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

                                   FORM 10-QSB


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

                  For the quarterly period ended: June 30, 2003

[ ]      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.)

              15165 Ventura Blvd. Suite 400 Sherman Oaks, CA 91403
                    (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 June 30, 2003, The Hartcourt  Companies,  Inc. had  146,681,039  shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                                            Yes [   ]                No [ X ]












                                       F-1

<PAGE>


                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                              Report on Form 10-QSB
                                For quarter ended
                                  June 30, 2003
                                                                        Page
                                                                        ----
PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Balance Sheets at June 30, 2003 (Unaudited)
        and December 31, 2002                                           F-3

        Consolidated Statements of Operations for the Three Months
        and Six Months ended June 30, 2003 and 2002 (Unaudited)         F-5

        Consolidated Statements of Shareholders' Equity for the
        Six Months ended June 30, 2003 (Unaudited)                      F-6

        Consolidated Statements of Cash Flows for the Six Months
        ended June 30, 2003 and 2002 (Unaudited)                        F-7

        Notes to the Consolidated Financial Statements                  F-8

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                       F-29


PART II OTHER INFORMATION

Item 1. Legal Proceedings                                               F-33

Item 2. Changes in Securities                                           F-34

Item 3. Defaults upon Senior Securities                                 F-34

Item 4. Submission of Matters to Vote of Security Holders               F-34

Item 5. Other Information                                               F-34

Item 6. Exhibits and Reports on Form 8-K                                F-34

Signatures                                                              F-35

302 certification                                                       F-36








                                       F-2

<PAGE>



                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

Part I
Item 1
                                               June 30, 2003    December 31,
                                                (Unaudited)        2002
                                               -------------   -------------
ASSETS

Current assets:
 Cash and cash equivalents                     $  6,085,682    $     79,845
 Accounts receivable, net                        10,527,846         260,306
 Inventory                                        2,566,194          16,464
 Notes receivable, current portion                  709,759         709,759
 Deposits, prepaid expenses and other debts       2,328,877          49,449
                                               ------------    ------------
Total current assets                             22,218,358       1,115,823
                                               ------------    ------------
Property and equipment, net                         220,306         474,521

Investments, net                                    935,665         430,000

Other assets
 Goodwill, net                                    8,960,245         624,689
 Intangibles, net                                         -         340,767
 Notes receivable, net of current portion         1,656,012       1,756,012
                                               ------------    ------------
Total other assets                               10,616,257       2,721,468
                                               ------------    ------------
Total assets                                   $ 33,990,586    $  4,741,812
                                               ============    ============







          See accompanying notes to consolidated financial statements.














                                       F-3

<PAGE>


                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                               June 30, 2003    December 31,
                                                (Unaudited)        2002
                                               -------------   -------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Bank loans                                    $  4,269,973    $          -
 Accounts payable                                 3,370,258       1,342,284
 Deferred revenue                                    38,018         209,333
 Notes payable, current portion                   5,620,185          18,988
 Due to related parties                           1,119,567       1,343,011
 Advances from customers                          2,574,709               -
 Accrued expenses and other current
  liabilities                                     2,193,050         357,265
                                               ------------    ------------
Total current liabilities                        19,185,760       3,270,881

Total liabilities                                19,185,760       3,270,881
                                               ------------    ------------
Contingencies

Minority interests                                3,078,118         561,720

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;146,681,039 shares and
  88,518,023 shares issued and outstanding
  at June 30, 2003 and December 31, 2002            146,681          88,518
 Treasury stock, at cost, 4,804,786 and
  5,610,588 shares at June 30, 2003 and
  December 31, 2002                              (3,223,928)     (3,723,928)
 Additional paid-in capital                      65,651,963      55,669,100
 Other comprehensive loss                           (71,094)        (71,094)
 Accumulated deficit                            (50,776,924)    (51,053,395)
                                               ------------    ------------
Total shareholders' equity                       11,726,708         909,211
                                               ------------    ------------
Total liabilities and shareholders' equity     $ 33,990,586    $  4,741,812
                                               ============    ============







          See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

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

<TABLE>
<S>                                           <C>                  <C>            <C>                <C>
                                              For the Three Months Ended June 30  For the Six Months Ended June 30
                                              ----------------------------------  --------------------------------
                                                   2003                 2002          2003                2002
                                              -------------        -------------  -------------      -------------
Net sales                                     $ 28,112,109         $  1,795,965   $ 33,834,458       $  5,343,564

Cost of sales                                   27,012,645            1,433,692     32,343,510          4,456,656
                                              ------------         ------------   ------------       ------------
Gross profit                                     1,099,464              362,273      1,490,948            886,908
                                              ------------         ------------   ------------       ------------
Operating expenses:
 Selling, general and administrative               760,206              807,772      1,191,001          1,886,928
 Depreciation and amortization                      18,550            1,167,619         47,250          1,530,363
 Impairments                                             -                    -         14,816                  -
                                              ------------         ------------   ------------       ------------
Total operating expenses                           778,756            1,975,391      1,253,067          3,417,291
                                              ------------         ------------   ------------       ------------
Gain/(loss) from continuing operations
before other income                                320,708           (1,613,118)       237,881         (2,530,383)

Other income (expense):
 Equity in earnings (loss) of affiliate                  -                  514              -              7,554
 Loss on abandonment of property and equipment           -              (50,082)       (72,371)          (164,973)
 Interest expense                                  (79,742)             (14,487)       (92,891)           (47,413)
 Interest income                                         -               65,681            508            119,299
 Other                                              42,433               58,887         42,463             58,887
                                              ------------         ------------   ------------       ------------
Total other income (expense)                       (37,309)              60,513       (122,291)           (26,646)
                                              ------------         ------------   ------------       ------------
Gain/(loss) from continuing operations             283,399           (1,552,605)       115,590         (2,557,029)

Less: gain/(loss) in subsidiary
attributed to minority interest                   (228,397)             514,131       (247,504)           736,726
                                              ------------         ------------   ------------       ------------
Gain/(loss) before discontinued operations          55,002           (1,038,474)      (131,914)        (1,820,303)

Discontinued operations:
 Loss from discontinued operations                       -                    -              -                  -
 Gain on disposal of discontinued operations       466,655                    -        466,655         (1,820,303)
                                              ------------         ------------   ------------       ------------
Gain/(loss) before income tax                      521,657           (1,038,474)       334,741

 Income tax                                        (58,270)                   -        (58,270)                 -
                                              ------------         ------------   ------------       ------------
Net Gain/(loss)                               $    463,387           (1,038,474)  $    276,471       $ (1,820,303)
                                              ------------         ------------   ------------       ------------
Other comprehensive gain (loss):
 Foreign currency translation gain (loss)                -              (22,711)             -             (9,405)
                                              ------------         ------------   ------------       ------------
Comprehensive gain/(loss)                     $    463,387           (1,061,185)  $    276,471       $ (1,829,708)
                                              ============         ============   ============       ============

