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, 2000

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

        For the transition period from ______________ to _______________

                        Commission File Number: 001-12671

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

                                      Utah
         (State or other jurisdiction of incorporation or organization)

                                   87-0400541
                        (IRS Employer Identification No.)

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

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the 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, 2000, The Hartcourt  Companies,  Inc. had  27,562,584  shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

              Yes [  ]                 No [ X ]

<PAGE>

                                TABLE OF CONTENTS
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES

                              Report on Form 10-QSB
                                For quarter ended
                                 March 31, 2000
                                                                         Page

PART 1    FINANCIAL INFORMATION

          Item 1. Financial Statements

                    Consolidated  Balance  Sheets  at March  31,  2000
                    (Unaudited) and December 31, 1999 .....................

                    Consolidated  Statements  of  Operations  for  the
                    Three   months  ended  March  31,  2000  and  1999
                    (Unaudited) ...........................................

                    Consolidated Statements of Shareholder' Equity for
                    the Three Months ended March 31, 2000 (Unaudited) .....

                    Consolidated  Statements  of  Cash  Flows  for the
                    Three   months  ended  March  31,  2000  and  1999
                    (Unaudited) ...........................................

                    Notes to the Consolidated Financial Statements ........


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

PART II   OTHER INFORMATION

          Item 1.   Legal Proceedings .....................................

          Item 2.   Changes in Securities .................................

          Item 3.   Defaults upon Senior Securities .......................

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

          Item 5.   Other Information .....................................

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

          Signatures ......................................................

                                        F-2

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

Part I
Item 1

<TABLE>
<CAPTION>

                                                                                    March 31,          December 31,
                                                                                      2000                 1999
                                                                                  --------------      ----------------
                                                                                   (Unaudited)
<S>                                                                             <C>                 <C>

ASSETS

Current assets:
   Cash and cash equivalents                                                    $     1,366,654     $         331,057
   Accounts receivable                                                                   62,732                37,626
   Inventory                                                                            132,527               127,091
   Notes receivable                                                                     228,800               228,800
   Prepaid expenses and other                                                            81,431               129,114
   Due from related parties                                                           1,422,641               108,222
                                                                                  --------------      ----------------

Total current assets                                                                  3,294,785               961,910
                                                                                  --------------      ----------------

Property and equipment, net                                                             817,209               815,085

Investments                                                                           5,512,993             5,554,644

Intangibles, net                                                                      2,149,468             2,206,033
                                                                                  --------------      ----------------

Total assets                                                                    $    11,774,455     $       9,537,672
                                                                                  --------------      ----------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                             $       119,676     $        152,709
   Deferred revenue                                                                      89,572               78,477
   Notes payable - current portion                                                      547,088              649,998
   Accrued expenses and other current liabilities                                       734,404            4,073,504
   Payables to related parties                                                        2,444,246            2,457,497
                                                                                  --------------      ---------------

Total current liabilities                                                             3,934,986            7,412,185

Notes payable, net of current portion                                                   597,375              608,184
                                                                                  --------------      ---------------

Total liabilities                                                                     4,532,361            8,020,369
                                                                                  --------------      ---------------

Commitments and Contingencies

Minority Interest                                                                       592,332              661,634

</TABLE>

                                      F-3

<PAGE>

<TABLE>

                                                                                    March 31,          December 31,
                                                                                      2000                 1999
                                                                                  --------------      ----------------
                                                                                    (Unaudited)
<S>                                                                             <C>                 <C>
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, 50,000,000 shares
   authorized; 27,562,584 shares and 23,832,152 shares issued
   and outstanding at March 31, 2000 and December 31, 1999                               27,563                23,833
   Stock subscription receivable                                                     (1,000,000)                    -
   Treasury stock, at cost (1,778,916 and 1,524,364
     shares at March 31, 2000 and December 31, 1999)                                 (1,918,634)           (1,680,928)
   Additional paid-in capital                                                        47,595,067            38,895,860
   Accumulated deficit                                                              (38,054,244)          (36,383,106)
                                                                                  --------------      ----------------

Total shareholders' equity                                                            6,649,762               855,669
                                                                                  --------------      ----------------

Total liabilities and shareholders' equity                                      $    11,774,455     $       9,537,672
                                                                                  --------------      ----------------
</TABLE>

                                      F-4

          See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                Three Months Ended December 31,
                                                                             ---------------------------------------
                                                                                   2000                  1999
                                                                             -----------------     -----------------
<S>                                                                          <C>                   <C>
Net sales                                                                  $          348,228    $                -

Cost of sales                                                                         116,541                     -
                                                                             -----------------     -----------------
Gross profit                                                                          231,687                     -
                                                                             -----------------     -----------------
Operating expenses
   Selling, general and administrative                                              1,804,237               241,775
   Depreciation and amortization                                                      105,228                     -
                                                                             -----------------     -----------------
Total operating expenses                                                            1,909,465               241,775
                                                                             -----------------     -----------------
Loss from operations                                                               (1,677,778)             (241,775)

Other income (expense):
   Equity in earnings of affiliate                                                    (41,651)                    -
   Interest expense                                                                   (38,249)                    -
   Interest income                                                                      8,231                20,095
   Other expense                                                                        9,007               (27,498)
                                                                             -----------------     -----------------
Total other (expense)                                                                 (62,662)               (7,403)
                                                                             -----------------     -----------------
Loss before minority interest                                                       1,740,440               249,978

Loss in subsidiary attributed to minority interest                                     69,302                     -
                                                                             -----------------     -----------------
Net loss                                                                   $        1,671,138 $             249,178
                                                                             -----------------     -----------------
Basic and fully diluted loss per common share                              $             (.06)$                (.01)
                                                                             -----------------     -----------------
Weighted average number of shares outstanding                                      26,330,688            19,073,049
                                                                             -----------------     -----------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>
<TABLE>
<CAPTION>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000

                                                                                                                  Common
                                                Common Stock              Preferred Stock         Additional       Stock
                                          -------------------------   -------------------------    Paid-In      Subscriptions
              Description                   Shares        Amount        Shares        Amount       Capital        Receivable
----------------------------------------  -----------   -----------   -----------   -----------   -----------   -------------
<S>                                       <C>           <C>           <C>           <C>           <C>           <C>

Balance - December 31, 1999               23,832,152  $     23,833         1,000  $         10  $ 38,895,860  $           -

Issuance of warrants for consulting
  services                                    20,000            20             -             -        22,180              -
Shares issued to investors                   227,445           227             -             -     3,529,719              -
Sale of shares under Regulation S            300,000           300             -             -     1,199,700     (1,000,000)
Shares issued upon exercise of warrants    1,373,075         1,373             -             -        74,379              -
Issuance of warrants for brokerage
  services                                         -             -             -             -       203,545              -
Shares issued to directors for services        2,424             2             -             -        35,998              -
Shares issued to directors in lieu of
  compensation                             1,552,773         1,552             -             -     3,393,235              -
Shares issued in connection with FTL
  acquisition                                254,552           255             -             -       237,451              -
Shares issued for services                       163             1             -             -         3,000              -
Net loss                                           -             -             -             -             -              -
                                          -----------   -----------   -----------   -----------   -----------   ------------

