, dated October 3, 1997.








Item 1.         THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
(cont.)             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
                                                                  (UNAUDITED)





Note 6.       Loss per Share :

                                         Quarter     Ended
              Quarter Ended
               March
              31,1998                            March 31,1997

              --------------------    ---------------------
             
 Income (Loss) from continuous
Operations:      $(75,228)                         $(101,549)
              
Less preferred stock dividends
                  (135,000)                                  -

               ----------------      --------------
              
Income (Loss) available
 to common shareholders 
                  (210,228)                         (101,549)

                   
Effects of dilutive
         securities       -                               -

              
Weighted average 
shares outstanding   16,417,375                    10,827,412

              
Basic and dilutive
 earnings per share $  (.01)                       $    (.01)


              During  1998  and  1997,   the  Company  had  2,000,000   warrants
              outstanding,  each  convertible into one share of common stock. In
              addition,  during  1998 and  1997,  the  company  had  convertible
              preferred stock  outstanding,  each share  convertible into common
              stock.  These  instruments were not included in the computation of
              diluted earnings per share for any of the periods  presented,  due
              to their  antidilutive  effects based on the net loss reported for
              each period.





















Part I
Item 2.       Management's Discussion and Analysis of Financial Condition and
               Results of Operations:

              As discussed in the Company's  annual report filed on Form 10-KSB,
              during 1997 the  Company  actively  implemented  a plan to acquire
              operating  companies  that are in  established  industries  with a
              history  of  growth.  The  Company   successfully   completed  two
              acquisitions during the fourth quarter of 1997. Pego Systems, Inc.
              was acquired  October 3, 1997 and the assets and  liabilities  and
              Electronic  Components and Systems, Inc. along with the assets and
              liabilities of Pruzin  Technologies,  Inc., a related entity, were
              acquired on October 27, 1997. Thus,  comparing income and expenses
              between the first quarter of 1998 and the first quarter of 1997 is
              not meaningful.

              Results of Operations:

              The  Company's  revenue  for the  first  three  months of 1998 was
              $5,103,000.  Domestic  writing  instrument  operations had minimal
              activity as the Company continues to restructure from unprofitable
              existing  operations  and seeks new  business  opportunities.  The
              Company's  subsidiaries  Pego Systems,  Inc. (Pego) and Electronic
              Components and Systems, Inc. (ECS) represent 99% of total revenues
              for  the  quarter.  Pego's  revenues  were  $1,506,300  and  ECS's
              revenues  were  $3,559,200.  ECS's  revenues  for the first  three
              months were below management's expectations as its major customer,
              General  Instruments,  pushed  production  schedules out to future
              production cycles.

              Components of cost of sales were as follows:  writing  instruments
              $12,851,  Pego $958,961,  64% as a percent of Pego's revenue;  and
              ECS, $2,705,453,  76% as a percent of ECS's revenue.  Consolidated
              cost of sales,  $3,677,265 is 72% of consolidated  revenue.  ECS's
              cost  of  sales,  as  a  percent  of  revenue,   has  returned  to
              management's  expectations  following the  acquisition  adjustment
              that occurred in the fourth quarter of 1997.

              Components of selling,  general and administrative  (SGA) expenses
              were as  follows:  corporate-  $74,221,  Pego-  $403,905  and ECS-
              $850,026. SGA expenses as a percent of consolidated revenues (26%)
              were  better  than  anticipated  by  management.  The better  than
              expected  results  were   attributable  to  on  going  efforts  to
              eliminate unprofitable operations.

              Goodwill  related  to  the  Pego  and  ECS  acquisition  is  being
              amortized  over 25  years.  Amortization  costs  of  $95,955  were
              recorded for the first three months of 1998.  Depreciation expense
              of $90,327 was incurred during the same period.

              Interest expense incurred in connection with facilities mortgages,
              notes and short-term  lines of credit,  capital lease  obligations
              and  factoring  agreement  was $62,000 for the three  months ended
              March 31,1998.

              Liquidity and Capital Resources:

              During the first quarter of 1998,  the Company sold  approximately
              $525,000 of its marketable securities for working capital needs of
              its consolidated operations and the redemption (250 shares) of the
              Company's  Series C preferred  stock.  The Company intends to sell
              additional  marketable  securities over the next twelve months for
              any additional working capital requirements,  capital expenditures
              and future  acquisitions that may occur. In addition,  the Company
              may  elect to sell  shares  of its own  common  stock to  overseas
              investors  (Regulation S) under  regulations of the Securities and
              Exchange Commission.