Basic and fully diluted gain/(loss) per common share:
 Gain/(loss) from continuing operations       $      0.000               (0.013)  $     (0.001)      $     (0.024)
 Gain/(loss) from discontinued operations            0.004                    -          0.004                  -
                                              ------------         ------------   ------------       ------------
   Gain/(loss) per share                      $      0.004               (0.013)  $      0.003       $     (0.024)
                                              ------------         ------------   ------------       ------------
Weighted average number of shares outstanding
  - Basic and fully diluted                    124,149,929           80,033,267    112,891,929         77,108,098
                                              ============         ============   ============       ============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<S>                                  <C>         <C>       <C>    <C>      <C>         <C>
                                                                                          Common
                                          Common Stock     Preferred Stock  Additional     Stock
                                     --------------------- ---------------   Paid-In   Subscriptions
     Description                        Shares     Amount  Shares  Amount    Capital     Receivable
------------------------------------ ----------- --------- ------ -------- ----------- -------------
Balance - December 31, 2002           88,518,023 $  88,518  1,000 $    10  $55,669,100 $          -

Shares issued for
  consulting services                  1,938,730     1,939      -       -      134,115            -
Shares issued in connection
  with acquisition of HuaQing Group   15,960,474    15,960      -       -    2,186,585            -
Shares issued in connection
  with acquisition of GuoWei Group    10,863,792    10,864                   4,334,653
Shares issued in connection
  with acquisition of NewHuaSun       13,769,156    13,769                   3,290,828
Shares issued in lieu of compensation  1,025,744     1,026                      47,474
Sale of treasury stock                         -                -       -     (451,187)           -
Shares issued for subscriptions       14,605,120    14,605      -       -      440,395            -
Net loss                                       -                -       -                         -
                                     ----------- --------- ------ -------  ----------- ------------
Balance - June 30, 2003              146,681,03  $ 146,681  1,000 $    10  $65,651,963 $          -
                                     ==========  ========= ====== =======  =========== ============
</TABLE>
<TABLE>
<S>                                    <C>       <C>          <C>           <C>           <C>
                                          Treasury Stock         Other                       Total
                                       ---------------------- Comprehensive  Accumulated  Shareholders'
     Description                         Shares     Amount        Loss         Deficit       Equity
-------------------------------------  --------- ------------ ------------- ------------- -------------
Balance - December 31, 2002            5,610,588 $(3,723,928) $    (71,094) $(51,053,395) $    909,211

Shares issued for
  consulting services                                                    -                     136,054
Shares issued in connection
  with acquisition of HuaQing Group                                      -                   2,202,545
Shares issued in connection
  with acquisition of GuoWei Group                                                           4,345,517
Shares issued in connection
  with acquisition of NewHuaSun                                                              3,304,597
Shares issued in lieu of compensation                                                           48,500
Sale of treasury stock                  (805,802)    500,000             -                      48,813
Shares issued for subscriptions                                          -                     455,000
Net loss                                                                        (276,471)      276,471
                                       --------- -----------  ------------  ------------- ------------
Balance - June 30, 2003                4,804,786 $(3,223,928) $    (71,094) $(50,776,924) $ 11,726,708
                                       ========= ===========  ============  ============  ============
</TABLE>












          See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
                                                     Six Months Ended June 30,
                                                    ----------------------------
                                                        2003            2002
                                                    -------------  -------------
Cash flows from operating activities:
 Net gain/(loss)                                    $    276,471     (1,820,304)
 Adjustments to reconcile net loss to
 net cash used in operating activities:
  Loss on abandonment of property and equipment           72,371        164,973
  Depreciation and amortization                           62,066      1,680,321
  Gain on sale of affiliate                             (466,655)             -
  Minority interest in loss/(gain) of subsidiaries       247,504       (714,828)
  Equity in loss of affiliate                                  -          7,370
  Shares issued in lieu of compensation and services     184,554        622,420
  Changes in operating assets and liabilities:
    (Increase) decrease in:
    Accounts receivable                                  (93,034)       349,518
    Inventory                                          3,867,039         (1,054)
    Prepaid expenses and other                          (139,927)        46,416
    (Decrease) Increase in:
    Cash overdraft                                             -        118,584
    Accounts payable                                  (4,914,889)    (1,114,799)
    Accrued expenses and other current liabilities      (418,949)       316,705
    Deferred revenue                                      17,527       (362,315)
                                                    ------------   ------------
Net cash used in operating activities                 (1,305,922)      (706,993)
                                                    ------------   ------------
Cash flows from investing activities:
 Proceeds on notes receivable                            100,000        287,115
 Proceeds on return of investment                        243,755              -
 Cash decreased due to merge                             (32,006)             -
 Cash paid for investments                                     -        (10,837)
 Cash acquired in acquisitions                         2,940,509              -
 Purchase of property and equipment                      (30,966)       (97,877)
                                                    ------------   ------------
Net cash provided by investing activities              3,221,292        178,401
                                                    ------------   ------------
Cash flows from financing activities:
 Proceeds on sale of common stock                              -              -
 Proceeds on sale of treasury stock                       48,813              -
 Proceeds on stock subscriptions                               -        326,487
 Proceeds on loans and lines of credit                 2,455,749              -
 Proceeds from related parties                           231,556        301,483
 Proceeds on notes payable                             1,354,349       (241,883)
 Payments on capital leases                                    -        (33,424)
                                                    ------------   ------------
Net cash provided by financing activities              4,090,467        352,663
                                                    ------------   ------------
Foreign currency translation                                   -            190
Net increase (decrease) in cash                        6,005,837       (175,739)
Cash and cash equivalents, beginning of period            79,845        281,563
                                                    ------------   ------------
Cash and cash equivalents, end of period            $  6,085,682        105,824
                                                    ------------   ------------

          See accompanying notes to consolidated financial statements.
                                       F-7

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)


Note 1:  Organization and Nature of Operations:

The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is an  investment  holding and  corporate  development  company  focusing on the
acquisition  of  private  companies  within  high-growth  industries  in  China.
Hartcourt's  strategy is to bring together a group of  complimentary  companies,
add substantial value in terms of financial  restructuring,  strategic  planning
and corporate governance to enable these subsidiaries to fully realize the value
of their assets and become  public  companies.  Today,  Hartcourt  has strategic
investments  in five  (5)  areas  in  China  including:  IT  Product  Marketing,
Financial Information Provider, Media Technology Services, and Online Education.

Due to limited  resources,  the Company  has  planned to focus  solely on the IT
product distribution and marketing business.  Other companies under the existing
Hartcourt's  portfolio  will  be  divested  and  dividends,   if  any,  will  be
distributed back to Hartcourt's  shareholders.  Hartcourt's  operative  business
strategy is to acquire  profitable  companies with strong market position in the
IT  Product  Marketing  sector.  The  consolidation  strategy  will  help  these
companies  to improve  their  margins  by  increase  purchasing  power and lower
marketing and  advertising  costs.  The current five  business  divisions are IT
Product  Marketing Group  (including  HuaQing  Corporate  Development  Co., Ltd.
("HuaQing"),  Guangdong  NewHuaSun  Computer Co., Ltd.  ("NewHuaSun"),  Shanghai
GuoWei Science and Technology Co., Ltd. ("GuoWei") and Wenzhou ZhongNan Computer
Group  ("ZhongNan")),  Financial  Information Group,  Media Technology  Services
Group, Online Education and Hartcourt Capital Inc.  Eventually,  Hartcourt would
dispose  of all  these  operating  divisions  except  the IT  Product  Marketing
business.