Balance - March 31, 2000                  27,562,584  $     27,563         1,000  $         10  $ 47,595,067  $  (1,000,000 )
                                          -----------   -----------   -----------   -----------   -----------   ------------
</TABLE>

                                      F-6

          See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000


                                              Treasury Stock                            Total
                                              ----------------------   Accumulated   Shareholders'
              Description                     Shares       Amount       Deficit         Equity
----------------------------------------      ---------    ---------   -----------    -----------
<S>                                           <C>          <C>         <C>            <C>

Balance - December 31, 1999                   1,524,364  $ (1,680,92)$   (36,383,106)$      855,669

Issuance of warrants for consulting
  services                                           -            -               -         22,200
Shares issued to investors                           -            -               -      3,529,946
Sale of shares under Regulation S                    -            -               -        200,000
Shares issued upon exercise of warrants              -            -               -         75,752
Issuance of warrants for brokerage
  services                                           -            -               -        203,545
Shares issued to directors for services              -            -               -         36,000
Shares issued to directors in lieu of
  compensation                                       -            -               -      3,394,787
Shares issued in connection with FTL
  acquisition                                  254,552     (237,706)              -              -
Shares issued for services                          -            -                -          3,001
Net loss                                            -            -       (1,671,138)    (1,671,138)
                                              ---------     ---------     -----------    -----------

Balance - March 31, 2000                      1,778,916  $ (1,918,63)$   (38,054,244)$    6,649,762
                                              ---------     ---------    -----------     -----------
</TABLE>

                                      F-6a

          See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

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

Increase (Decrease) in Cash

                                                                                Three Months Ended March 31,
                                                                          ---------------------------------------
                                                                                2000                  1999
                                                                          -----------------     -----------------
<S>                                                                     <C>                   <C>

Cash flows from operating activities:
   Net loss                                                             $       (1,671,138)   $         (249,178)
   Adjustments to reconcile net loss to net cash used in operating
     activities:
   Depreciation and amortization                                                   105,228                     -
   Minority interest in loss of subsidiaries                                       (27,651)                    -
   Stock issued for services                                                     4,646,480                     -
   Changes in operating assets and liabilities:
     Accounts receivable                                                           (25,106)               18,862
     Inventory                                                                      (5,436)              (71,137)
     Prepaid expenses and other                                                     50,037                     -
     Accounts payable                                                              (33,034)               (11,000)
     Accrued expenses and other current liabilities                             (3,339,100)                    -
     Deferred revenue                                                               11,094                     -
                                                                          -----------------     -----------------
Net cash used by operating activities                                             (288,626)             (312,453)
                                                                          -----------------     -----------------
Cash flows from investing activities:
   Proceeds from sale of 35% of ESC                                                      -             5,400,000
   Proceeds on sale of marketable securities                                             -             1,135,607
   Distribution of subsidiaries ownership to shareholders                                -              (399,388)
   Purchase of property and equipment                                              (50,747)                    -
                                                                          -----------------     -----------------
Net cash provided by (used in) investing activities                                (50,747)            6,136,219
                                                                          -----------------     -----------------
Cash flows from financing activities:
   Proceeds from issuance of common stock                                        2,743,000               152,560
   Proceeds on exercise of options and warrants                                     75,750                50,000
   Redemption of preferred stock                                                         -            (6,405,000)
   Payments to related parties                                                  (1,316,811)                    -
   Payments on note payable                                                       (113,718)                    -
   Payments on loans from shareholders                                             (13,251)                    -
                                                                          -----------------     -----------------
Net cash provided by (used in) financing activities                              1,374,970            (6,202,440)

Net increase (decrease) in cash                                                  1,035,597              (378,674)

Cash and cash equivalents, beginning of period                                     331,057               384,453
                                                                          -----------------     -----------------
Cash and cash equivalents, end of period                                $        1,366,654    $            5,779
                                                                          -----------------     -----------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-7

<PAGE>

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

Item 1

Note 1. Organization and Nature of Operations:

Stardust,   Inc.-Production-recording-Promotion   ("Stardust"),   a  corporation
organized under the laws of the State of Utah in September 1983, acquired all of
the outstanding shares of Hartcourt Investments, a Nevada corporation,  pursuant
to an Agreement and Plan of  Reorganization  dated November 5, 1994. At the time
of  this  acquisition,  Stardust  was a  "shell"  corporation  with  no  assets,
businesses  or   operations.   Subsequent  to  the   acquisition   of  Hartcourt
Investments, Stardust changed its name to "The Hartcourt Companies, Inc."

Hartcourt  Pen was  organized  under the laws of the State of Nevada in  October
1993, to engage in the sale of writing  instruments.  Hartcourt Pen entered into
an Agreement and Plan of  Reorganization  dated  December 1, 1994 with Hartcourt
Investments,  pursuant  to  which  Hartcourt  Investments  acquired  all  of the
outstanding   shares  of  Hartcourt  Pen.  Through  January  1999,   Hartcourt's
operations   relating  to  writing   instruments   involved   the  assembly  and
distribution of writing instruments. In January 1999, Hartcourt discontinued the
operations of Hartcourt  Investments  and Hartcourt Pen, and disposed of all its
pen related assets in the United States.

In August  1996,  Hartcourt  entered  into a Purchase  and Sale  Agreement  with
NuOasis International,  Inc. ("NuOasis"),  a corporation  incorporated under the
laws of the  Commonwealth  of 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, China. The purchase price consists of a Convertible
Secured  Promissory  Note  granted  to  NuOasis,  in  the  principal  amount  of
$12,000,000,  a security  interest in the property and the greater of 10,000,000
shares of  Hartcourt's  common  stock,  or that number of shares of  Hartcourt's
common stock having a market value equal to  $10,000,000  immediately  preceding
the  closing  date.  On August 8, 1996,  an Addendum  to the  Purchase  and Sale
Agreement  was  agreed  to  by  Hartcourt  and  NuOasis,  by  which  Hartcourt's
obligation to issue stock to NuOasis was reduced to 4,000,000  shares (valued at
$10,000,000) of its common stock. On March 15, 1999,  Hartcourt  entered into an
Exchange  Agreement with Dragon King  Investment  Services Inc.  ("Dragon King")
pursuant to which  Hartcourt  agreed to assign its rights under the Purchase and
Sale  Agreement  dated  August 8,  1996 of its  interest  in the  Peony  Gardens
development for investment securities valued at $10 million. Due to restrictions
on the ability to trade the investment  securities received,  Hartcourt recorded
an impairment of $5,000,000 as of December 31, 1998.

