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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
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                                   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, 2004

           [ ] 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.)

              911 E. Colorado Blvd. Third Floor Pasadena, CA 91106
                    (Address of principal executive offices)

                                 (626) 844 2437
                           (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, 2004, The Hartcourt  Companies,  Inc. had 174,482,322  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, 2004
                                                                        Page
                                                                        ----
PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Balance Sheets at March 31, 2004 (Unaudited)
        and December 31, 2003                                            F-3

        Consolidated Statements of Operations for the Three
        Months ended March 31, 2004 and 2003 (Unaudited)                 F-5

        Consolidated Statements of Shareholders' Equity for the
        Three Months ended March 31, 2004 (Unaudited)                    F-7

        Consolidated Statements of Cash Flows for the Three Months
        ended March 31, 2004 and 2003 (Unaudited)                        F-8

        Notes to the Consolidated Financial Statements                   F-9

Item 2. Management's Discussion and Analysis or Plan of Operations      F-22

Item 3  Controls and Procedures


PART II OTHER INFORMATION

Item 1. Legal Proceedings                                               F-27

Item 2. Changes in Securities                                           F-28

Item 6. Exhibits and Reports on Form 8-K                                F-29

Signatures                                                              F-30
















                                      F-2

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


Part I
Item 1

                                                  March 31, 2004  December 31,
                                                   (Unaudited)        2003
                                                  -------------- --------------
ASSETS

Current assets:
 Cash and cash equivalents                         $  6,837,164   $  2,486,103
 Accounts receivable, net                             9,858,378      4,017,087
 Inventory                                           11,030,086      4,285,538
 Trade deposits                                       4,137,859      2,619,030
 Prepaid expenses and other                           4,556,862      1,373,656
 Notes receivable, current portion                      478,110        608,573
 Due from related parties                             1,914,767      1,934,794
                                                   ------------   ------------
Total current assets                                 38,813,226     17,324,781
                                                   ------------   ------------
Property and equipment, net                           1,063,011        686,436

Investments, net                                        410,163      1,505,836

Other assets
 Goodwill, net                                       15,259,613     12,926,782
 Notes receivable, net of current portion             1,827,509      1,827,509
                                                   ------------   ------------
Total other assets                                   17,087,122     14,754,291
                                                   ------------   ------------
Total assets                                       $ 57,373,522   $ 34,271,344
                                                   ============   ============



          See accompanying notes to consolidated financial statements.

















                                      F-3

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                  March 31, 2004  December 31,
                                                   (Unaudited)        2003
                                                  -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Bank Loans                                        $  5,057,472   $  1,583,973
 Short-term Loans                                     2,160,574      2,096,536
 Notes payable, current portion                       3,572,478      1,553,038
 Accounts payable                                     8,399,382      2,062,511
 Deferred revenue                                     1,024,179         81,808
 Accrued expenses and other current liabilities       2,512,821        274,875
 Staff loans                                            912,745        671,402
 Due to related parties                               3,841,640      2,135,671
 Due to shareholders                                    229,936        229,936
                                                   ------------   ------------
Total current liabilities                            27,711,227     10,689,750

Total liabilities                                    27,711,227     10,689,750
                                                   ------------   ------------
Contingencies                                         1,300,000      1,300,000

Minority interests                                    7,316,750      4,021,833

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, 250,000,000
   shares authorized; 174,482,322 shares and
   171,157,104 shares issued and outstanding
   at March 31, 2004 and December 31, 2003              174,482        171,157
 Additional paid-in capital                          72,196,271     70,858,036
 Treasury stock, at cost, 48,728 shares
   at March 31, 2004 and December 31, 2003              (48,728)       (48,728)
 Stocks subscription receivable                        (455,944)    (1,842,326)
 Other comprehensive income                             933,487        933,487
 Accumulated deficit                                (51,754,033)   (51,811,875)
                                                   ------------   ------------
Total shareholders' equity                           21,045,545     18,259,761
                                                   ------------   ------------
Total liabilities and shareholders' equity         $ 57,373,522   $ 34,271,344
                                                   ============   ============


          See accompanying notes to consolidated financial statements.







                                      F-4

<PAGE>

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

                                                   For the Three Months Ended
                                                             March 31
                                                  -----------------------------
                                                       2004           2003
                                                  -------------- --------------
Net sales                                         $  67,723,105  $   5,722,349
Cost of sales                                        64,204,846      5,330,865
                                                  -------------  -------------
Gross profit                                          3,518,259        391,484
                                                  -------------  -------------
Operating expenses:
 Selling, general and administrative                  2,669,066        421,867
 Depreciation and amortization                           13,496         37,628
 Impairment                                                   -         14,816
                                                  -------------  -------------
Total operating expenses                              2,682,562        474,311
                                                  -------------  -------------
Gain/(loss) from continuing operations                  835,697        (82,827)

Other income (expense):
 Loss on abandonment of property and equipment                -        (72,371)
 Interest expense                                      (233,241)       (13,149)
 Interest income                                         16,131            508
 Other                                                  115,252             30
                                                  -------------  -------------
Total other income (expense)                           (101,858)       (84,982)
                                                  -------------  -------------
Gain (loss) from continuing operations before
    minority interest                                   733,839       (167,809)

Less:  gain in subsidiary attributed to
     minority interest                                  508,167        (19,107)
                                                  -------------  -------------
Gain (loss) before discontinued operations              225,672       (186,916)

Discontinued operations:
 Loss from discontinued operations                            -              -
 Gain on disposal of subsidiaries/discontinued
     operations                                               -              -
                                                  -------------  -------------
Gain (loss) before income tax                     $     225,672  $    (186,916)
                                                  -------------  -------------
Income tax                                              167,830              -
                                                  -------------  -------------
Net income (loss)                                        57,842       (186,916)
                                                  -------------  -------------
Other comprehensive gain (loss):
 Foreign currency translation gain (loss)                     -              -
                                                  -------------  -------------
Comprehensive gain (loss)                         $      57,842  $    (186,916)
                                                  =============  =============
          See accompanying notes to consolidated financial statements.