In November, 2002, Hartcourt obtained irreversible voting rights proxy (See Note
11,  Irreversible  Proxy  Statements)  for 10% of the total equity  interests of
HuaQing  from  two  HuaQing  shareholders,   who  are  Chinese  citizens,  in  a
Shareholders and Board of Directors meeting,  in addition to the purchase of 45%
of the total equity  interests of HuaQing.  Such 10% voting  rights proxy covers
from  February  1,  2003 to  March  31,  2006,  over a period  of  three  years.
Hartcourt's  management  believes  that  with the 10% proxy  right,  and the 45%
equity interests owned by Hartcourt, Hartcourt becomes effectively controlling a
55%  of  the  total  voting  rights  of  HuaQing  starting   February  of  2003.
Subsequently,  Hartcourt's  management  believes the Company can demonstrate its
control over HuaQing.,  and has controlling  relationship in HuaQing's operation
and treats HuaQing as its controlling subsidiary.  In accordance with FASB # 94,
HuaQing's  financial   statements  are  consolidated  under  the  operations  of
Hartcourt starting March of 2003.

In  December  2002,  similar to the  practice  of  HuaQing,  Hartcourt  obtained
irreversible  voting rights proxy (See Note 11,  Irreversible  Proxy Statements)
for 10% of the total equity interests of GuoWei and NewHuaSun  respectively from
their  shareholders,  who are Chinese  citizens,  in a Shareholders and Board of
Directors  meeting,  in  addition  to the  purchase  of 45% of the total  equity
interests of GuoWei and  NewHuaSun  respectively.  Such 10% voting  rights proxy
covers  from  April 1 2003,  to June 30,  2006,  over a period  of three  years.
Hartcourt's  management  believes  that  with the 10% proxy  right,  and the 45%
equity interests owned by Hartcourt, Hartcourt becomes effectively controlling a

                                       F-8

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

55% of the total voting rights of GuoWei and NewHuaSun  starting  April of 2003.
Subsequently,  Hartcourt's  management  believes the Company can demonstrate its
control over GuoWei and NewHuaSun,  and has  controlling  relationship in GuoWei
and  NewHuaSun's  operation and treats  GuoWei and NewHuaSun as its  controlling
subsidiaries.  In accordance  with FASB # 94, GuoWei and  NewHuaSun's  financial
statements are  consolidated  under the operations of Hartcourt  starting May of
2003.

The  accompanied  consolidated  financial  statements  of Hartcourt  for the six
months  ended  June 30,  2003  contains  $33,541,888  of sales and  $242,588  of
operating  profit of  Huaqing,  GuoWei  and  NewHuaSun  (See Note # 2,  Basis of
Presentation,  Note # 3 Key Factor on the Company and Note # 4 Foreign Operating
Risks).

Hartcourt, through a combination of synergistic internal expansion and accretive
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 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.

1) IT Products  Marketing Group: This group provides  distribution and marketing
services  for IT products  ranging from PC systems and  components  to all other
digital products,  serving individual,  business and government customers. As of
30 July 2003, the group is comprised of 4 main operations, which are all located
in China: HuaQing, located in Shanghai, China, the first member of this Group, a
key  distributor  for Samsung  Electronics,  helps  customers build their own PC
systems with components, technology and after sales support. HuaQing is recently
voted by International Data Group (IDG) Computer World (China) as one of the Top
100 (by sales) Computer Marketing  Companies in China, and the result was posted
in the related newspaper.. Followed by NewHuaSun, a similar business to HuaQing,
located in the Guangdong  province  covering the Southern China market.  GuoWei,
the largest PC retailer (by sales) in Shanghai area with 13 retail outlets,  and
ZhongNan,  the largest PC retailer (by sales)  covering  the Zhejiang  province.
This group is  currently  the core  business of the  Company  (See Note # 4, Key
Factors on the Company)

2) Financial Information Group: This group consists of three (3) entities.  They
are  Financial  Telecom  Limited,  a  Hong  Kong  incorporated  company,  Genius
Technology  International  Ltd., a China incorporated  company (acquired 100% of
Sinobull  Information  Co.  Ltd  which is  formerly  Shanghai  GuoMao  Science &
Technology Co. Ltd.), and Sinobull Network  Technology  Company Limited, a China
incorporated  company (formerly  Beijing Net Technologies  Center Company Ltd.).
The group is engaged in the construction of financial  information  database and
provision of securities and commodities  information to brokerages and financial
institutions  to enable  their  customers'  access to a  comprehensive  suite of
quality  financial  news,   real-time  market  data,   financial   analysis  and
professional  market  commentary.  The group's  main scope of business  includes

                                       F-9

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

financial  information  service terminal,  financial  publications  indexing and
search,  internet-based  information services.  The group is at the forefront of
the  financial   information   industry  in  China,  please  refer  to  website:
www.genius.com.cn,  its financial services and information portal, is one of the
China's financial  portals.  The group's e-Finance platform is an integration of
the advanced Internet,  telecommunication  and wireless access systems available
on the market today. The service platform and collateral  content is offered via
subscription to leading  securities  brokerages,  investment  firms,  banks, and
media companies throughout Greater China.

3) Media  Technology  Services  Group:  This group consists of six (6) entities.
They are AI-Asia Inc;  StreamingAsia Holdings Ltd; LogicSpace Ltd; SyndicateAsia
Ltd; Empact Solutions Inc; and Beijing Total Solution System Ltd. As of June 30,
2003,  Hartcourt has exited this business  sector by disposing of  StreamingAsia
Holdings Ltd, LogicSpace Ltd and SyndicatAsia Ltd. to non-related companies. For
the disposed of companies,  Hartcourt may still have some potential  liabilities
regarding  their  past  businesses.   Management  believes  that  the  potential
liabilities are being monitored at its minimum.

4) Online  Education  Group:  This business was formed in 2001, after entering a
partnership  agreement in  cooperation  with Northern  Jiaotong  University  and
California State University  Fullerton to jointly develop education projects and
introduce  American career training courses and post-graduate  business programs
in China. The project planned to offer both certificate and degree programs.  As
of June 30, 2003,  Hartcourt has not made any new  investment  after the initial
investment  and  plans to exit  this  business  at the  appropriate  time in the
future.