In September  1996,  Hartcourt  entered  into a Sales  Agreement  with  Mandarin
Overseas  Investment Co., Ltd.  ("Mandarin"),  an unaffiliated  Turks and Caicos
chartered  company  located in Hong Kong,  for its  undivided  50%  interest  in
thirty-four  State of Alaska  mineral lease gold lode claims,  known as Lodestar
claims  numbered  35-68,  consisting  of 160  acres  each,  all  located  in the
Melozitna mining district near Tanana, Alaska,  approximately 300 air-kilometers
west of the City of Fairbanks,  Alaska.  Hartcourt paid  $3,000,000 in shares of
its common stock to Mandarin for its undivided 50% interest in the mineral lease
gold lode claims,  The number of shares were determined by the average price per
share  over a 10 day  period  for the 10 days  prior  to the  execution  of this
agreement.  In September  1996,  Hartcourt  entered into a Sales  Agreement with
Promed International Ltd. ("Promed"), an unaffiliated Turks and Caicos chartered
company with offices in the British crown colony of Gibraltar,  for the purchase
of their  undivided 50% interest in  thirty-four  State of Alaska  mineral lease
gold lode claims,  known as Lodestar  claims  numbered  1-34,  consisting of 160
acres each, all located in the Melozitna  mining  district near Tanana,  Alaska,
approximately  300  air-kilometers  west  of  the  City  of  Fairbanks,  Alaska.
Hartcourt  paid  $3,000,000  in shares  of its  common  stock to Promed  for its
undivided  50% interest in the mineral  lease gold lode claims,  all shares were
issued  pursuant to Regulation  "S." The number of shares were determined by the
average  price  per  share  over a 10 day  period  for the 10 days  prior to the

                                      F-8

<PAGE>

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

execution of this agreement.  In July 1998, Hartcourt filed notice upon Mandarin
and Promed requesting rescission of the purchase of the Alaska gold mine mineral
leases as the sellers failed to provide  Hartcourt with the required  geological
evaluations. On March 8, 1999 Hartcourt entered into a rescission agreement with
the  sellers,  returning  the  claims and  receiving  back  1,298,700  shares of
Hartcourt common stock.

In December 1996,  Hartcourt  entered into a Consulting  Agreement with American
Equities,  LLC ("American  Equities"),  a California  Limited Liability Company.
Hartcourt  intended  to  acquire,  manage and  develop a real  estate  portfolio
through  the year 2001.  On  September  3, 1998,  American  Equities  filed suit
against Hartcourt for breach of contract.  Hartcourt denied that it had breached
any contract with American  Equities and filed a  cross-complaint  for fraud and
non-performance  against American Equities and additional  cross-defendants.  As
settlement of these matters on March 8, 1999,  the parties  agreed that all fees
paid to American  Equities were earned and to provide  American  Equities with a
27.65%  interest in  Electronics  Components  and  Systems,  Inc.  (ECS).  Also,
American  Equities  agreed to pay back  1,075  the  Series  AB  preferred  stock
dividend  issued by Hartcourt in 1998 and 1,000,000  shares of Hartcourt  common
stock.  Accordingly,  all expenses  relating to settlement  were recorded in the
year ended December 31, 1998. Additionally,  American Equities agreed to provide
working capital for operations of ECS.

On October 3, 1997,  Hartcourt  purchased all of the outstanding  shares of Pego
Systems,  Inc.  (Pego) and Pego became a wholly owned  subsidiary  of Hartcourt.
Pego,  a  manufacturer's  representative  organization  for air and gas handling
equipment,  offers a full line of value added services  including  distribution,
service and manufacturing of custom process equipment packages.  The acquisition
was accounted for using the purchase  method of accounting.  In connection  with
the  purchase,  Hartcourt  paid  $500,000  in cash,  issued  450,000  shares  of
restricted  common stock,  1,500 shares of Series C redeemable  preferred stock,
and entered into a non-compete  agreement with Pego's  majority  shareholder and
director. The total value of this transaction was approximately $2,300,000.

On October 28, 1997,  Hartcourt through a wholly owned subsidiary,  acquired ECS
and Pruzin  Technologies,  Inc. ("Pruzin"),  an Arizona  corporation,  a related
entity of ECS. ECS specializes in high  technology  contract  manufacturing  and
assembly  of  printed  circuit  boards,  phone  and cable  wires.  ECS has three
manufacturing  facilities,  and contracts  with a maquiladora  in the free trade
zone  in  Sonora,   Mexico.   The  acquisition  was  structured  as  a  tax-free
reorganization and was accounted for using the purchase method of accounting. In
connection with the acquisition,  Hartcourt paid $250,000 in cash, issued a note
payable for  $250,000,  issued  3,400 shares of Series D  convertible  preferred
stock  and  2,500,000  shares  of its  common  stock.  The  total  value  of the
transaction was approximately $9,500,000.

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

As a result  of the  Share  Purchase  Agreement,  the  Enova  Agreement  and the
Distribution  Agreement,  each  shareholder  of record of Hartcourt on March 31,
1999  received  one (1)  share of Enova  for  every  four  (4)  shares  owned of
Hartcourt.  Following the  distribution of the Enova shares,  both Hartcourt and
Enova continue to operate as separate companies.

                                      F-9

<PAGE>

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

On August 17, 1999,  Hartcourt entered into a stock purchase agreement with FTL,
a  Hong  Kong  corporation,  to  purchase  4,964,990  shares  of  common  stock,
representing  58.53% of the total common stock  outstanding.  FTL is a financial
data bank  providing  real-time  stock quotes and financial  information of Hong
Kong  listed  companies  as well as  information  on other  international  stock
exchanges  in the U.S. and Europe to  institutional  and retail  investors.  The
purchase  price was agreed to be HK $4.713  (US$ 0.604) per share for a total of
HK$23.4 million or US$3.0 million, payable 50% in cash and the remaining balance
in Hartcourt  common shares.  The  acquisition  was completed on October 4, 1999
with  Hartcourt  making total cash payments of $801,860,  recorded a payable for
$797,140 and issued  1,500,000  shares of its common stock.  The stock  purchase
agreement  required a post closing  adjustment  for any deficiency to be paid to
FTL in the event the final  closing  net worth as of the  closing  date shall be
more  than  $5,000  over and above the net worth  reported  in  calculating  the
purchase price. As a result of the post closing  adjustment,  the purchase price
was revised to HK$25,563,8421 or US$3,277,412.  At December 31, 1999,  Hartcourt
recorded  the  increase  in  purchase  price  as a result  of the  post  closing
adjustment,  as a note payable to FTL of $138,706 and a payable for the issuance
of 148,512 shares of common stock of Hartcourt.  On January 18, 2000,  Hartcourt
issued  254,552  additional  shares of common stock to FTL in  settlement of the
post closing adjustment. As of May 10, 2000, Hartcourt has paid $750,000 towards
its amounts payable to FTL.

On March 27, 2000, FTL entered into a Memorandum of Understanding with NiceVoice
Investment  Holdings Limited (NiceVoice) to form a joint venture for the purpose
of establishing and operating a financial paging service network in Hong Kong on
the FLEX transmission protocol on a PDA receiver device. Subject to verification
of total costs to be incurred in erection of FLEX transmission  network,  design
of financial information broadcast system,  sourcing,  testing and tuning of PDA
receiver devices,  etc. and signing of formal joint venture agreement,  FTL will
invest  cash by phases to the amount not to exceed  HK$4,000,000  (approximately
US$512,800) in exchange for a total  ownership of 51% in the joint venture.  The
transaction is currently under management  review and a definitive joint venture
agreement is expected to be finalized by May 31, 2000.