                                      F-5

<PAGE>

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

                                                   For the Three Months Ended
                                                             March 31
                                                  -----------------------------
                                                       2004           2003
                                                  -------------- --------------

Basic and fully diluted loss per common share:
 Gain (loss) from continuing operations           $       0.000  $      (0.001)
 Gain from discontinued operations                        0.000          0.000
                                                  -------------  -------------
 Loss per share                                   $      (0.000) $       (0.00)
                                                  -------------  -------------
Weighted average number of shares outstanding
 - Basic and fully diluted                          174,230,388    101,630,023
                                                  =============  =============

          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>           <C>    <C>       <C>        <C>           <C>
                                      Preferred                    Common                      Other
                    Common Stock        Stock     Additional      Stock      Treasury Stock   Compre-                     Total
                ------------------- -------------  Paid-In    Subscriptions ----------------  hensive   Accumulated   Shareholders'
 Description      Shares    Amount  Shares Amount  Capital     Receivable   Shares   Amount     Loss      Deficit        Equity
--------------- ---------- -------- ------ ------ ----------- ------------- ------ --------- ---------- ------------- ------------
Balance -
December 31,
2003            171,157,10 $171,157  1,000 $   10 $70,858,036 $ (1,842,326) 48,728 $(48,728) $(933,487) $(51,811,875) $18,259,761

Shares issued
for consulting
services           159,200      159      -      -      48,841                                                              49,000

Shares issued
for executions
of cashless
 option            841,270      841      -      -        (841)                                                                  -

Shares issued
for acquisition
of Challenger
Group            2,324,748    2,325                 1,290,235                                                           1,292,560

Subscriptions
receivable                               -      -                1,386,382                                              1,386,382

Net Income                               -      -                                                             57,842       57,842
                ---------- -------- ------ ------ ----------- ------------  ------ --------  ---------  ------------  -----------
Balance -
March 31,
2004            174,482,32 $174,482  1,000 $   10 $72,196,271 $   (455,944) 48,728 $(48,728) $(933,487) $(51,754,033) $21.045,545
                ========== ======== ====== ====== =========== ============  ====== ========  =========  ============  ===========
</TABLE>












          See accompanying notes to consolidated financial statements.











                                      F-7

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

                                                    Three Months Ended March 31,
                                                   -----------------------------
                                                        2004           2003
Cash flows from operating activities:              -------------- --------------
 Net loss                                          $      57,842  $    (186,916)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Loss on abandonment of property and equipment               -         72,371
   Depreciation and amortization                          13,496         52,444
   Gain on sale of affiliate                                   -              -
   Minority interest in (loss)/gain of subsidiaries      508,167         19,107
   Shares issued in lieu of compensation and services     49,000        105,733
   Changes in operating assets and liabilities:
     (Increase) decrease in:
     Accounts receivable                                (492,725)    (2,172,162)
     Trade deposits                                   (1,007,872)
     Inventory                                        (3,245,804)      (109,579)
     Prepaid expenses and other                          307,685         50,436
     Increase (decrease) in:
     Accounts payable                                  2,229,140       (106,473)
     Accrued expenses and other current liabilities      (97,976)     1,125,097
     Deferred revenue                                   (387,261)         3,531
                                                   -------------  -------------
Net cash provided (used) in operating activities      (2,066,308)    (1,146,411)
                                                   -------------  -------------
Cash flows from investing activities:
 Proceeds on notes receivable-net                        130,463              -
 Proceeds on return of investment                              -         10,000
 Proceeds from minority's investments                    231,934              -
 Cash acquired in acquisitions                         5,063,668      2,608,356
 Purchase of property and equipment                     (185,413)             -
                                                   -------------  -------------
Net cash provided by investing activities              5,240,652      2,618,356
                                                   -------------  -------------
Cash flows from financing activities:
 Proceeds on sale of common stock                              -              -
 Proceeds on sale of treasury stock                            -         48,813
 Proceeds on stock subscriptions                       1,386,382              0
 Proceeds on loans and lines of credit                   155,159        604,741
 Proceeds from / (payments to) related parties            64,008        159,361
 Proceeds on notes payable                              (428,832)       622,883
                                                   -------------  -------------
Net cash provided by financing activities              1,176,717      1,435,798
                                                   -------------  -------------
Foreign currency translation                                   -              -

Net increase (decrease) in cash                        4,351,061      2,907,743

Cash and cash equivalents, beginning of period         2,486,103         79,845
                                                   -------------  -------------
Cash and cash equivalents, end of period           $   6,837,164  $   2,987,588
                                                   =============  =============
          See accompanying notes to consolidated financial statements.
                                      F-8

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


Item 1

Note 1:  Organization and Nature of Operations:

The Hartcourt Companies,  Inc.  ("Hartcourt" or the "company"),  incorporated in
Utah in 1983, is a growth oriented  company in the China's IT  distribution  and
retail  sectors.  There are four main  operations  in this sector  which are all
located in China.:  1) HuaQing  Corporate  Development  Co.,  Ltd.  ("HuaQing"),
located in Shanghai,  China, a key  distributor for Samsung  Electronics,  helps
customers build their own PC system with components,  technology and after sales
support.  2) Guangdong  NewHuaSun  Computer Co., Ltd.  ("NewHuaSun"),  a similar
business to HuaQing , located in the  Guangdong  province  covering the Southern
China market. 3) Shanghai GuoWei Science and Technology Co., Ltd. ("GuoWei"),  a
PC retailer in Shanghai  area with 13 retail  outlets,  and 4) Wenzhou  ZhongNan
Computer  Group  ("ZhongNan"),  a PC retailer  covering  the  Zhejiang  province
..Through  the  strategic  acquisition  of  controlling  interest  in  profitable
companies with leadership  positions in regional  markets,  Hartcourt intends to
integrate and consolidate the businesses to reach economy of scale and operating
efficiency.

The company's  China  distribution  network spans from the north, east and south
regions of China.  It has 25 retail  stores in the cities of Shanghai,  Beijing,
and  Wenzhou,  primarily  engaged in the sales of PC  components,  monitors  and
accessories.  It has sales offices and distribution  centers located in Beijing,
Shanghai,   Guangzhou,   Hangzhou,  Wenzhou  and  Ninbo  to  service  commercial
customers.  The company's commercial customers are mainly value-added  resellers
(VARs),  systems integrators (SIs), retail outlets and enterprise end users. The
company  provides  warranty  and repair  services  to further  enhance  customer
experience  and increase our  competitive  position in the market  place.  As of
March 31, 2004, IT  distribution  and retail sector located in China  (including
HuaQing,  NewHuaSun, GuoWei and ZhongNan) contributes approximately 99% of sales
of Hartcourt.

The company serves over 500 commercial  customers in a given year in addition to
the consumers in the geographic  areas where the company has retail outlets.  No
single  retailed  customer  accounted for more than two percent of the company's
2004 sales.

The company  sources from over 300 vendors for over 4,000  different types of PC
related components and products. With the exception of Samsung, the company does
not regard any one supplier to be essential to its  operations and believes that
many of the  products  presently  sold by the vendors are  available  from other
sources at competitive  prices.  Most of the company's purchases are pursuant to
distributor  agreements  which are  typically  cancelable by either party at any
time or on short notice.

Approximately thirty five percent of the company's inventory consists of Samsung
monitors and about twenty one percent of the  inventory  is  indirectly  sourced
from IBM.  It is the  policy  of the  manufacturers  as well as their  exclusive


                                      F-9

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


distributors, in this case pertaining to IBM's, to protect distributors, such as
the  company,  against  the  potential  write-down  of such  inventories  due to
technological change or manufacturers' price reductions.  Under the terms of the
related  distributor  agreements,  and assuming the  distributor  complies  with
certain  conditions,  the  supplier is required  to credit the  distributor  for
inventory losses incurred through  reductions in  manufacturers'  list prices of
the items. The company maintains less than a month's worth of inventory and does
not  believe  it has  risk of  inventory  loss  if the  manufacturer  elects  to
terminate the distributor agreement.