5)  Hartcourt  Capital  Inc:  This  division  was  originally  formed  to  be an
investment-banking  arm to act as a bridge between high-growth Chinese companies
and the U.S. capital  markets.  Given the refocusing of the Company in expanding
the IT Product Marketing Group. To supplement its objective, the division begins
publishing a magazine called "China Report". The objective of the magazine is to
provide international  institutional  investors with updates and analysis on the
fast-changing investment environment and opportunities in China.

History of the Company:

Stardust, Inc. ("Stardust"), a corporation organized under the laws of the State
of Utah in September 1983,  acquired all of the outstanding  shares of Hartcourt
Investments, a Nevada corporation, for 6,110,337 shares of Stardust common stock
(after taking into account a reverse stock split and stock dividend) pursuant to
an Agreement and Plan of  Reorganization  dated November 5, 1994. At the time of
this  acquisition,  Stardust  was a "shell"  entity with no assets,  business or
operations.  Subsequent to the  acquisition of Hartcourt  Investments,  Stardust
changed its name to The Hartcourt Companies,  Inc. Over the years of operations,
the total equity structure expanded with common shares of 146 million issued and
outstanding as of June 30, 2003.

OPERATIONS BY BUSINESS DIVISIONS

IT PRODUCTS MARKETING AND DISTRIBUTION GROUP:


                                       F-10

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

HuaQing Corporate Development Co., Ltd. ("HuaQing"): HuaQing, founded in 1992 in
Shanghai, China, specializes in marketing and distribution of PC components, and
assembling  of PC. The company  owns and  operates  11 stores in Shanghai  area,
providing  consulting and technical  services to customers in choosing  computer
components and assembling of PC to meet each  customer's  unique needs.  HuaQing
was  promoted  as one of the top 100  Hi-Tech  enterprises  and  granted  with a
certificate by the Shanghai  Government's  Science and Technology  Commission in
2001 and 2002. It was recently voted by IDG's Computer World (China),  a private
company,  as one of the Top 100 (by sales) Computer Marketing Companies in China
and the resulted was posted in the related newspaper.

On February 14, 2003,  Hartcourt and HuaQing's  shareholders signed a definitive
agreement  ("The  Agreement") to purchase of 45% of the total equity interest of
HuaQing,  for a total  consideration of $2,202,545,  of which the purchase price
was solely  paid by  issuance  of  15,960,474  common  shares of the  Hartcourt,
restricted  under  Rule  144,  at value of  $0.138  each.  Due to the  temporary
restrictions  of the Chinese  government  against  foreign entity holding direct
interest in marketing and distribution  services  companies in China,  Hartcourt
nominated Mr.  Richard Yan, the Financial  Controller of Hartcourt and a Chinese
citizen, and Mr. Li ZhengZheng, the President and a major shareholder of HuaQing
to hold 30% and 15% of the equity interest of HuaQing respectively, on behalf of
Hartcourt,  according to advice  received from  Hartcourt's  Chinese  attorneys.
Subject to the Chinese law,  the two  nominees  have pledged all their shares to
Hartcourt;  as well as all its voting  power to enable  Hartcourt to appoint the
controlling slate of Directors of HuaQing. The nomination could be terminated by
Hartcourt at its sole discretion and Hartcourt  holds the  irrevocable  right to
receive back the ownership of the shares upon request,  whenever the Chinese law
is revised to allow  foreign  ownership in HuaQing,  as  stipulated in the World
Trade Organization (WTO) agreement entered by the Chinese  government.  On March
6, 2003, the  shareholders  meeting of HuaQing  approved the Share  Transferring
Agreement and accepted the two nominees of Hartcourt to be the new  shareholders
of HuaQing.  The  shareholders  meeting  updated the Article of Association  and
elected new directors to satisfy The Agreement.  In November of 2002,  Hartcourt
obtained voting rights proxy (See Note 11,  Irreversible  Proxy  Statements) for
additional  10% of the equity  interests from two HuaQing  shareholders,  Mr. Li
Zhengzheng and Mr. Zhang Hui in a HuaQing's Shareholders and Board of Directors'
meeting.  Such 10% voting rights proxy covers from February 1, 2003 to March 31,
2006, over a period of three years.  Consequently,  Hartcourt  controls a 55% of
the total voting rights of HuaQing through the complicated  mechanism  mentioned
above, starting February,  2003. As such, Hartcourt considers it has controlling
relationship  in  HuaQing's  operation  and treats  HuaQing  as its  controlling
subsidiary.  HuaQing financial statement is consolidated under the operations of
Hartcourt starting March 2003. As of June 30, 2003,  Hartcourt has signed a Sale
and  Purchase  Agreement  to purchase  an  additional  6% of equity  interest of
HuqQing for a total  consideration of $857,891,  of which the purchase price was
solely paid by issuance of 1,340,455 common shares of the Hartcourt,  restricted
under Rule 144, at value of $ 0.64 each and the  completion of the purchase will
be in August, 2003.

Guangdong  NewHuaSun  Computer  Co.  Ltd.  ("NewHuaSun"):   Guangdong  NewHuaSun
Computer Co. Ltd, founded in 1998, headquartered in Guangzhou Province of China,
is a well-established distribution and marketing company for PC, electronics and
digital  products.  (www.newhuasun.com.cn)  With over 80 employees,  the company

                                       F-11

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

owns  and  operates  5  flagship  stores,  and has over 60  independently  owned
franchised  stores,  and with subsidiary  offices  located in 5 key cities.  The
company is voted by  www.pconline.com.cn  as one of the top marketer in Southern
China with the one of the largest market share in computer monitor  marketing at
close to 30%.

On April 24, 2003,  Hartcourt and NewHuaSun's  shareholders  signed a definitive
agreement  ("The  Agreement") to purchase of 45% of the total equity interest of
NewHuaSun, for a total consideration of $3,304,597,  of which the purchase price
was paid by issuance of 13,769,156  common shares of the  Hartcourt,  restricted
under Rule 144, at value of $0.24 each. Due to the temporary  restriction of the
Chinese  government  against foreign entity holding direct interest in marketing
and distribution  services  companies in China,  Hartcourt adopted the same deal
structure as HuaQing.  On April 24, 2003, the shareholders  meeting of NewHuaSun
approved  the Share  Transferring  Agreement  and  accepted  the two nominees of
Hartcourt to be the new  shareholders  of NewHuaSun.  The  shareholders  meeting
updated the Article of  Association  and  elected new  directors  to satisfy The
Agreement. In December of 2002, Hartcourt obtained voting rights proxy (See Note
11,  Irreversible  Proxy  Statements) for additional 10% of the equity interests
from one of  NewHuaSun's  shareholder,  Mr.  Kan  XiaoMin,  in  NewHuaSun's  all
shareholders' meeting.  Hartcourt also obtained the voting rights proxy from one
of the NewHuaSun's Board of Directors,  Mr. Xiao YongLi, in NewHuaSun's Board of
Directors'  meeting.  Such 10% voting  rights proxy covers from March 1, 2003 to
April 30, 2006, over a period of three years. Consequently, Hartcourt controls a
55% of the total voting rights of NewHuaSun  through the  complicated  mechanism
mentioned  above,  starting  May,  2003.  As such,  Hartcourt  considers  it has
controlling  relationship in NewHuaSun's  operation and treats  NewHuaSun as its
controlling  subsidiary.  NewHuaSun's  financial statement is consolidated under
the operation of Hartcourt starting May, 2003.