On June 20, 1999,  Hartcourt  entered  into an agreement  with Beijing UAC Stock
Trading Online Co., Ltd. ("UAC  Trading") to form a joint venture  company under
the laws of China.  The name of the joint  venture  company is Beijing UAC Stock
Exchange  Online Co. Ltd.  ("UAC").  UAC operates the first and only  nationwide
online securities trading network,  UAC 162 Network,  connecting  investors with
their stock brokerage  offices via China Pac. China Pac is the nationwide packet
switched  network in China owned by China  Telecom  since 1991.  UAC 162 Network
consists of proprietary  server software and user interface,  servers,  gateways
and other communication  hardware.  Under the terms of the agreement,  for a 35%
interest in UAC, Hartcourt agreed to invest $1,000,000 in UAC, pay $1,700,000 to
the owners of UAC Trading and transfer  1,000,000  common shares of Hartcourt to
UAC.  200,000 of these common shares will be  transferred  to UAC Trading for an
existing  loan of $200,000  and 800,000  common  shares have not been issued and
upon their issuance, will be recorded as a loan from Hartcourt to UAC. On August
9, 1999,  Hartcourt  and UAC  Trading  agreed to convert the  Hartcourt  loan of
$200,000 into an option to purchase an  additional  15% interest in UAC from UAC
Trading.  On May 1, 2000  Hartcourt  exercised its option to convert the loan to
UAC for  into  an  additional  15%  interest  in UAC  making  Hartcourt's  total
investment interest in UAC to 50%.

On December 30, 1996,  Hartcourt  and American  Equities  entered into a Warrant
Agreement,  whereby Hartcourt agreed to issue and sell to American Equities, for
the price of $100,  a warrant to purchase up to  2,000,000  shares of its common
stock,  $.01 par value, in connection with the consulting  services  provided to
Hartcourt.  American  Equities  shall have the right to purchase at any time and
from time to time prior to December 30, 2002, up to the number of fully paid and
non-assessable shares of warrants stock, upon payment of specific exercise price
or apply the cashless  exercise clause specified in the Agreement.  On September
9, 1999, pursuant to Cashless Exercise clause in the Warrant Agreement, American
Equity exercised its cashless exercise right and converted 800,000 warrants into
621,674  Hartcourt's  common shares  without  payment of any  consideration.  On
December  14,  1999,  American  Equities  files a  complaint  against  Hartcourt


                                      F-10

<PAGE>

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

alleging breach of Warrant Agreement,  claiming damages of $30,000,000. The case
concerned  dispute over whether shares issued under the Warrant  Agreement would
be issued as  restricted  shares or free trading  shares.  An agreement has been
reached and the litigation was settled on March 20, 2000.  American Equities was
allowed to further  exercise  its  cashless  exercise  right and  converted  the
remaining  1,200,000  warrants  into  1,070,075  free trading  common  shares of
Hartcourt without any payment of consideration.

On October 21, 1998, Mr. James Pruzin, the selling  shareholder and president of
ECS,  formally  requested a  rescission  of the  October  28,  1997  acquisition
whereby,  Hartcourt  through a wholly owned subsidiary  acquired ECS and Pruzin.
Mr. Pruzin alleged that he was authorized to request  rescission of the original
transaction based on an alleged breach of the acquisition agreement by Hartcourt
which Hartcourt denied.  On November  10,1998,  Hartcourt and Mr. Pruzin entered
into a memorandum of  understanding  whereby Mr. Pruzin could  reacquire ECS and
Pruzin from Hartcourt by returning all of the  Hartcourt's  common and preferred
shares  originally  issued  to  Mr.  Pruzin,  making  payment  to  Hartcourt  of
$1,850,000 during 1999, negotiating the return of Hartcourt common shares issued
in the Elan transaction,  and issued to Hartcourt a promissory note for $400,000
amortized over five years with monthly payments beginning in 2000. Subsequently,
Mr. Pruzin was unable to meet the terms of the memorandum of  understanding  and
entered into new negotiations  with Hartcourt.  Mr. Pruzin and Hartcourt reached
an agreement  whereby Mr. Pruzin agreed to return to Hartcourt  2,000,000 common
shares of Hartcourt  representing 80% of the amount originally issued, and 3,400
shares of Series D preferred  stock.  Hartcourt agreed to assign to Mr. Pruzin a
30%  ownership  interest in ECS, and has a right to purchase  500,000  shares of
Hartcourt common stock held by Mr. Pruzin at $1 per share. Additionally, as part
of the agreement,  the payment terms for the  promissory  note and advances were
changed to thirty-six  monthly payments of $7,083 with no interest until paid in
full.

On December 23,  1999,  Hartcourt  entered  into an  agreement  with GoCall Inc.
("GoCall"), a Delaware corporation,  to form a strategic alliance for the common
interest  of the  respective  corporations,  including  but not  limited  to the
development  of  GoCall's  Internet  related  development-stage  businesses  and
software.  GoCall agreed to give Hartcourt  1,000,000  shares of its convertible
preferred stock (par value @ $5.00).  Each share of convertible  preferred stock
is convertible into 10 shares of common stock  (restricted under Rule 144 for 12
months).  In  return,  Hartcourt  agreed to give  GoCall  all of the  marketable
securities  received  from  Dragon  King which are  carried at  $5,000,000  plus
192,000  shares of common stock of ECS.  Hartcourt  withheld  192,000  shares of
common  stock of ECS,  valued at $196,358 at the date of closing on December 29,
1999 and this was recorded as payable to GoCall at December 31, 1999. The GoCall
convertible   preferred  stock  has  subsequently  been  valued  at  $2,500,000.
Accordingly,  Hartcourt has recorded an  impairment  of  $2,696,358  against the
marketable  securities for the year ended  December 31, 1999.  Hartcourt has the
option to appoint three out of the five directors of GoCall. As of May 10, 2000,
Hartcourt has not given  possession of 192,000  shares of common stock of ECS to
GoCall.  In addition,  Hartcourt  has not  appointed any directors to the GoCall
Board and has not exercised any control on GoCall's operations.

                                      F-11

<PAGE>

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

Recent Events

No assurance can be given that Term Sheet and Heads of Agreements will result in
actual agreements.