              The Company's  current ratio and working capital changed  slightly
              from  December  31,1997 to March 31, 1998.  Current ratio at March
              31, 1998 was 2.6  compared to 2.4 at December  31,  1997.  Working
              capital  was  $7,142,703  at  March  31,  1998 and  $7,480,308  at
              December 31, 1997.





Item 2.        Management's Discussion and Analysis of Financial Condition and 
               Results of Operations:
(cont.)

              Liquidity and Capital Resources: cont.

              The Company's operating  activities provided cash of approximately
              $194,000 for the three  months  ended March 31, 1998.  The Company
              had operating  income,  before  depreciation  and  amortization of
              approximately  $113,000. In addition,  decreases in inventories of
              $581,360,  offset by  changes  in  accounts  receivable,  due from
              related party and accounts payable provided an additional $81,000.

              Cash provided by investing  activities for the three  months-ended
              March  31,1998  was  approximately   $429,000.  The  Company  sold
              $525,000 in  marketable  securities,  purchased  of  property  and
              equipment of $100,637 and received payments on notes receivable of
              $5,382.

              Financing  activities consumed  approximately  $265,000 during the
              first  quarter of 1998.  Payments on  short-term  lines of credit,
              capital lease  obligations;  long-term  debt and  preferred  stock
              redemption accounted for the reduction in cash.

              As a result of the above  activities,  the company  experienced an
              increase in cash of $107,000 for the first three months of 1998.

              Business Risks:

              As discussed previously, the Company intends to acquire additional
              profitable operating  businesses.  At this time, the Company is in
              negotiations  with  several  potential   acquisition   candidates.
              However,  no  definitive  agreements  have  been  reached.  If any
              acquisition  agreements  are reached in the near term, the Company
              can  make no  assurances  that it  will  be  able  to  obtain  the
              financing necessary to complete the any transaction.

              Competition:

              The Company does not have any direct across the board competitors,
              but does have  competition  within the industries its subsidiaries
              operate.  The Company  believes that these markets are  relatively
              fragmented and highly competitive.  The Company ability to compete
              successfully  will be dependent upon numerous  factors,  including
              its ability to obtain  necessary  financing in a timely manner and
              on  commercially  acceptable  terms,  as well as upon the  design,
              quality and price of its products and its customer  service.  Many
              of the  Company's  competitors  have  greater  experience  and far
              greater financial and other resources than the Company.  There can
              be no  assurance  that the Company  will be able to compete in its
              markets.

              Management of Growth:

              If the Company is successful in implementing  its growth strategy,
              the  Company  believes it could  undergo a period of rapid  growth
              that could place a significant strain on its management, financial
              and other  resources.  The Company's  ability to manage its growth
              will  require  it to  continue  to  improve  its  operational  and
              financial  systems  and to  motivate  and  effectively  manage its
              employees.  If the  Company  grows it will have to  implement  new
              financial,  budgeting, management information and internal control
              systems.  The  Company's  success  will depend upon its ability to
              attract  and  retain  highly  skilled  personnel.  There can be no
              assurance  that the Company will be successful  in attracting  and
              retaining   key   management,   technical,   marketing  and  sales
              personnel.  Its failure to do so would  materially  and  adversely
              affect the Company's business and results of operations.







                                                      Part II OTHER INFORMATION


              Item 1.   LEGAL PROCEEDINGS

              There have been no changes since the Company's last report in Item
              3,  "Legal  Proceedings"  of Form 10-KSB for the fiscal year ended
              December 31, 1997.

              Item 2.   CHANGES IN SECURITIES

                    In October  1997,  the  Company's  Articles  were amended to
              authorize  the issuance of AB  preferred  stock.  As amended,  the
              Articles  provide  that the  total  number  of shares of Series AB
              preferred are 25,000 with a stated value of $1,000 per share.  The
              Series AB  preferred  shares may be redeemed by the Company at any
              time at a  redemption  value  equal to $1,000  per share  plus any
              accrued  and  unpaid  dividends  to the  date  of  redemption.  In
              addition,  at the option of the holder of the Series AB  preferred
              shares,  the shares  may be  converted  into  1,334  shares of the
              Company's common stock (conversion rate). During the first quarter
              of 1998,  the  Company  issued  270 shares of Series AB to Capital
              Commerce, Ltd.

              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



















                                                 Part II  OTHER INFORMATION




                                                              SIGNATURES

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


                                                The  Hartcourt Companies, Inc.

              Date: May 18,1998                 By: _/s/ Alan V. Phan
                                                    Dr. Alan V. Phan
                                                    President