Shanghai GuoWei Science and Technology Ltd. ("GuoWei"):  Shanghai GuoWei Science
and  Technology  Ltd.,  founded  in April  1997,  is  strategically  located  in
Shanghai,  China  (please refer to website:  ). GuoWei has now developed  into a
well-respected  specialty  computer retail,  distribution and marketing company.
With over 180  employees,  the company owns and  operates 13 retail  stores that
cover 11  districts  of  Shanghai.  The company is  particularly  strong in both
corporate  and  education  PC markets in Shanghai  with clients such as Shanghai
Jiaotong University, Shanghai Fudan University, Shanghai Architecture Institute,
BaoSteel, etc. In addition,  GuoWei has successfully launched an online computer
DIY (Do-It-Yourself) online store at: www.12diy.com. In the recent years, GuoWei
has become the  "outstanding  performance"  agent of many  international  brands
including Intel, Philips, Samsung, Hyundai, Asus, Logitech, etc.

On April 30,  2003,  Hartcourt  and  GuoWei's  shareholders  signed a definitive
agreement  ("The  Agreement") to purchase of 45% of the total equity interest of
GuoWei, for a total consideration of $4,345,517, of which the purchase price was
paid by issuance of 10,863,792 common shares of the Hartcourt,  restricted under
Rule 144, at value of $0.4 each. Due to the temporary restriction of the Chinese
government  against  foreign  entity  holding  direct  interest in marketing and
distribution  services  companies  in  China,  Hartcourt  adopted  the same deal
structure as HuaQing.  On April 30,  2003,  the  shareholders  meeting of GuoWei
approved  the Share  Transferring  Agreement  and  accepted  the two nominees of
Hartcourt to be the new shareholders of GuoWei. The shareholders meeting updated

                                       F-12

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

the Article of  Association  and elected new directors to satisfy The Agreement.
In  January  of 2003,  Hartcourt  obtained  voting  rights  proxy  (See Note 11,
Irreversible  Proxy  Statements) for additional 10% of equity interests from one
GuoWei  shareholder,   Mr.  ZhouJian  in  GuoWei's  Shareholders  and  Board  of
Directors'  meeting.  Such 10% voting rights  proxy,  covers from May 1, 2003 to
June 30, 2006, over a period of three years. Consequently,  Hartcourt controls a
55% of total voting rights of GuoWei through the complicated mechanism mentioned
above,  starting  May 2003.  As such,  Hartcourt  considers  it has  controlling
relationship  in  GuoWei's  operation  and  treats  GuoWei  as  its  controlling
subsidiary..GuoWei's  financial statement is consolidated under the operation of
Hartcourt starting May, 2003.

WenZhou ZhongNan Group.  ("WenZhou"):  It is a company incorporated in China. On
June 28th, 2003, Hartcourt Capital Inc., incorporated in British Virgin Islands,
a wholly owned subsidiary of The Hartcourt  Companies,  Inc., a Utah Corporation
(Registrant),  signed a  definitive  agreement  to purchase of 51% of all of the
equity interest of ZhangNan Group  ("ZhongNan"),  for a total  consideration  of
$4,176,807.  The  purchase  price will be paid by issuance of  7,013,950  common
shares of the Hartcourt,  restricted under Rule 144,at value of $0.5955 each. In
the  agreement,  the  Registrant  also  committed  to acquire  51% of all of the
interest of WenZhou Huaqing Monitor  Company Ltd. for a total  consideration  of
$834,545 by issuance of 1,401,420  common  shares of the  Hartcourt,  restricted
under  Rule 144.  Zhongnan,  founded  in 1996,  owns and  operates  21 stores in
Wenzhou area and its  surrounding  areas,  completed  with  service  centers and
warehouse  distribution.  The stores  provide  customers  with  latest  computer
hardware,  software,  technical services and other digital products.  As of June
30, 2003, the execution of the agreement has not been completed.

The  accompanied  consolidated  financial  statements  of Hartcourt  for the six
months  ended on June 30, 2003  contains  $33,541,888  of sales and  $242,588 of
operating  profit of  HuaQing,  NewHuaSun  and GuoWei  combined.  These  amounts
represent four-month's operating result of HuaQing, two-month's operation result
of GuoWei and NewHuaSun.  These companies' sales and operating profits are being
consolidated  as  Hartcourt's  income,  because  of the recent  acquisitions  of
certain  shareholders'  proxy  rights (See Note # 3, Key Factors on the Company,
Note # 10, Segment and Related  Information).  In addition,  the total assets of
Hartcourt  in the amount of  $33,990,586  include  total  assets of  $21,473,746
contributed from HuaQing, GuoWei and NewHuaSun combined. These companies' assets
are being consolidated as Hartcourt's assets, because of the recent acquisitions
of certain  shareholders' proxy right (See Note # 3, Key Factors on the Company,
Note # 10, Segment and Related Information).

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 of our Chinese  attorney.  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 ours.

FINANCIAL INFORMATION GROUP:

This group ("Sinobull  Group") was formed in November 1999 with the intention to

                                       F-13

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

consolidate  various related  businesses  acquired or expected to be acquired by
Hartcourt or Sinobull.com Inc. ("Sinobull"), the holding company of the Sinobull
Group incorporated in British Virgin Islands. On May 16, 2002, Sinobull.com Inc.
changed  its  name  to  Hartcourt  Companies  Limited.  In the  test  hereafter,
Hartcourt  Companies  Limited is  referred to as  "Sinobull".  On April 2, 2001,
Sinobull's  one share  issued  and  outstanding  held by Mr.  Tang Wing On,  was
formally transferred to Hartcourt, and Sinobull became a wholly owned subsidiary
of Hartcourt.

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

On August 17, 1999,  Hartcourt entered into a stock purchase agreement with FTL,
a  Hong  Kong  corporation,  to  purchase  4,964,990  shares  of  common  stock,
representing 58.53% of the total common stock outstanding.