Beijing Innostar Hi-Tech Enterprises,  Ltd.  ("Innostar") - On October 20, 1999,
Hartcourt signed a Joint Venture Agreement with Innostar to establish a wireless
nationwide  Internet service provider network and IP phone services in China via
a Chinese satellite. The total amount of investment in the joint venture company
will be $24.0 million of which $14.0 million will be contributed by Innostar for
65%  ownership  interest  and  $10.0  million  by  Hartcourt  for 35%  ownership
interest.  The  profits  and  losses  of  the  joint  venture  company  will  be
distributed in accordance with their ownership  interest ratios. The duration of
the  Joint  Venture  Agreement  is  fifteen  (15)  years.  The date of  official
establishment  of the  joint  venture  company  shall be the  date the  business
license is issued. The license is expected to be granted by June 2000.

eSAT, Inc.  ("eSAT") - On November 29, 1999,  Hartcourt signed a Term Sheet with
eSAT to create a strategic  alliance through the exchange of their common shares
to establish a wireless Internet service provider and IP phone network in China.
In a private  placement,  Hartcourt will purchase  2,000,000  restricted  common
shares of eSAT.  eSAT will  also  grant  Hartcourt  an  option  to  purchase  an
additional  2,000,000  restricted common shares of eSAT at the exercise price of
$4.00 per share subject to customary  anti-dilution  provisions and  exercisable
for a three year period.  Fully  exercised,  it will  represent 20% ownership in
eSAT.  In exchange,  Hartcourt  will issue  1,000,000 of its  restricted  common
shares to eSAT.  All the shares and  options  will be placed in an escrow with a
mutually  agreed agent.  The operation was expected to start in late April 2000.
If by April  30,  2000,  eSAT was not able to  obtain a  satisfactory  exclusive
supply  contract  with the  Innostar  Joint  Venture,  either party may void the
agreement,  and the  escrow  agent will be  instructed  to return the shares and
options to the respective parties. The parties did not open the escrow as of May
10, 2000 and have extended the agreement through the end of June 2000.

Beijing Shangdi Net Technologies Center Co., Ltd.  ("Shangdi") - On December 18,
1999,  Sinobull  signed  a Term  Sheet  Agreement  with  Shangdi  to  form a new
corporation in Beijing.  Sinobull shall have 40% interest and Shangdi shall have
60% interest in the new corporation. The terms of agreement required Sinobull to
invest $2,670,000 in the new corporation payable as follows: $200,000 payable in
cash by UAC on behalf of Sinobull  within  three days from the date of execution
of this Term Sheet Agreement, $1,470,000 in cash payable within 15 days from the
closing of the transaction,  and $1,000,000 in cash payable, within 60 days from
the close of the  transaction.  The agreement  required the new  corporation  to
maintain  $2,000,000 as equity and the remaining  $670,000 could be withdrawn as
payment to Shangdi's  existing  shareholders.  Shangdi will invest the following
assets to the new  corporation:  the web and trading  center under  development,
33.84% shares of Hua Xia Info (a Chinese  corporation  specialized  in financial
information  and data  provider,  free and clear),  51% shares of Orient  Future
Financial Information  Corporation (a Chinese Corporation going to be registered
in Shanghai), and all tangible and intangible assets except cash.

On April 12, 2000,  Sinobull  signed a Term Sheet Agreement with Shandi revising
the terms of the Term Sheet Agreement  signed on December 18, 1999. The terms of
the  revised  agreement  required  Sinobull to pay Shandi  US$670,000  being the
consideration  for all  tangible and  intangible  assets in relation to computer
network information  services excluding cash and debts, and 33.84% shares of Hua
Xia Information Company Limited; US$1,000,000 to a newly formed company Sinobull
Network  Inc., a  corporation  registered  in Beijing,  for its working  capital
needs;  140,000  restricted  common  shares of  Hartcourt  to Shandi  and 60,000
restricted  common  shares of Hartcourt to Sinobull  Network,  Inc. In exchange,
Shandi  agreed to  transfer  without  any  pledge  and debt,  all  tangible  and
intangible  assets in  relation  to  computer  network  information  services to
Sinobull Network,  Inc.;  transfer to Hartcourt 40% of the ownership interest in
Tian Di Hu Lian Technologies,  Ltd, a BVI corporation,  holding the interest for
the shareholders of Shandi. After the above transfers,  Shandi shall be entitled
to own 18% of total  shares of Sinobull.  As of May 10, 2000,  Sinobull has paid
cash consideration of $1,000,000 towards the purchase of Shandi.

                                      F-12

<PAGE>

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

StreamingAsia.Com  Ltd.   ("StreamingAsia")  -  On  April  14,  2000,  Hartcourt
announced  that  Sinobull  signed a  Subscription  and  Shareholders'  Agreement
("Agreement")  relating to  StreamingAsia,  whereby Sinobull agreed to subscribe
all of the  issued  and  outstanding  fully  paid  shares of  StreamingAsia  for
HK$7,000,000   (approximately   US$897,500).   The  terms  of  payment  included
HK$500,000  (approximately US$64,100) payable in cashier's check upon signing of
the  Agreement;   at  the  option  of  Sinobull,   HK$1,500,000   (approximately
US$192,300)  payable in cash or  Sinobull  delivering  such  number of shares of
Hartcourt  equivalent in value to HK$1,500,000  within 14 days after signing the
Agreement;  HK$500,000  (approximately US$64,100) payable in cash within 30 days
from the date of the Agreement;  HK$1,000,000 (approximately US$128,200) payable
in cash within 60 days from the date of the Agreement;  HK$1,000,000  payable in
cash  within  90  days  of  the  date  of  the   Agreement;   and   HK$2,500,000
(approximately  US$320,500)  within  120 days  from  the date of the  Agreement.
Sinobull  will appoint two members to the Board of  Directors of  StreamingAsia.
Together  with the existing two  directors,  the new board shall consist of four
directors. Sinobull has completed the acquisition of StreamingAsia and as of May
10, 2000, Sinobull paid cash consideration of HK$1,500,000  towards the purchase
of StreamingAsia.

Shanghai  Guo Mao Science &  Technology  Co.  Ltd.  ("Guo Mao") - On December 1,
1999,  Sinobull  signed a Term Sheet  Agreement  with Guo Mao. Guo Mao agreed to
issue  new  shares  for a  total  proceeds  of  $1,000,000  that is  subject  to
negotiation,  will  represent  30% to 50% of the  expanded  capital  of Guo Mao.
Sinobull  agreed to subscribe for all the new shares issued by Guo Mao.  Subject
to approval of the Share Purchase  Agreement and the Joint Venture  Agreement by
the  relevant  government  authorities,  payment by Sinobull  for the new shares
shall be as  follows:  $100,000  in cash  upon  signing  of the  Share  Purchase
Agreement,  $100,000 in cash within 30 days after signing of the Share  Purchase
Agreement,  $100,000 in cash within 60 days after signing of the Share  Purchase
Agreement,  $100,000  in cash  within 90 days,  $100,000 in cash within 120 days
after signing of the Share Purchase Agreement, and $500,000 within 14 days after
the signing of the Share Purchase  Agreement in shares of Hartcourt based on the
average closing price in the last 7 trading days before payment, or in shares of
Sinobull  based on valuation  to be agreed by both  parties.  Sinobull.com  will
appoint not more than five directors to the board of Guo Mao.  Together with the
existing  five  directors,  the new  board  shall  consist  of not more than ten
directors.  Although  the  transaction  is  expected  to close by May 31,  2000,
Hartcourt has already assigned its ownership interest in Guo Mao to Sinobull.