The company's  business is extremely  competitive,  particularly with respect to
prices,  quantity, and in certain instances,  product availability.  The company
competes with numerous regional and local distributors.

Corporate structure

Hartcourt as a US registered  company  conducts its  operations  solely in China
through   direct  wholly  owned   subsidiaries   and  indirect   majority  owned
subsidiaries. As the Chinese Government does not allow foreign investors to hold
more than 50% equity interest of local companies,  which are in distribution and
retail sectors,  so the equity of the indirect  majority owned  subsidiaries are
held by Hartcourt  nominees Richard Yan,  Hartcourt  financial  controller,  and
Zhengzheng Li,  president of Huaqing,  both of whom PRC citizens.  Hartcourt has
entered into a series of contractual  arrangements with all of the subsidiaries,
their  shareholders  and  the  nominees.   As  a  result  of  these  contractual
arrangements,  Hartcourt is considered  the majority  beneficiary  of all of its
subsidiaries  and accordingly  Hartcourt  consolidate  all of its  subsidiaries'
results of operations in Hartcourt's financial statements.

The company has entered  into other  agreements  with each of its  subsidiaries,
shareholders and nominees that provide Hartcourt with the substantial ability to
control all of its subsidiaries. Pursuant to these contractual arrangements:

   - Hartcourt's  nominees  have  granted  an  irrevocable  proxy  and  power of
     attorney to  individuals  designated by us to exercise the right to appoint
     majority number of directors in any of its subsidiaries;
   - the shareholders of all of Hartcourt's  subsidiaries may not enter into any
     transaction that may materially affect its assets,  liabilities,  equity or
     operations without its prior written consent;
   - any  dividend or any other  payment for  shareholder  benefits  received by
     Hartcourt's  nominees from any of its  subsidiaries  on its behalf is to be
     paid to us directly;
   - Hartcourt  may purchase or transfer the entire  equity  interest in, or all
     the assets of, all of its subsidiaries held by Hartcourt's  nominees on its
     behalf  for a  purchase  price  of the  lower of RMB1 or the  lowest  price
     permitted  under PRC law when and if such  purchase is permitted by PRC law
     or  Hartcourt's  nominees  cease to be directors or employees of any of its
     subsidiaries;



                                      F-10

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


   - Hartcourt's   nominees  have  pledged  their  equity  interest  in  all  of
     Hartcourt's  subsidiaries to Hartcourt to secure the payment obligations of
     acquisitions of controlling  interests in all of its subsidiaries under the
     sales and purchase agreements between Hartcourt and the shareholders of its
     subsidiaries; and
   - Hartcourt's  nominees of any of its subsidiaries  will not transfer,  sell,
     pledge,  dispose of or create any  encumbrance on their equity  interest in
     any of Hartcourt's subsidiaries without its prior written consent.

Hartcourt's  contractual  arrangements  with  each  of  its  subsidiaries,   its
shareholders,  and its  nominees  may  only be  amended  with  the  approval  of
Hartcourt's  audit  committee  or  another  independent  body  of its  board  of
directors.

In the opinion of Zhonglun Law Firm (Shanghai), Hartcourt' PRC legal counsel,

(1)  the  ownership  structures  of its  subsidiaries,  are in  compliance  with
existing PRC laws and regulations,
(2) Hartcourt's  contractual  arrangements  with each of its  subsidiaries,  its
nominees and its shareholders are valid and binding,  and will not result in any
violation of PRC laws or regulations  currently in effect;  and
(3) the business operations of its subsidiaries, are in compliance with existing
PRC laws and regulations in all material aspects.
(4) the  enforcement of foreign  judgments made by the courts outside PRC has no
direct and automatic operation in the PRC, but these judgments may be recognized
and enforced by a PRC court in accordance  with the  bilateral or  international
treaty to which PRC is a party,  or subject  to the  principles  of  reciprocity
finding the judgment non conflict with the fundamental principles,  sovereignty,
security and public interests of PRC after review of the judgment.

There are, however,  substantial  uncertainties regarding the interpretation and
application  of  current or future PRC laws and  regulations.  Accordingly,  the
Company  cannot assure that the PRC regulatory  authorities  will not ultimately
take a view that is contrary to the opinion of its PRC legal counsel. If the PRC
government  finds that the agreements that establish the structure for operating
Hartcourt's  China  business do not comply with PRC government  restrictions  on
foreign investment in its industry,  Hartcourt could be compelled to restructure
the transaction or dispose a particular subsidiary.

The Chinese  regulations  pertaining  to these  restrictions  have been  relaxed
overtime  and the  current  broad  guideline  issued  by the  government  allows
majority  ownership  in these  sectors.  The  company  intends to  simplify  the
indirect  ownership as soon as the general  regulations have been implemented by
the local  governments  who have  jurisdiction  over the legal entity  structure
where Hartcourt subsidiaries operate.

"Guidance Catalog for Foreign  Investment"  [2002] Order 21, issued jointly by 3
ministries under the PRC State Council: PRC State Planning Commission, PRC State
Economic  and Trade  Commission,  PRC  Ministry  of Foreign  Trade and  Economic


                                      F-11

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


Co-operation,  on March 11, 2002 , in accordance with the government  commitment
made under jointing WTO stated that:

(1) Commissioned  agent and wholesale in our sector:  Foreign  investors will be
allowed to hold  majority  equity not later than  December  11, 2003 and to hold
full equity not later than December 11, 2004.
(2)  Retails in IT product  sector:  foreign  investors  will be allowed to hold
equity up to 50% not later than December 11, 2002 and full equity not later than
December 11, 2004.

Note 2.  Basis of Presentation

The  management  of  Hartcourt   believes  that  the   accompanying   un-audited
consolidated   financial  statements  have  been  prepared  in  accordance  with
generally accepted accounting  principles for interim financial  information and
the  instructions  of Form 10-QSB.  Accordingly,  they do not include all of the
information and footnotes required by generally accepted  accounting  principles
for audited  financial  statements  and related notes  included in the Company's
2003 Form 10-KSB filed under SEC.

During  the first  quarter  ended on March 31,  2004,  the  Company  acquired  a
controlling interest in Beijing Challenger Group (See Note # 3 Acquisitions).

The  management  believes the  accompanying  un-audited  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, 2004 and December 31, 2003,
and the results of their  operations  and their cash flows for the three  months
ended March 31, 2004 and 2003,  respectively.  The financial  statements for the
three  months ended March 31, 2004 are  consolidated  to include the accounts of
The Hartcourt  Companies Inc., its wholly owned subsidiary  Hartcourt  Companies
Ltd.  (formerly known as Sinobull.com  Inc.), its 51% owned  subsidiary  HuaQing
Corporate  Development  Co.,  Ltd.,  45% owned  subsidiary  GuangDong  NewHuaSun
Computer  Co.,  Ltd.,  50.5%  owned  subsidiary   Shanghai  GuoWei  Science  and
Technology Co., Ltd., 51% owned  subsidiary  WenZhou  ZhongNan Group,  51% owned
subsidiary  Beijing  Challenger  Gorup,  its wholly owned  subsidiary  Hartcourt
Capital  Inc and  its  wholly  owned  subsidiary  Ai-Asia  Inc.  For  NewHuaSun,
Hartcourt  obtained  voting rights proxy for  additional 10% of the total equity
interests  from few  shareholders  in a  Shareholders  and  Board  of  Directors
meeting.  Management  believes with the 10% proxy right and 45% equity  interest
purchased, Hartcourt can demonstrate control over NewHuaSun and treats NewHuaSun
as its  controlling  subsidiaries  (See Note # 3 Key Factors  for the  Company's
Presentation and Note # 4, Operating Risks).