On March 27, 2000, FTL entered into a Memorandum of Understanding with NiceVoice
Investment  Holdings  Limited  (NiceVoice)  to form a joint venture named Fintel
Wireless  Internet Limited (FWL) for the purpose of establishing and operating a
financial paging service network in Hong Kong on the FLEX transmission  protocol
on a PDA receiver device. FTL agreed to invest cash by phases, to the amount not
to exceed HK$4,000,000 (approximately US$512,800) in exchange for a total of 51%
ownership  interest in the joint  venture,  and Nice Voice agreed to  contribute
certain assets in FWL. After the completion of due diligence, the parties signed
the formal joint venture agreement on April 28, 2000 and FWL became a subsidiary
of FTL.  Although  NiceVoice has  contributed  certain assets in FWL, due to the
method  of  funding  these  assets,  NiceVoice  does not  presently  have  legal
ownership  title to such assets until the final dollar  payment has been made on
these assets. The accompanying  financial statements as of June 30, 2003 reflect
FTL's  investment  of 51%  ownership  interest in FWL. FWL ceased  operations on
March 1, 2002 after all its customers  were sold to a third party (See Note # 8,
Litigation).  As of June 30, 2003, FTL had advanced  approximately  HK$4,216,162
(US$540,534)  towards  its  investment  in FWL.  During  the  quarter  ended  30
September  2002,  FTL  disposed  off its wholly  owned  subsidiary  Topomedia to
Bowland,  the other shareholder of FTL.  Topomedia acts as a holding company for
FTL's office real estate, it suffered  substantial losses due to server property
market  downturn  in  Hongkong,   FTL  made  bad  debt  provision   HK$8,704,514
(US$1,115,963) for the advance to Topomedia.

Sinobull Network Technology Company Limited (Sinobull  Network):  Formally known
as  Beijing  Shangdi  Net  Technologies  Center  Company,  Ltd.  ("Shangdi")  is
principally  engaged in the  business of data  broadcasting  in China.  Its main

                                       F-14

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

activities include research, development and sales of data broadcasting hardware
and software. Shangdi is a major shareholder of Hua Xia Info, the financial data
provider of Hua Xia  Securities,  one of the largest  stock  brokerage  firms in
China.  Hua Xia Info has its own financial  reporters for its  data-broadcasting
network via cable TVs and  magazines.  Through this  relationship,  Sinobull can
have access to account holders through Hua Xia Securities Brokerages nationwide.
Shangdi has completed a software  program for cable set top boxes,  which enable
users to trade stock  online from their home  television  sets.  On December 28,
2000,  Sinobull  through  Tiandi  Hulian  Technologies   Limited  (Tiandi),   an
investment  holding  company  incorporated  in the British Virgin Islands (BVI),
holding the 51% of interest of Sinobull  Network.  Tiandi and  Sinobull  Network
ceased its operations as of May 16, 2001 (See Note # 8, Litigation).

Shanghai Sinobull  Information Company Limited (Sinobull  Information):  It is a
company  incorporated in China, and formally known as Shanghai Guo Mao Science &
Technology  Co. Ltd.  ("Guo Mao").  Sinobull  Information  is a major  real-time
financial data provider in Shanghai  using a satellite  network to transmit data
specializes  in  stock  quotes,  futures,  indexes  and  commodities  data  that
compliments the financial information database of Hua Xia Info and the financial
data delivery systems of FTL. Association with Guo Mao gives Sinobull a distinct
edge over any  competitive  financial  portals in China.  On  December  1, 1999,
Sinobull  signed a Term Sheet  Agreement  with Guo Mao whereby Guo Mao agreed to
issue new shares for a total proceeds of $1,000,000  which will represent 50% of
the expanded  capital of Guo Mao.  Sinobull  agreed to subscribe for all the new
shares  issued  by Guo Mao.  On May 16,  2000,  Sinobull  and  Hopeful  Internet
Technologies  Limited  ("Hopeful") entered into an agreement whereby Hopeful, an
investment  holding company  incorporated  in the British Virgin  Islands,  will
acquire  through  its  wholly-owned  subsidiary  Shanghai  Sinobull  Information
Company  Limited  ("Sinobull  Information"),  all of the  operating  assets  and
business of Guo Mao. To finance this  acquisition,  Hopeful issued new shares to
Sinobull  equal  to  40%  of  the  expanded  capital  of  Hopeful  for  a  total
consideration  of $1,000,000.  The terms of payment by Sinobull for the purchase
of new shares will be: $200,000 in cash upon signing of the agreement;  $150,000
in cash within 30 days of signing of the  agreement;  $150,000 in cash within 60
days of signing of the agreement;  and $500,000  within 30 days after signing of
the agreement in shares of Hartcourt  based on the average  closing price in the
last 7 trading  days before  payment,  or in shares of  Sinobull  based upon the
valuation  to be agreed on by the  parties.  On  December  28,  2000,  Sinobull,
Hopeful,  Guo Mao and Lee Lu Ping  (representative  of the  owners  of Guo  Mao)
signed a Share Subscription  Agreement whereby,  Sinobull will own 51% ownership
in Hopeful and Lee Lu Ping will own 49% of ownership in Hopeful after payment of
consideration  to Guo Mao for purchase of all tangible  and  intangible  assets.
Sinobull has paid $500,000 in cash received from Hartcourt  towards the purchase
of new shares of Hopeful and issued 805,802  shares of Hartcourt's  common stock
valued at $500,000 to Sinobull  Information in February 2001. The 805,802 common
shares  issued  to  Sinobull  Information  were  sold  out  to  satisfy  certain
obligation as of March 31, 2003. In order to strengthen the  competitiveness  in
the  financial  information  provision  sectors,  Sinobull  Information  Company
Limited  was sold to a non  related  company,  Genius  Technology  International
Limited  ("GTI"),  a  leader  in  this  field,  on  May  7,  2003,  for a  total
consideration  of  $410,163,  of  which  the  amount  was  paid by  issuance  of
57,826,793 common stock of GTI at value of $0.0071 each.


                                       F-15

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

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

On September 7, 2000,  Hartcourt  signed a joint venture  agreement with Hopeman
Computer  Services  Corporation  Limited  (Hopeman")  to form a joint venture in
Shanghai and jointly develop and market a 24-hour financial  television  program
and/or provide  financial  data services to  existing/new  financial  television
programs  for China  market.  Due to the complex  regulation  regarding  foreign
investment  in the TV  industry  sector  in  China,  and  due to the  fact  that
Hartcourt and Hopeman do not have the financial resources to support the initial
investment  capital required,  on August 28, 2002,  Hartcourt agreed to sell its
entire  interest  in this  joint  venture  back  to  Hopeman.  According  to the
agreement  entered on August 28,  2002,  Hartcourt  will receive back all of its
investment $50,000 from Hopeman. As of June 30, 2003, Hartcourt has received US$
40,000 from Hopeman.

Beijing  UAC Stock  Trading  Online  Co.  Ltd.  (UAC  Trading):  It is a company
incorporated in China. On June 20, 1999 Hartcourt entered into an agreement with
UAC Trading to form a joint venture  company  Beijing UAC Stock Exchange  Online
Co. Ltd. ("UAC Exchange"). Under the terms of the agreement, Hartcourt agreed to
invest in cash and stock  $2,868,000 for the purchase of 51% ownership  interest
in UAC Exchange.  In September 2000, the Chinese  government  allowed all online
transactions  to be conducted via  Internet.  It caused UAC Exchange to lose its
competitiveness  as its Network was not  compatible to the Internet.  Therefore,
UAC Exchange started converting its operations to Internet based operations.