Swartz Private Equity,  LLC ("Swartz") - Swartz is an investment  entity focused
on equity  investments  in  Internet  and other high  technology  companies.  On
November 3, 1999, Hartcourt signed an Investment  Agreement with Swartz.  Swartz
agreed to purchase  from  Hartcourt,  from time to time,  shares of  Hartcourt's
common stock, as part of an offering of common stock by Hartcourt to Swartz, for
a maximum aggregate offering amount of $25,000,000.  These fundings will be used
to  satisfy  Hartcourt's  working  capital  requirements  for the year  2000 and
complete  acquisitions  of  Internet  related  operations.  On  January 5, 2000,
Hartcourt and Swartz  agreed to increase the equity line funding to  $35,000,000
due to the planned  acquisition  of a Linux  Internet  operations  in China.  On
February 28, 2000 Hartcourt filed a form SB-2 Registration  document with SEC to
register  additional common shares for issuance to Swartz. Once approved by SEC,
Swartz has the  obligation to purchase  these shares at the market price less 10
percent  discount  during  the next 24  months.  The  Registration  document  is
currently under review by the SEC.

eMPACT Solutions,  Inc. ("eMPACT") - On February 9, 2000, Hartcourt entered into
a Stock  Purchase  Agreement  Term Sheet to purchase 30% of the  authorized  and
outstanding  shares of eMPACT's new shares of common stock.  The purchase  price
was agreed to be $2,000,000,  payable $1,000,000 in cash at the date of closing,
and the remainder $1,000,000 in cash within ninety days of closing. In the event
that  eMPACT  shall fail to meet the  revenues  projections  for the fiscal year
2000,  Hartcourt shall receive an additional one percent of the shares of eMPACT
for every  percent that revenue does not meet the  projections  for revenue to a
maximum of an additional  twenty  percent.  On April 10, 2000,  Hartcourt paid a
consideration  of $300,000  towards the purchase of eMPACT.  The  transaction is
expected to close in June 2000.

                                      F-13

<PAGE>

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

Shenzhen  China Cable  Integrated  Network Co. Ltd.  ("SCIC") - On February  25,
2000,  Hartcourt signed a Letter of Intent with Shenzhen Sinlan  Investment Co.,
Ltd. to jointly  invest in SCIC.  No terms have been  reached  and a  definitive
agreement  to form a joint  venture  company is expected to be signed by May 31,
2000.  SCIC  operates an exclusive  television  and cable network in the capital
city of Chengdu. SCIC is planning an expansion program to add subscribers and to
modernize  the  existing  system  and  make  it a  showcase  cable  system  with
interconnecting   data  transmission  via  a  network  of  satellite  and  cable
transmission.

On April 8, 2000,  Hartcourt entered into Heads of Agreement  ("Agreement") with
DF Ltd.,  Loughborough Ltd., and Express Internet Investment Ltd. (collectively,
"the  Management")  and an unnamed  investor to form a joint venture company for
the  commercial  exploitation  of the  Publication  Rights of the  internet  and
production  of the content of the  website in respect of the laws of China.  Per
the terms of the Agreement, both Hartcourt and the unnamed investor's obligation
are to invest  US$2,000,000 each, in the joint venture company for 25% ownership
interest and will share the  responsibility  in providing  funding,  finance and
technological  support.  The  obligation  of Hartcourt  and unnamed  investor to
provide  funding as working  capital for the joint venture company is subject to
the conditions  precedent that the joint venture company shall have entered into
an agreement with the relevant parties in China for the commercial  exploitation
of the Publication Rights on the Internet and the website. Each of the investors
shall  within 14 days of  entering  into  such  agreement  by the joint  venture
company, pay a sum of US$1,000,000,  making a US$2,000,000 being the 1st Tranche
of the working  capital;  within three (3) months  thereafter pay another sum of
US$1,000,000, making a US$2,000,000 being the 2nd Tranche of the working capital
for the remaining portion of their  investment.  Production of the website shall
commence  upon the  payment in full of the 1st Tranche by the  investors  to the
joint venture company and the appropriate  production costs being made available
to the  parties  responsible  for  production.  The  joint  venture  company  is
currently negotiating  agreements with the relevant parties in China and has not
been granted approval for the commercial  exploitation of the Publication Rights
on the Internet and the website. Therefore, as of May 10, 2000, Hartcourt has no
payment obligations under this Agreement.

On April 19, 2000,  Hartcourt  entered  into a Fee  Agreement  for  Introduction
Services  ("Agreement")  with  Tang Wai  Leong and  Thomas  Kwok,  (collectively
referred  to as  "Introducers")  whereby  the  Introducers  will use their  best
efforts to search for,  identify  and make known to  Hartcourt  Internet-related
businesses  and  opportunities  for  potential  acquisition  by  Hartcourt.   In
addition,  Introducer  will seek out sources of funding and search for  suitable
candidates  for  employment  by Hartcourt in its Chinese  operations.  Hartcourt
agrees to satisfy  Introducer's time and expense  incurred,  up to and including
the first  acquisition by Hartcourt of an opportunity  introduced or arranged by
Introducer, by granting to Introducer options to purchase up to 2,500,000 shares
of Hartcourt  common stock at a price of five  dollars  fifty cents  ($5.50) per
share.  The option is  non-transferable  and will expire unless  exercised on or
before the third anniversary of the date of Agreement.  Upon consummation of the
introduction  by  the  Introducer  and  Hartcourt  completing  the  acquisition,
Hartcourt agreed to register with the Securities and Exchange Commission under a
Form S-8 such shares  granted under the option  agreement,  and shall cause such
registration  statement to remain  effective at all times while Introducer holds
the options.

The Introducer has introduced to Hartcourt a potential  acquisition  opportunity
and Hartcourt  signed the necessary  documents to consummate  the purchase of an
entity on April 27,  2000.  On May 8,  2000,  in  accordance  with  terms of the
Agreement,  Hartcourt  filed a Form  S-8 to  register  with the  Securities  and
Exchange Commission the options granted to the Introducer under the Agreement.

                                      F-14

<PAGE>

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

On April 27, 2000, Hartcourt signed a Stock Purchase Agreement Term Sheet with a
third  party  to form a new  entity  of  which  Hartcourt  desires  to  purchase
fifty-one  percent (51%) of the outstanding  shares of the capital stock and the
third  party  agrees to retain the  remaining  forty-nine  percent  (49%) of the
outstanding  shares.  The third party being the sole owner all of rights,  title
and interest in an operating  company  desires to contribute  fifty-one  percent
(51%) of its share to the new entity.  The transaction is to close no later than
45 days  following  the  execution of this  Agreement  during which time all due
diligence shall be completed,  which includes  evaluation of the third party and
the operating  company by Morgan  Stanley,  a legal opinion of counsel as to the
acceptability of the proposed structure of Hartcourt's  acquisition of fifty-one
percent (51%) of new entity,  financial reviews, et al. The purchase price shall
be  not  less  than  US$50,000,000  in  cash  and  not  exceeding  US$76,000,000
(including  US$50,000,000  in  cash  together  with  marketable  shares  of upto
US$26,000,000 in value).  The terms of the Agreement  required:  a) Hartcourt to
deposit  $10,000,000  in an escrow  account no later  than  April 28,  2000 upon
complete  execution  of the  Agreement;  b)  upon  completion  of all of its due
diligence,  including  evaluation by Morgan  Stanley and  confirmation  by legal
counsel as to acceptable  structure,  Hartcourt  shall  deposit such  additional
funds  as  shall  be  determined  as  required  in  conformity  with  the  value
established  by Morgan  Stanley.  On April 28, 2000,  Hartcourt  entered into an
agreement  with  another  third  party  who  opened  the  escrow  and  deposited
$10,000,000  on behalf of Hartcourt.  Hartcourt is currently  performing its due
diligence and expects to complete the transaction.