The  financial  statements  for the  three  months  ended  March  31,  2003  are
consolidated to include the accounts of The Hartcourt Companies Inc., its 58.53%
owned  subsidiary   Financial  Telecom  Limited,  its  wholly  owned  subsidiary
Hartcourt Companies Ltd. (formerly known as Sinobull.com Inc.) which owns 85% of
StreamingAsia   Limited  Group,  its  45%  owned  subsidiary  HuaQing  Corporate


                                      F-12

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


Development  Co., Ltd., its wholly owned subsidiary  Hartcourt  Capital Inc. and
its wholly owned subsidiary  Ai-Asia Inc. These entities were either inactive or
has been sold in the current year. Therefore, they were not included in the 2004
financial statements.

The  results of  operations  for the three  months  ended March 31, 2004 are not
necessarily indicative of the results to be expected for the entire year.

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, 2003.

Notes 3. Acquisitions

Shanghai GuoWei Science and Technology Ltd. ("GuoWei"): Shanghai GuoWei, founded
in April of 1997, is an operator of large PC retail chain stores  throughout the
city of  Shanghai.  The primary  products  sold  through its retail  outlets are
customized  white  box PCs,  PC  components,  accessories  and  peripherals.  In
addition to retail  sales,  Guowei  distributes  PC  components to other smaller
retailers  operating  in PC malls  throughout  Shanghai and  wholesalers  in the
neighboring provinces.

In January of 2003,  Hartcourt  obtained 10% equity voting rights  through proxy
statements  from one of GuoWei's  shareholders,  Mr.  Zhou Jian.  The 10% voting
rights cover a period of three years from April 1, 2003 to June 30, 2006.

On April  30,  2003,  Hartcourt  and  GuoWei  shareholders  signed a  definitive
agreement  ("The  Agreement") for the purchase of 45% equity interest of GuoWei,
for a total consideration of $4,345,517,  of which the purchase price was solely
paid for by the  issuance  of  10,863,792  shares  of  Hartcourt  common  stock,
restricted  under  Rule 144 of the US  securities  laws,  at a value of $0.4 per
share.  Due  to  the  Chinese  government's  restrictions  over  direct  foreign
investments  in Chinese  owned sales and  distribution  companies at the time of
signing of The Agreement,  Hartcourt adopted the same legal structure (ie equity
interest hold by nomination) as used in the HuaQing and NewHuaSun acquisition.

On April 30,  2003,  the  shareholders  of GuoWei  approved  The  Agreement  and
accepted the two nominees from Hartcourt to be the new  shareholders  of GuoWei.
The  shareholder  meeting  updated  the Article of  Association  and elected new
directors to satisfy The Agreement.

Hartcourt  management  believes that the ownership of 45% GuoWei equity plus the
10% proxy voting right  amount to an  effective  management  control of GuoWei's
operations.  As such, Hartcourt treated GuoWei as its controlling subsidiary and
consolidated its financial statements from May of 2003.

On February  11,  2004,  Hartcourt  signed a purchase  agreement  to purchase an
additional 5.5 percent of outstanding shares of GuoWei for a total consideration
of  $363,636,  paid in cash.  Together  with  the 45  percent  equity  interests


                                      F-13

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


purchased on April 30, 2003,  Hartcourt owns a 50.5 percent of equity  interests
of GuoWei as of January 1, 2004.


On March 2004,  Hartcourt  formulated a  restructure  plan to integrate  Huaqing
retailed  business with GuoWei.  A new company will be established for Hartcourt
retailed  business in order to better utilitzed the resources.  Profit shared by
the  minority  shareholder  and the  amount  of assets  integrated  had not been
finalized,  the plan was being  postponed  until later  period of the year.  The
Company is planning to invite Chinese CPA to conduct a study on the  integration
of Huaqing  retailed  business  with  Guowei.  The  structure  is expected to be
executed on June 2004.

Beijing  Challenger  Group.  ("Challenger"):  Challenger is a group of companies
incorporated in China, mainly engaged in the distribution and maintenance of IBM
products  in the  Northern  China.  On December  16,  2003,  Hartcourt  signed a
definitive  agreement  with the 5  shareholders  of  Challenger  to  purchase 51
percent of Challenger,  comprised of four wholly owned  subsidiaries  located in
Beijing  and one  located  in  Shanghai.  The  purchase  price for 51 percent of
Challenger is RMB 31.3 Million (US$3.8 Million) payable in 6,824,748  restricted
shares of Hartcourt  common stock,  calculated  at US$0.60 a share,  plus a cash
investment of RMB 5 Million  (US$610,000).  Hartcourt did not consolidate any of
Challenger's  financial  results in its 2003 operating results since many of the
legal  transactions were not fully executed.  Hartcourt began to consolidate its
financial  statements  from  January 1,  2004.  2,324,748  restricted  shares in
connection of the acquisition had been issued as at period ended.

In  addition,  under  the  definitive  agreement,  Hartcourt  have the  right to
increase its equity interest in Challenger proportionally to the purchase price,
should the  financial  performance  fail to meet the preset  revenue  and profit
targets  agreed by all  parties  within the first 12 months from the date of the
signing of definitive  agreement.  Subsequently,  the shareholders of Challenger
have the right to receive  additional  consideration in Hartcourt's common stock
should the financial  performance  of Challenger  exceed the preset  revenue and
profit targets agreed by all parties within the first 12 months from the date of
the signing of the definitive agreement.

The management  believes that Hartcourt's  current ownership  structure of these
Chinese  incorporated  entities  complies with all existing PRC laws,  rules and
regulations,  according  to  the  legal  opinion  provided  by  Hartcourt's  PRC
attorneys.

ServiceNet  Group  ("ServiceNet"):  On  February  6,  2004,  Hartcourt  signed a
definitive agreement to purchase 51% percent equity interest in ServiceNet.  The
purchase  price  is  RMB  21  Million  (US$2.5  Million)  payable  in  3,576,751
restricted  shares of Hartcourt  common stock,  calculated at US$0.61 per share,
plus a cash investment of RMB 3 Million  (US$364,000) in ServiceNet.  ServiceNet
engaged  in the  business  of  providing  technical  support  service  for  some
accredited  customers  such  as HP,  Philips  and  Dell  etc.  Since  one of the


                                      F-14

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


subsidiary  of  Hartcourt,  Challenger,  provided  maintenance  service  for IBM
computers,  The company  considered that there will be a conflict of interest in
between  ServiceNet  and the  Challenger,  this were not noticed  during the due
diligent  process.  In  order  not to harm  much to the  ServiceNet's  business,
Hartcourt wished to restructure ServiceNet in advance of consolidated the assets
and liabilities of ServiceNet.