On July 16,  2001,  Hartcourt  and UAC  Trading,  by mutual  consent,  agreed to
rescind the contractual joint venture  agreement named UAC Exchange.  As part of
the rescission,  Hartcourt  agreed to accept a promissory note for the amount of
its net  investment  in UAC Exchange as of the date of  rescission  amounting to
$2,858,286,  bearing  interest  at six per cent  (6%) per anum,  payable  over a
thirty-nine  months  period.  The  parties  mutually  agreed to forego all other
rights  and  benefits   provided   under  the   contractual   joint  venture  as
consideration  for the rescission of the contract.  On September 10, 2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  purchased all
existing  tangible  and  intangible  assets of UAC  Exchange  for the  amount of
Hartcourt's net investment in UAC Exchange,  and signed a promissory note in the
amount of $2,858,286  bearing interest at six per cent (6%) per anum, payable in
quarterly  installments  of $50,000  commencing  November 1, 2001 with a balloon
payment of $2,715,772 due on December 1, 2006. The promissory note is secured by
a security agreement granting to Hartcourt all tangible and intangible  property
of Edda Limited. As of June 30, 2003, Edda paid seven quarterly note payments of
$50,000  each.  As  of  December  31,  2002,   Hartcourt   corrected  the  share
subscription  price of the shares  issued to Edda in the Stock  Sales  Agreement

                                       F-16

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

signed with Edda to raise  capital,  which lead to reducing of $652,274  towards
the promissory note due to Hartcourt. As of June 30, 2003, Edda has paid $60,459
towards interest due on the promissory note due to Hartcourt.

Shanghai  Wind  Information  Company,  Limited  ("WindInfo"):  It  is a  company
incorporated in China.  WindInfo is one of China's  financial  research  content
provider, developing original content through its nationwide network.

On September 18, 2000,  Hartcourt and WindInfo signed a Term Sheet Agreement and
agreed to form a  Joint-Venture  Company  (JVC) to  expand  the  financial  data
service business in China. On the same day,  Sinobull  advanced  $500,000 to Guo
Mao who loaned the same amount to WindInfo on behalf of  Hartcourt.  Pursuant to
the addendum to the Term Sheet  Agreement,  on January 10, 2001,  Hartcourt  and
WindInfo  signed a direct  investment  agreement  whereby  Hartcourt  agreed  to
convert the loan from Guo Mao of $500,000 to a 5% equity ownership in the JVC to
be formed.  Upon further  negotiations  between the two parties,  Hartcourt  and
WindInfo have mutually agreed to terminate the Term Sheet Agreement of formation
of JVC and  WindInfo  agreed  to return  Hartcourt's  contribution  of  $500,000
towards  its  investment  in the JVC.  As of June 30,  2003,  WindInfo  returned
$60,241 to Hartcourt via Sinobull Information.  Both parties are negotiating, on
a friendly  basis,  to an  acceptable  payment plan for Hartcourt to receive the
remainder of its loan during the year 2003.

Equis International  Inc.((R)), is incorporated in US, a wholly owned subsidiary
of a Nasdaq  listed  company of Reuters  Group PLC,  signed on June 1, 2001,  an
International  Distribution Agreement with Hartcourt including Sinobull Group in
Shanghai,  Beijing  and Hong  Kong,  a  non-exclusive  distributor  of  licensed
products  within the  People's  Republic of China (PRC)  except in Hong Kong and
Taiwan,  and grants to Hartcourt a non-exclusive  right to market and distribute
the licensed  products in the PRC to  sub-distributors.  The initial term of the
agreement  is  for  three  years.   Under  the  terms  of  the  agreement  Equis
International also granted Sinobull Group conditional  territory exclusivity for
a period of twelve months for the Chinese versions of MetaStock  products within
the Greater  China  market.  Hartcourt's  remuneration  for the sale of licensed
products will be the  difference  between the selling price to its customers and
Hartcourt's  discounted purchase price as agreed between Hartcourt and Equis. As
of June 30, 2003,  Hartcourt is planned to rescind the  agreement so as to focus
on the IT Products Marketing Group

MEDIA TECHNOLOGY SERVICES GROUP:

The Media  Technology  Services Group mainly consists of six (6) entities,  they
are  Ai-Asia   Inc.,  ,   StreamingAsia   Limited,   LogicSpace   Asia  Limited,
SyndicateAsia Limited., Empact Solutions Inc., and Beijing Total Solution System
Ltd. The Media  Technology  Services  Group provides a  comprehensive  real-time
audio  and  video  delivery  (Streaming  Media)  solution  along  with  Internet
consulting  and  web  application  development  to  businesses,   professionals,
organizations,  web sites and content publishers. As of June 30, 2003, Hartcourt
has disposed of StreamingAsia Limited, LogicSpace Asia Limited and SyndicateAsia
Limited for its exited this business sector.

AI-Asia Inc. ("AI-Asia"): On August 20, 2001, Hartcourt established a new wholly
owned subsidiary AI-Asia Inc. to hold and develop assets of the Media Technology

                                       F-17

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

Services  Group.  AI-Asia's  objective  is to  identify,  develop,  and maintain
first-mover advantages in technologies,  products and services for corporate and
consumer Internet deployment.

Empact  Solutions,  Inc.  ("Empact"):  Empact is a US company,  aims to help its
customers improve business management through smart, efficient, and effective IT
management. It is founded by IT outsourcing and management  professionals,  data
mining pioneers, and experts in the fields of systems and application management
technologies.  On April 30, 2000, Harcourt executed a Subscription Agreement and
Investment  Representation  and agreed to subscribe  and purchase  three hundred
(300)  shares of Class B  Convertible  Preferred  Stock of Empact,  at par value
$0.001 per share for  $300,000.  Hartcourt has  determined  that at this time to
increase its  investment in Empact would not be  advantageous  to the company or
its shareholders.  On January 7, 2002, Empact received  $7,500,000 as the second
round of funding from the venture capital partners for further  expansion of its
business.  In  March  2002,  Empact  launched  the  EyeQTM  service  to  provide
independent  service quality audit and analysis  across IT utilities  (networks,
servers, infrastructures),  applications and business processes.The accompanying
financial  statements  at  June  30,  2003  reflect  Hartcourt's  investment  of
$300,000.

Beijing Total Solution System,  Ltd.  ("TSS"):  It is a company  incorporated in
China. On September 15, 2000, Hartcourt and TSS signed a Term Sheet Agreement to
form a  Joint  Venture  Company  (JVC)  to  develop  web-casting  solutions  and
broadband  enabling  technology in China.  Hartcourt  agreed to contribute  $2.4
million for 60%  ownership  interest in the JVC. On December 1, 2000,  Hartcourt
and TSS  signed  a loan  agreement  and  Hartcourt  advanced  $70,000  as a loan
(interest  free) to support TSS's 2000 marketing  plan, the loans is convertible
into 5%  ownership  of  TSS.  Upon  contribution  of the  remaining  $2,330,000,
Hartcourt  could own the  additional 55% shares of the JVC. As of June 30, 2003,
Hartcourt has not converted its loan into an investment of 5% in TSS.  Hartcourt
has not exercised its right to subscribe for the additional 55% of the ownership
interest  in  the  JVC  and  such  right  has  subsequently  been  lapsed.   The
accompanying  financial statements reflect Hartcourt's loan of $70,000 to TSS as
of June 30,  2003.  Hartcourt  does not intend to acquire any further  ownership
interest in TSS. Both parties are negotiating to an acceptable  payment plan for
Hartcourt to receive its loan, during the year 2003.