Sinobull.Com Inc.  ("Sinobull") - On May 1, 2000, Hartcourt and Sinobull entered
into an Exchange Agreement and agreed to exchange shares of interests  Hartcourt
has in certain  related  businesses  for  Sinobull  common  stock.  The terms of
Agreement required Sinobull to exchange  forty-eight (48%) percent of its common
stock (par  value @ $1.00) for all of  Hartcourt's  ownership  interests  in the
following companies:  a) 58.53% of Financial Telecom Limited; 50% of Beijing UAC
Stock Exchange Online Co Ltd.; c) 40% of Shandi; d) 50% of StreamingAsia; and e)
50% of GuoMao.  The  Agreement  required  Sinobull to form an eleven (11) member
Board of Directors  group with Hartcourt to appoint six (6) members and Sinobull
to appoint  five (5)  members.  The  transaction  closed on May 1, 2000 and as a
result of this  restructure,  Sinobull  became an  investment  holding  company.
Hartcourt is currently  reviewing the structure of operations of Sinobull  under
the laws of China and Hong Kong and  proposes to finalize  the  structure by the
end of June 2000.

Hartcourt's  partners  in the  above  mentioned  joint  ventures  are  expecting
Hartcourt  to  provide  two key  elements  in  these  joint  ventures:  Internet
technology  and investment  capital.  Hartcourt  management,  which has recently
hired  individuals with extensive  experience and expertise in relevant industry
sectors,  intends to provide  Internet  technology  by merging with or acquiring
companies already active in these businesses.  On the financial side,  Hartcourt
plans to raise substantial funds necessary to carry out the plans of its venture
partners by selling its own common  shares to  selected  investors/partners  and
bringing in partners whose  contributions to each joint venture will include the
necessary cash contributions.

                                      F-15

<PAGE>

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

Note 2.       Basis of Presentation:

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions  to Form 10-QSB.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted  accounting  principles for complete  financial  statements and related
notes included in the Company's 1999 Form 10-KSB.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present  fairly the balance  sheets of The  Hartcourt
Companies,  Inc. and  Subsidiaries as of March 31, 2000 and the results of their
operations  and their cash flows for the three  months  ended March 31, 2000 and
1999.  The  financial  statements  for the three months ended March 31, 2000 are
consolidated  to include the accounts of The Hartcourt  Companies and its 58.53%
owned subsidiary  Financial Telecom Limited, and its 35% owned equity investment
in Beijing UAC Stock Exchange  Online Co. Ltd. The financial  statements for the
three  months  period  ended March 31,  1999  include  only the  accounts of The
Hartcourt  Companies,  Inc.  The  operations  of  Hartcourt  Pen  and  Hartcourt
Investments were discontinued in January 1999 and Hartcourt's investment in Pego
Systems,  Inc. and Electronic Components and Systems, Inc. was spun-off to Enova
effective March 1, 1999 and distributed as stock dividend.

The  results of  operations  for the three  months  ended March 31, 2000 are not
necessarily indicative of the results to be expected for the entire year.

Certain  1999  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, 1999.

                                      F-16

<PAGE>

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

<TABLE>
<CAPTION>

Note 3.       Supplemental Disclosure of Non-Cash Financing Activities:

                                                                    Quarter Ended                  Quarter Ended
                                                                    March 31, 2000                March 31, 1999
                                                                     (Unaudited)                    (Unaudited)
                                                               -------------------------    --------------------------
<S>                                                            <C>                          <C>

Cash received for:
         Taxes                                                 $                      -     $                     800

Non-cash operating and financing activities:
         Issuance of warrants for services                                      203,545                             -
         Shares issued for services                                           1,012,147                             -
         Shares issued to directors for services                              3,430,788                             -

Note 4.       Loss per Share:

                                                                     Quarter Ended                 Quarter Ended
                                                                    March 31, 2000                March 31, 1999
                                                               -------------------------    ---------------------------

Net loss                                                       $              1,671,138     $                 249,178

Effects of dilutive securities
                                                               -------------------------    ---------------------------
Weighted average shares outstanding                                         26,330,688                   19,073,049
                                                               -------------------------    ---------------------------
Basic and dilutive earnings per share                          $                 (0.06)     $                   (.01)

</TABLE>

At March 31, 2000 and 1999,  the Company  had  463,530  and  2,000,000  warrants
outstanding,  each convertible into one share of common stock. These instruments
were not included in the  computation  of diluted  earnings per share for any of
the periods presented,  due to their anti-dilutive effects based on the net loss
reported for each period.

                                      F-17

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
        MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
                                   (UNAUDITED)

Item II
Part 1

Currently,  Hartcourt  is  involved  in  Internet  joint  ventures  in  Asia  to
facilitate the expansion of China's first commercial  e-trade  financial network
and wireless Internet Service Provider  services.  Hartcourt has set as its goal
to create the  premiere  financial  portal in the  Chinese  market by building a
network of Internet companies in partnership with young Chinese enterprenuers as
well as government  owned entities.  Its mission is to become one of the leading
Internet  companies  in Asia.  With a a vision to create the  premier  financial
portal and financial  information  technology service provider in Asia, Sinobull
was incorporated in the BVI in November 1999 as an investment holding company to
consolidate  various related businesses  acquired by Hartcourt during the period
from  August  1999 to  December  1999.  For the  purposes  of  presenting  these
businesses  under a unified and strong  brandname,  a restructuring  exercise is
currently  underway  to  consolidate  these  businesses  under  Sinobull.   Upon
completion  of the  restructuring  exercise,  Sinobull  will  operate  a premier
financial  portal on the  Chinese  Internet  with a  comprehensive  Web site and
supporting utilities that will be capable of executing  securities  transactions
on-line in a timely and  efficient  manner  while  providing  real-time  quotes,
research,  charts and other  collateral  information  regarding  stocks,  bonds,
currencies and other markets in China and other Asian markets.