Note 4. Key Factors for The Company's Financial Presentation

Management  believes  that through a proxy  statement  exercises  (See Note # 11
Irreversible  Proxy  Statement),   the  Company  can  demonstrate  control  over
NewHuaSun. Therefore, the management consolidated the assets, sales, operational
profits and income of this entity in the  accompanied  financial  statements  of
Hartcourt. Had the Company excluded the operational results of this company, its
sales will be decreased by $11,409,564 (or equivalent to 17% of the consolidated
sales)  and an  additional  net income of $7,426  (or  equivalent  to 13% of the
consolidated net income)

Note 5. Operating Risks

The  Company's  operations  are solely  conducted in China (See Note # 8 Foreign
Exchange  Risks,  Note  # 10  Foreign  Corrupt  Practices  Act),  its  business,
financial  conditions  and  results  of  operations  may  be  influenced  by the
political, economic and legal environment in China. Consequently,  the Company's
operations  are  subject  to  special  considerations  and  risks  which are not
typically associated with companies in North America.

As the Chinese legal system and rules are just start to formulate and continuing
upgrading,  there are uncertainties  regarding the interpretation of current PRC
laws and regulations that it is possible that the PRC government will ultimately
take a view contrary to the Company.

Note 6  Gain/(Loss) per Share

                                           Three Months Ended Three Months Ended
                                                March 31,          March 31,
                                                  2004               2003
                                           ------------------ ------------------
Net gain (loss)                            $           57,842 $        (186,916)
Effects of dilutive securities                              -                 -
                                           ------------------ -----------------
Weighted average shares outstanding               174,230,388       101,630,023

Basic and dilutive earnings per share      $            0.000 $          (0.000)
                                           ================== =================

On March 31, 2004 and 2003, the Company had  39,323,769  and 9,733,530  warrants
and options outstanding,  each exercisable into one share of common stock. These
instruments  were not included in the computation of diluted  earnings per share


                                      F-15

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


for any of the periods presented,  due to their  anti-dilutive  effects based on
the net loss reported for each period.

Note 7.  Segment and related information:

The Company has two (2) income generating sectors as of March 31, 2004. However,
base on the US GAAP the company has only one reporting  segment which  represent
more than 10% of Hartcourt income. The reportable  segments is as follows: a) IT
Products  Marketing and Distribution  Group,  provides  services to customers to
build their own PCs with  components,  technology and after sales  support;  The
principal market and operation for the Company's products is located in China.

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,  2004 and 2003 are as
follows:


                     IT-Products  Financial  Streaming Consul-
                      Marketing   Services     Media     ting         Total
                     ----------- ----------- --------- ----------- ------------
2004
----
Net sales             67,723,105 $        -                        $ 67,723,105

Gain/(Loss) from
operations               325,756          -              (267,914)       57,842

Assets                48,872,214                        8,501,358    57,373,522

Capital expenditures     185,413          -         -           -       185,413
                     ----------- ----------  --------  ----------  ------------
2003
----
Net sales              5,494,725 $  181,342  $      -  $   46,282  $  5,722,349

Gain/(Loss) from
operations                56,726    (95,342)  (23,463)   (124,837)     (186,916)

Assets                10,696,394  2,244,619   142,525   3,533,632    16,617,170

Capital expenditures           -          -         -           -             -
                     ----------- ---------- ---------  ----------  ------------





                                      F-16

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


Note 8.  Foreign Exchange Risks

The Company  prepares its  consolidated  financial  statements  using the United
States Dollars as the reporting currency. However, its operations are located in
China using Reminbi (RMB) - the functional  currency of China.  All transactions
in RMB are  translated  into United  States  dollars - the  reporting  currency.
Management does not expect any major fluctuation in the currency rate that would
affect the  stockholders'  equity.  However,  if a major  fluctuation of foreign
exchange occurs, the Company's operations may have positive implication.

As of March 31, 2004,China is under pressures from the United States to increase
RMB value. If the RMB is appreciated,  it is expected that the RMB  appreciation
may have favorable implication to the Company's operations.

Note 9.  Inflation

It is believed that inflation did not have any material  impact on the Company's
business in recent years. If severe inflation occurred,  it may have unfavorable
impact to the Company's  operations.  It is management's belief that significant
inflation will not occur in the near future.

Note 10.  Foreign Corrupt Practices Act

The Company is a US entity  incorporated  in the State of Utah. As the Company's
operations are mainly in China, is subject to the Foreign Corrupt  Practices Act
1977.  The  management  believes  that  there has been no  violation  of Foreign
Corrupt Practices Act as of March 31, 2004.

Note 11. Irreversible Proxy Statement

Hartcourt has entered into the irreversible proxy statement ("Statement") with a
non-US citizen, Mr. Kan XiaoMing,  who is Chinese citizen and is shareholder and
director of NewHuaSun.  In the Statement,  this individual assigns the 10% proxy
rights of his owned equity  shares to the Company on an  irreversible  basis.  A
legal opinion on the legality of the irreversible proxy statement from Zhong Lun
Law Firm, a Chinese law firm,  was  obtained.  The legal opinion from the non-US
legal advisor stated that in general  practice of contract law under the Laws of
People's  Republic of China (PRC),  despite the proxy  statement is indicated as
irreversible,  the above named person is still legally  entitled to withdraw the
assignment  made under the  Statement.  No US legal  opinion is  obtained by the
management of Hartcourt to further disclose the legal status or position of this
proxy statement.  It is management  believes that if this individual rescind the
proxy assignment, Hartcourt has the rights to sue for the breach of contract and
seek to recover economic damages from this individual accordingly. (See Note # 4
Key Factors for the Company's Financial Presentation).






                                      F-17

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


Note 12. Litigations

To the best of knowledge and belief, the followings are litigations known to the
management:

Securities  and Exchange  Commission v. The Hartcourt  Companies,  Inc., et al.,
United States  District  Court for the Central  District of California  Case No.
CV03-3698LGB(PLAx):

The  Securities  and  Exchange  Commission  has filed a  complaint  for  alleged
securities violations.  The complaint alleges that the company illegally used an
S-8 registration  statement in 1999 to improperly raise capital,  and that false
and misleading  press releases were issued by the company from September 9, 1999
through November 18, 1999, and the SEC is seeking  disgorgement from the company
of  approximately  $800,000.00,  civil  penalties  and  interest,  as well as an
injunction against future securities law violations.

Court-ordered  mediation took place on April 22, 2004.  Hartcourt requested that
the Judge  orders  another  session  of  mediation  and order the SEC to send to
mediation  an  individual  with the power to settle the case.  A  post-mediation
status conference is set for June 1, 2004.

The company has made a provision of $1,300,000  against its income at the end of
2003 for this litigation.

Note 13.  Subsequent events

Nil

Note 14.  Commitment

Hartcourt signed a definitive  agreement to purchase 51% percent equity interest
in  ServiceNet.  3,576,751  common  shares  and  cash  amount  to RMB 3  Million
(US$364,000) had not been issued or paid as of March 31, 2004

Note 15 Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements.

Note 16 Shares issued

During the quarter ended March 31, 2004, we issued  155,000 shares of our common
stock to a  consultant  for  services  rendered a value of  $46,500.  The common
shares were issued  pursuant to  Regulation S and Rule 144 under the  Securities
Act of 1933, as amended (the "Act").  There was no underwriter  involved in this
issuance.





                                      F-18

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANACIAL STATEMENTS
                           MARCH 31, 2004 (UNAUDITED)


During the quarter  ended March 31,  2004,  we issued 4,200 shares of our common
stock to a consultant for services rendered a value of $2,500. The common shares
were issued  pursuant to Regulation  S-8 under the Act. There was no underwriter
involved in this issuance.

During the quarter ended March 31, 2004, we issued  841,270 shares of our common
stock upon the net  issuance  of  outstanding  options.  The common  shares were
issued  pursuant  to  Regulation  S and Rule 144  under  the Act.  There  was no
underwriter involved in this issuance.

During the  quarter  ended March 31,  2004,  we issued  2,324,748  shares of our
common stock upon  acquisition of Beijing  Challenger  Group.  The common shares
were issued  pursuant to  Regulation S and Rule 144 under the Act.  There was no
underwriter involved in this issuance.





































                                      F-19

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                       MANAGEMENT DISCUSSION AND ANALYSIS
                           MARCH 31, 2004 (UNAUDITED)


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

General

The  following  is a  discussion  of the results of  operations  and analysis of
financial  condition  for the three  months ended  March 31,  2004 and March 31,
2003. The following  discussion may be understood more fully by reference to the
financial statements,  notes to the financial  statements,  and the Management's
Discussion  and  Analysis or Plan of Operation  section  contained in our Annual
Report on Form 10-KSB/A,  filed with the  Securities and Exchange  Commission on
April 20, 2004.

Forward Looking Statements

We make written and oral statements from time to time regarding our business and
prospects, such as projections of future performance, statements of management's
plans and  objectives,  forecasts of market  trends,  and other matters that are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities  Exchange Act of 1934.  Statements
containing  the words or phrases "will likely  result," "are expected to," "will
continue," "is anticipated,"  "estimates,"  "projects,"  "believes,"  "expects,"
"anticipates,"  "intends," "target," "goal," "plans,"  "objective,"  "should" or
similar expressions  identify  forward-looking  statements,  which may appear in
documents,  reports,  filings with the Securities and Exchange Commission,  news
releases,   written   or  oral   presentations   made  by   officers   or  other
representatives  made  by  us  to  analysts,   stockholders,   investors,   news
organizations   and  others,   and   discussions   with   management  and  other
representatives of us. For such statements,  we claim the protection of the safe
harbor  for  forward-looking  statements  contained  in the  Private  Securities
Litigation Reform Act of 1995.

Our future results,  including  results related to  forward-looking  statements,
involve a number  of risks  and  uncertainties  that are  described  in our 2003
Annual Report on Form 10-KSB/A filed with the Securities and Exchange Commission
on April 20, 2004. No assurance  can be given that the results  reflected in any
forward-looking  statements will be achieved. Any forward-looking statement made
by or on behalf  of us speaks  only as of the date on which  such  statement  is
made.  Our  forward-looking  statements  are  based  upon  assumptions  that are
sometimes based upon estimates,  data, communications and other information from
suppliers,  government  agencies  and  other  sources  that  may be  subject  to
revision.  Except as required  by law, we do not  undertake  any  obligation  to
update or keep  current  either  (i) any  forward-looking  statement  to reflect
events or  circumstances  arising after the date of such statement,  or (ii) the
important  factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any  forward-looking  statement which may be made
by or on behalf of us.




                                      F-20

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                       MANAGEMENT DISCUSSION AND ANALYSIS
                           MARCH 31, 2004 (UNAUDITED)


Plan of Operation

Hartcourt, through a combination of synergistic internal expansion and strategic
acquisitions focused on the IT Product Marketing business in China, is executing
plans to provide a sustainable,  fast growing,  and profitable revenue base. The
company is continuing aggressively  identifying and pursuing acquisition targets
within the industry as well as helping its subsidiaries to explore and share the
best business  opportunities  available.  Through a continued  refinement of its
acquisition programs,  operational efficiencies,  and setting higher standard of
corporate governance, the Company is demonstrating to the market a unique growth
strategy,  consistent  execution  of  its  business  plan,  and  growth  of  its
businesses  mirroring the  tremendous  growth  presented by the emergence of the
world's largest consumer and business markets.

Results of Operations

The  operations of Hartcourt for the three months ended March 31, 2004 consisted
of operations of Huaqing (51%  ownership  interest),  NewHuaSun  (45%  ownership
interest), GuoWei (50.5% ownership interest), ZhongNan (51% ownership interest),
Challenger  Group  (51%  ownership  interest),   Hartcourt  Capital  Inc.  (100%
ownership  interest),  Hartcourt  Companies  Limited (100% ownership  interest),
Ai-Asia Inc. (100% ownership  interest),  and  Hartcourt's  investments to other
entities in US and China. The operations of Hartcourt for the three months ended
March 31, 2003 consisted of the operations of FTL (58.53%  ownership  interest),
Hartcourt   Companies  Limited  (formerly  known  as  Sinobull.com  Inc.)  (100%
ownership interest) which holds 85% ownership interest in StreamingAsia  Limited
and Syndicate Asia Limited,  Ai-Asia Limited (100% ownership interest),  HuaQing
Corporate Development Co., Ltd. (45% ownership interest), Hartcourt Capital Inc.
(100%  ownership  interest),  and  Hartcourt's  investment and advances to other
entities in US, China and Hong Kong.

Net sales and cost of sales:  The Company  recorded net sales of $67,723,105 for
the three  months  ended March 31,  2004,  compared to  $5,722,349  for the same
period  in 2003.  Net  sales  during  the three  months  ended   March 31,  2004
represented  revenues derived from sales of IT products to customers,  providing
services to help customers build their own PCs with  components,  technology and
after sales support.  Apart from above,  net sales during the three months ended
March 31, 2003 also included rental of equipment,  and the related  Internet and
telephone  services  provided by FTL;  and  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. The increase in sales was mainly attributed due to, Huaqing,
GuoWei, NewHuaSun,  ZhongNan and Challenger,  the 4 additional groups' operating
results  consolidated in the quarter ended March 31, 2004,  compared to only one
month's  result of Huaqing  consolidated  in the quarter  ended March 31,  2003.
Huaqing's results in thefirst quarter of 2004 increased 40% over the same period
of 2003.