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

During 1999,  Hartcourt  continued its  previously  implemented  plan to acquire
operating  companies  that were in  established  industries  with a  history  of
growth. However, as a result of continued losses,  particularly at the Company's
Electronic   Components  and  Systems,   Inc.  subsidiary,   Hartcourt  recorded
significant  impairments  to its  goodwill in 1998.  In March,  1999,  Hartcourt
entered into a series of agreements and transactions  that in the aggregate were
designed to streamline and restructure the company while dissolving the entities
comprising of inactive assets and settle outstanding litigation.  As a result of
such restructuring,  Hartcourt  discontinued the operations of Hartcourt Pen and
Hartcourt  Investments  and had a spin-off  of  Hartcourt's  investment  in Pego
(100%) and ECS (35%).
Hartcourt effectively became an entity with no operations.

Results of Operations:

The  operations of Hartcourt for the three months ended March 31, 2000 primarily
consisted of operations of FTL and Hartcourt's  35% investment  interest in UAC.
Operations of Hartcourt Pen and Hartcourt  Investments were  discontinued at the
beginning of 1999,  and operations of Pego and ECS were disposed off as a result
of  spin-off  to  Enova  and the  subsequent  distribution  of  Enova as a stock
dividend to Hartcourt shareholders.

Net sales and cost of sales:  The Company recorded net sales of $348,228 for the
first three months ended March 31, 2000  compared to zero for the same period in
1999.  Net sales  consisted  of the sale of  financial  pagers  and the  related
Internet  and  telephone  services.  Cost of sales  amounted to $116,541 for the
three months ended March 31, 2000  compared to zero for the same period in 1999.
Hartcourt did not have any ongoing operations during the first quarter of 1999.

                                      F-18

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
        MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
                                   (UNAUDITED)

Corporate selling, general and administrative (SGA) expenses were $1,804,237 for
the three months ended March 31, 2000  compared to $241,775 for the three months
ended  March 31,  1999.  The  increase is  primarily  attributed  to  additional
consulting  and legal costs  associated  with the  restructuring  of Hartcourt's
business,  and  expenses  incurred  in  brokerage  fees in  connection  with the
issuance of warrants raising working capital.

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2000 are to fund the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia.  During  the three  months  ended  March 31,  2000,  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 net losses
of  $1,671,138  and $249,178 for the three months ended March 31, 2000 and 1999,
respectively. Additionally, Hartcourt's current liabilities exceeded its current
assets by $640,201 at March 31, 2000.  These  factors,  as well as negative cash
flows from  operations,  Hartcourt's  inability to meet debt obligations and the
need to raise additional funds to accomplish its objectives,  create substantial
doubt about Hartcourt's ability to continue as a going concern.

Hartcourt  has taken  certain  restructuring  steps,  which in the  management's
opinion will provide the  necessary  capital to continue its  operations.  These
steps included: 1) the settlement of certain matters of litigation and disputes;
2) exchange of its interests in Peony Gardens for  investment  securities  which
were  subsequently  exchanged for the  investment in GoCall Inc.; 3) completed a
private  placement with PYR Management,  LLC and received  $2,743,000 on January
27, 2000; 4) signed a Investment  Agreement  with Swartz  Private  Equity,  LLC,
which agreed to purchase from time to time, up to $35,000,000  Hartcourt  shares
of common stock.  The  Investment  Agreement with Swartz is still subject to the
approval of SEC; 5) raised cash through the  issuance of its common  shares upon
exercise of an equal number of warrants.

Operating activities.  During the three months ended March 31, 2000, the Company
had a net loss of $1,671,138. Net cash used by operating activities decreased to
$288,626  during the three  months  ended  March 31,  2000  compared to $312,453
during the same period in 1999. This is primarily due to the fact that Hartcourt
issued its common shares instead to pay for its consulting,  legal and brokerage
costs.

Investing  activities.  Net cash used in investing  activities  during the three
months  ended March 31,  2000 was  primarily  due to  purchase  of property  and
equipment for $50,747.

Financing activities. Net cash provided by financing activities during the three
months  ended March 31, 2000 was  primarily  due to  proceeds  from  issuance of
common  shares and  exercise of options and  warrants  amounting  to  $2,818,750
offset by  advances  to related  parties of  $1,316,811  and  payments  on notes
payable of $113,718.

As a result of the above activities,  the company  experienced a net increase in
cash of  $1,035,597  for the three months  ended March 31, 2000.  The ability of
Hartcourt  to continue as a going  concern is still  dependent on its success in
fulfilling its plan of restructuring as outlined above.

                                      F-19

<PAGE>

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

Part II

Item 1.  LEGAL PROCEEDINGS

Charles E. Hogue vs.  Hartcourt,  Circuit Court of the Ninth  Judicial  Circuit,
Orange County, Florida Case No. CIO-2190

The  litigation  concerns a claim filed on April 8, 2000 against  Hartcourt  for
breach of  contract  for alleged  fees due to Charles  Hogue  ("plaintiff")  for
introductory  services.  Such  fee was set as a  percentage  of the  transaction
contemplated  and a check of $40,500 for payment in full thereof was tendered to
the plaintiff which the plaintiff  refused  claiming sums far in excess of those
agreed to. Hartcourt's legal counsel has interposed a motion to dismiss the suit
which is pending  before the court and is confident of success in disposition of
this matter.

ComericaBank  of California  ("Comerica")  vs. Enova.  Et al.  Superior Court of
California, County of Los Angeles, California. Case No. BC 221594.

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of another  entity's  ("Pego")  alleged  obligation on a promissory note that is
asserted to be in non-financial default. The plaintiff in that matter may be the
subject of a  cross-complaint  by  Hartcourt,  which will depend on the evidence
disclosed by documents Harcourt has demanded be produced.  The complaint alleges
that  Harcourt  executed  a  guarantee  of  obligation  of  Pego  (approximately
$925,000) which obligation went into non-financial  default.  Pego expects to be
able to settle with plaintiff and such  settlement  will  eliminate  Hartcourt's
liability.  The prospects for the success of those settlement  negotiations,  as
well as the  approximately  range or amount of any potential  loss by Hartcourt,
are uncertain at this time.

The Company is party to various claims and legal proceedings  arising out of the
normal  course of its  business.  These claims and legal  proceedings  relate to
contractual rights and obligations,  employment  matters,  and claims of product
liability.  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.

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

                                      F-20

<PAGE>

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

Item 5.  OTHER INFORMATION

None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

          a)   Exhibits

               27   Financial Data Schedule

          b)   Reports on Form 8-K

               o    On February 4, 2000, Hartcourt completed a private placement
                    of 227,445  Units and a class II Warrants to PYR  Management
                    LLC for  $3,000,000  pursuant to a regulation D Subscription
                    Agreement,   File  No.   524390.   Incorporated   herein  by
                    reference.

               o    On February 8, 2000,  Appointment  of BDO  International  as
                    Hartcourt's  independent Certified Public Accountants,  File
                    No. 530104. Incorporated herein by reference.

                                      F-21

<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 15, 2000                  By:  /s/  Dr. Alan V. Phan
                                             ----------------------------------
                                                  Dr. Alan V. Phan
                                                  President & CEO

                                      F-22

<PAGE>

                                 EXHIBIT INDEX

          27        Financial Data Schedule

                                      F-23