                                      F-21

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                       MANAGEMENT DISCUSSION AND ANALYSIS
                           MARCH 31, 2004 (UNAUDITED)


Cost of sales amounted to $64,204,846  for the three months ended March 31, 2004
compared to $5,330,865 for the same period in 2003.  Cost of sales for the three
months  ended  March  31,  2004  represented  the  cost of IT  products  sold to
customers provided by Huaqing, NewHuaSun,  GuoWei, ZhongNan and Challenger. Cost
of sales for the three months ended March 31, 2003 primarily  included the costs
of IT products sold to customers  provided by HuaQing;  cost of transmission and
Internet  services  provided to FTL  customers;  and costs incurred in providing
financial  data services in stock quotes,  futures and  commodities by Sinobull.
The drop in  operational  margin was mainly  contributed  to the lower margin in
distribution sector when compared to the margin of financial data sector.

Total  operating  expenses:  Operating  expenses were  $2,682,562  for the three
months  ended March 31, 2004  compared to $474,311  for the same period in 2003.
The increase of expenses was mainly due to the increase in sales.  However,  the
expenses  ratio  decreased from 8.3% of the quarter ended March 31, 2003 to 4.0%
of the quarter  ended March 31, 2004.  The  significant  decrease was  primarily
attributable  to lower expenses  ratio of IT  distribution  sector,  compared to
higher expense ratio of financial data sector.

Interest expenses: Interest expenses were $233,241 compared for the three months
ended  March 31 2004  compare  to  $13,149  for the  same  period  in 2003.  The
significant  increase was mainly  attributable  to the expansion of the China IT
distribution  sector.  Hartcourt's  subsidiaries  are seeking kinds of financial
leverages to expand their sales network.

Other  revenue:  Other  revenue  mainly  represented  the income from  repairing
services and other after sales services.


Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2004 are to fund (by
issuing additional stock) the acquisitions of growth and profitable,  IT related
operating  companies  in China.  During the three  months  ended March 31, 2004,
Hartcourt  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 gain
of $57,842 for the three  months  ended March 31, 2004 as compared to a net loss
of $186,916 for the same period in 2003, in addition, Hartcourt's current assets
exceeded its current  liabilities  by  $11,101,999  at March 31, 2004. All above
factors  show  that  Hartcourt  has  improved  substantially  on its  cash  flow
position.

However,  to support  the  expansion  plan of  existing  subsidiaries  in the IT
Product  Marketing  business  and  to  meet  Hartcourt's   requirements  in  its
acquisition plan, the Company has continued to raise funds from capital markets.
The plan includes: 1) settlement of all outstanding  litigation and disputes. 2)
raise funds in private placements.

                                      F-22

<PAGE>

As of March 31,  2004,  we had  working  capital of  US$11,101,999.  Our working
capital  requirements over the next 12 months will include capital necessary for
capital  injection  into the current  business due to  expansion  and for making
additional acquisitions.  In addition to our working capital on hand, we believe
that we will need an  additional  $3-4  million of  working  capital to fund our
proposed  plan of  operations.  We  intend  to  obtain  the  required  capital a
combination of bank debt and sales of our equity securities.  However, there are
no commitments or agreements on the part of anyone to provide us with additional
bank  financing  or  purchase  our  securities.  If we are  unable  to raise the
additional 2-3 million of working  capital,  our proposed plan of operations may
be adversely affected.

The report of our independent accountants for the fiscal year ended December 31,
2003 states that due to recurring net losses from  operations and the absence of
an established  source of revenue,  there is substantial doubt about our ability
to continue as a going concern.


Operating  activities:  During the three months  ended March 31, 2004,  net cash
used by  operating  activities  recorded to  $2,066,308  compared to  $1,146,411
during the same period in 2003. The cash inflow in operating activities resulted
primarily  due to the increase of accounts  payable of  $2,229,140,  decrease of
prepaid expenses of $307,685,  minority interest of $508,167, net operation gain
of $57,842  and other  non-cash  related  expenses  of  $62,496.  The outflow of
operating  activities  is mainly due to the increase of accounts  receivable  of
$492,725,  increase of trade  deposits to suppliers of  $1,007,872,  increase of
inventory of $3,245,804, decrease of accrued liabilities of $97,976 and decrease
of advances from customers of $387,261.

Investing activities. Net cash provided by investing activities during the three
months ended March 31, 2004, was $5,240,652  compared to $2,618,356 for the same
period in 2003.  Cash provided  during the three months ended March 31, 2004 was
primarily  resulted  from  $5,063,668  of  the  acquisition  of  Challenger  and
consolidation of subsidiaries of Huaqing,  GuoWei in the quarter ended March 31,
2004,  proceeds  from  notes  receivable  of  $130,463,  and  proceeds  from the
investment  into a new  subsidiary of NewHuaSun by its minority  shareholder  of
$231,934,  netting off the payment  for  acquiring  property  and  equipment  of
$185,413.

Financing activities. Net cash provided by financing activities during the three
months ended March 31, 2004 was  $1,176,717  compared to  $1,435,798  during the
same period in 2003. Net cash was provided  primarily due to proceeds from stock
subscription  receivable  of  $1,386,382,  proceeds  from  loans and  credits of
$155,159, and net proceeds from related parties of $64,008,  netting off the net
payments on note payable of $428,832.

As a result of the above activities,  the company  experienced a net increase in
cash of $4,351,061 for the three months ended March 31, 2004. Although around $4
million cash increased during the first quarter of 2004, most of the increase is
due to  one-off  event,  such as  cash  acquired  from  Beijing  Challenger  and
subsidiaries of $5,063,668, and the proceeds on stock subscription receivable of
$1,386,382.  In spite of the positive cashflow results, 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.


                                      F-23

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                       MANAGEMENT DISCUSSION AND ANALYSIS
                           MARCH 31, 2004 (UNAUDITED)


Item 3 Controls and procedures

Our management,  with the participation of our Chief Executive Officer and Chief
Financial  Officer,  has evaluated the effectiveness of our disclosure  controls
and procedures (as defined in Rule 15d-15(e)  under the Securities  Exchange Act
of 1934)  as of the end of the  period  covered  by this  report.  Based on such
evaluation,  the Chief  Executive  Officer  and  Chief  Financial  Officer  have
concluded  that our  disclosure  controls  and  procedures  as of the end of the
period  covered by this report were  designed  and  functioning  effectively  to
provide  reasonable  assurance that the information  required to be disclosed by
Hartcourt  in  reports  filed  under  the  Securities  Exchange  Act of  1934 is
recorded, processed,  summarized, and reported within the time periods specified
in the SEC's rules and forms.  Management  believe  that a controls  system,  no
matter how well designed and operated,  cannot provide  absolute  assurance that
the objectives of the controls system are met, and no evaluation of controls can
provide  absolute  assurance that all control issues and instances of fraud,  if
any, within a company have been detected.

As  required  by Rule  15d-15(e)  under  the  Securities  Exchange  Act of 1934,
management,  including  Hatcourt's  Chief Executive  Officer and Chief Financial
Officer,  have evaluated the Company's internal control over financial reporting
to determine  whether any changes occurred during the most recent fiscal quarter
that have materially  affected,  or are reasonably likely to materially  affect,
Hartcourt's internal control over financial reporting. Based on this evaluation,
no such change in its internal control over financial  reporting occurred during
the most recent fiscal quarter.

























                                      F-24

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2004 (UNAUDITED)


Part II

Item 1.  LEGAL PROCEEDINGS

Securities  and Exchange  Commission v. The Hartcourt  Companies,  Inc., et al.,
United States  District  Court for the Central  District of California  Case No.
CV03-3698LGB(PLAx):

The  Securities  and  Exchange  Commission  has filed a  complaint  for  alleged
securities violations.  The complaint alleges that the company illegally used an
S-8 registration  statement in 1999 to improperly raise capital,  and that false
and misleading  press releases were issued by the company from September 9, 1999
through November 18, 1999, and the SEC is seeking  disgorgement from the company
of  approximately  $800,000.00,  civil  penalties  and  interest,  as well as an
injunction against future securities law violations.

Court-ordered mediation took place on April 22, 2004. All of the defendants will
be requesting  that the Judge order  another  session of mediation and order the
SEC to send to  mediation  an  individual  with the power to settle the case.  A
post-mediation status conference is set for June 1, 2004.

The company has made a provision of $1,300,000  against its income at the end of
2003 for this litigation.

Apollo Financial Network, LLC vs Hartcourt

Apollo Financial Network filed an action for breach of contract arising out of a
consulting  agreement  which was  canceled  in January  of 1999.  The matter was
settled  when the  Company  stipulated  to enter of  judgment  in the  amount of
$11,500,  which  represent an amount less than the  projected  costs of defense.
Judgment in such as amount was entered against the Company on November 20, 2002.

Charles Hogue vs. The Hartcourt Companies Inc.

Charles Hogue claimed a finder's fee for  introducing  The Hartcourt  Companies,
Inc to a potential acquisition target. The Hartcourt Companies Inc, sent a check
to Mr.  Hogue in the  amount of $40,500  for such  finder's  fee,  but which the
amount of shares are in dispute. The Hartcourt  Companies,  Inc, Florida counsel
failed to timely file an answer to the complaint,  and a default judgment in the
amount of $2,901,752 was entered on January 31, 2001.  The Hartcourt  Companies,
Inc. brought a motion to set aside the default,  which was denied, and for which
The Hartcourt Companies,  Inc. appealed.  The appellate Court ruled in favor the
Company and reversed the verdict as well as dismissed  the complaint for lack of
jurisdication.  Mr.  Hogue has until the  middle of the year of 2005 to bring an
action in California,  against the Company. The probable legal liability for The
Hartcourt Companies, Inc is approximately $32,000.





                                      F-25

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2004 (UNAUDITED)


d) Comerica Bank - California vs. Pego Systems, Inc

The Hartcourt  Companies,  Inc., was named as a co-defendant as a guarantor of a
promissory note, along with  co-guarantor  Enova Holdings,  executed by a former
subsidiary,  Pego Systems,  Inc. The parties executed a stipulation for entry of
judgment to enforce a settlement agreement,  which stipulation calls for certain
payments  and  transfers of funds by Pego  Systems,  Inc. As  co-guarantor,  the
Company  liabilities  could be  approximately  $600,000 or less, with the amount
decreasing upon payment by Pego Systems,  Inc., and Enova Holdings. In addition,
certain  assets of Enova  Holdings  have been held in trust for the  benefit  of
Commerica  only,  which should be  sufficient  to  accomplish  a resolution  and
settlement of the Commerica  judgment  without the need for any  contribution by
the Company.

The Company Is Also A Party Possibly Subject To Various Claims And Legal

Proceedings  arising out of the normal course of its  business.  These claim and
legal  proceedings  relate 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.

Potential Liabilities Relating To the Ceased Subsidiaries.

As mention in Note # 1, General,  that the Company ceased the operations of many
subsidiaries, during the year of 2003. Some of these companies not being legally
dissolved  are still legal  entities as of December  2003.  The Company with its
subsidiaries  located in various  geographic  locations in Hong Kong, China, US,
and BVI,  are subject to different  legal  jurisdictions  and laws.  Each of the
entities may subject to potential claims, or has un-fulfilled obligations or/and
litigations  due to the  cessations  of  operations  and/or  dismissals of prior
employees.  No risk  exposure  study  was  performed  to  identify  the  related
financial  risks and  potential  liabilities  to the Company as of December  31,
2003.  The Company  management  and its legal  advisor were unable to provide an
estimate of the potential risks.

Potential   Liabilities   Relating   To  the  Tax   Liabilities   to  US  Taxing
Authoritiesand Foreign Taxing Agents

As mentioned in the  Independent  Audit Report,  that Hartcourt has not prepared
its US Federal and state corporate tax filings for its operations ended December
31, 2002 which is overdue, as of December 31, 2003 Hartcourt management believes
that Hartcourt  incurs losses in the past,  thus is late for the  preparation of
its 2002 US tax returns.  Management  also  indicated that the Chinese sales tax
returns were filed on a monthly basis to the local Chinese  taxing  authorities.
Hartcourt's  tax  liabilities  in China are  limited,  because  the  acquisition


                                      F-26

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2004 (UNAUDITED)

agreements  contain a clause that the Chinese  original  owners of the  acquired
entities are to bear all tax liabilities prior to Hartcourt's acquisitions,  the
records  of the five  acquired  subsidiaries  were not  being  reconstructed  to
determine the tax liabilities, which may due to the Chinese taxing authorities.


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
       On December 16, 2003, Hartcourt signed a definitive agreement to purchase
       51%  equity  interest  in  Beijing  Challenger.   File  Number  04521029.
       Incorporated herein by reference.

       On December 3, 2003,  the Board of Directors  of the Company  elected Mr.
       David Y. Chen to be  Company's  Acting  Chairman.  File Number  04531788.
       Incorporated herein by reference.

       On February 11, 2004, Hartcourt signed a definitive agreement to purchase
       an  additional  5.05 percent of all  outstanding  shares of GuoWei.  File
       Number 04612873. Incorporated herein by reference.

       On February 12, 2004,  the Board of Directors of the Company has accepted
       the  resignation of Mr. X.Y. Li, and appointed Mr. Victor Wang to replace
       Mr. Li. File Number 04612901. Incorporated herein by reference.

       On February 6, 2004,  Hartcourt signed a definitive agreement to purchase
       a 51% equity interest in ServiceNet.  File Number 04623435.  Incorporated
       herein by reference.





                                      F-27

<PAGE>

                                   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 21, 2004                By: /s/ David Chen
                                           --------------------------------
                                           David Chen
                                           Chairman and
                                           Chief Executive Officer


Date:  May 21, 2004                By: /s/ Carrie Hartwick
                                           --------------------------------
                                           Carrie Hartwick
                                           President and
                                           Chief Financial Officer


































                                      F-28