HARTCOURT CAPITAL GROUP:

On August 8, 2000, Hartcourt  established  Hartcourt Capital Inc, a wholly owned
subsidiary  incorporated  in BVI. On January 25,  2002,  Hartcourt  Capital Inc.
purchased   Sinobull.com  Limited  from  Sinobull  Group  as  its  wholly  owned
subsidiary and changed its name to Hartcourt  Capital Limited.  On July 1, 2002,
Hartcourt  Capital Inc.  purchased  Fintel  International  Limited,  a Hong Kong
company,  from a third party as its wholly owned subsidiary and changed its name
to Hartcourt  Capital Asia Limited.  To cut-down  costs and to get closer to our
potential  acquisition  targets, in July 2002, Hartcourt  established  Hartcourt
Investment Management (Shanghai) Co., Ltd in China, a wholly owned subsidiary of
Hartcourt Capital Inc. to act as its executive office.

China Report Magazine - China Report magazine, is an English-language  magazine,
published  quarterly,  is  entirely  focused on the risks and  opportunities  of

                                       F-18

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

investing  in  China.  It pays  particular  attention  to the  operations  of US
publicly-listed Chinese companies and other China assets having access to the US
and European capital markets,  as well as profiling the industries of which they
operate in. It  identifies  investment  opportunities  and provides an essential
source of objective  market  intelligence and analysis of the economic and legal
environments that assists readers in making informed investment decisions. China
Report is distributed  primarily in North America and Europe,  sent each quarter
to an exclusive list of institutional and retail investors.  The second issue of
the  magazine is  published  in June,  2003 and is  available  both in print and
online  (Hartcourt's  website).  As of June 30,  2003,  the  magazine is free of
charge.

ONLINE EDUCATION GROUP:

On June 18, 2001,  Hartcourt executed a Revenue Sharing Agreement in cooperation
with Northern Jiaotong University and California State  University-Fullerton  to
jointly  develop  education  projects and  introduce  American  career  training
courses and post-graduate business programs in China. Hartcourt is to receive 5%
on the tuition  income as its revenue  sharing for the  project.  The project is
intended to offer prestigious  American education  programs in China,  utilizing
one of the online  education  licenses awarded by China's Ministry of Education.
The project plan to offer both  certificates  and degree  programs  with courses
designed for relevance in today's  business  world.  Coursework  will be offered
initially  in the  classroom  and later  expanded  online.  As of June 30, 2003,
courses are not started. Hartcourt has advanced $100,000 without any interest or
collateral  in 2001.  The  fund is used  towards  the  working  capital  for its
investment  in this  project as of June 30,  2003.  The  accompanying  financial
statements as of June 30, 2003 reflect Hartcourt's investment of $100,000 in the
education  project.  The total  financial  commitments of Hartcourt and terms of
payment on this project are currently being  negotiated  between the parties and
expect to be finalized by end of 2003.

OTHER DIVESTED VENTURES:

Elephant Talk Limited ("ElephantTalk"): ElephantTalk (OTCBB: ETLK), is a leading
telecommunications  company  located and  operated in Hong Kong with  offices in
Cerritos,  of California  and switching  facilities in China,  Hong Kong,  U.S.,
Taiwan and Singapore.  On May 16, 2001,  Hartcourt and  ElephantTalk  executed a
Sale and Purchase  Agreement  whereby  Hartcourt  acquired 51% of the  ownership
interest in ElephantTalk for a total consideration of $4,194,000.

Pursuant to an Agreement of Merger and Plan of Reorganization,  effective August
27, 2001, and through the subsequent transaction that closed on January 4, 2002,
Staruni Corporation, a California corporation merged with Elephant Talk Limited.
Staruni was the surviving  corporation  and  continued  its corporate  existence
under the laws of California. On January 9, 2002, Staruni filed a Certificate of
Amendment of Articles of  Incorporation  to amend its corporate name to Elephant
Talk Communications,  Inc. (ETCI). This name change was done in conjunction with
the merger, and to emphasize that the new focus of the ETCI will be the business
of Elephant  Talk Limited.  Pursuant to the terms of the merger,  each holder of
ordinary shares of ElephantTalk  common stock,  par value of HK$1 (One Hong Kong
Dollar) immediately prior to the effective time of the merger date, by virtue of
the merger and without any action on the part of such holder, received as of the

                                       F-19

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

merger date, such number of shares of common stock of ETCI, no par value, as the
number of shares of  ElephantTalk  common  stock  owned by such holder as of the
merger  date.  Collectively,   following  the  merger,  the  former  holders  of
ElephantTalk common stock held an aggregate of 90% of the issued and outstanding
shares of ETCI's common stock.  The merger caused no change in any of the shares
of the  ETCI's  common  stock  outstanding  on the  merger  date,  and no  other
securities were converted as a result of the merger.  Prior to the completion of
the merger  with  Staruni,  on January 2, 2002,  Hartcourt  purchased  7,500,000
shares of  Elephant  Talk  Limited  from a  shareholder  for a note  payable  of
$140,595  bearing an annual interest rate of 8%. At the conclusion of the merger
on January 4, 2002, Hartcourt retained a 51.7% ownership in ETCI.

However,  on October 21, 2002,  Hartcourt has decided to divest the relationship
with ETCI, via  distributing  of 5 million shares of ETCI that it still retained
as  dividends  to all of its  shareholders.  Furthermore,  on October 23,  2002,
Hartcourt  and ETCI has  completed  an agreement  in which  Hartcourt  agreed to
return to ETCI 12,895,579  shares of ETCI in exchange for 2 promissory  notes of
$1,250,000  and  $140,595  plus  4,756,058  shares  of HRCT held by ETCI and its
shareholders.  As a result, as of October 23, 2002,  Hartcourt has completed its
divesture of ETCI and no longer has any interest in ETCI.

Acquisitions and Partnerships Disclaimer:

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

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

FUNDING:

The following entities have provided  substantial  capital and cash flows to the
Company in the past and in the future. The management has conducted due diligent
work and believes that these funding are perfectly  legal.  The funding  sources
are not  related to any  illegal  activities,  such as  drug-related  money,  or
terrorist organizations.

Swartz Private  Equity,  LLC ("Swartz") - Swartz is an  institutional  financing
company, incorporated in Delaware,  specializing in private placement and equity
credit line for public  companies..  On November  3, 1999,  Hartcourt  signed an

                                       F-20

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

Investment Agreement with Swartz. Swartz agreed to purchase from Hartcourt, from
time to time,  shares of  Hartcourt's  common  stock,  as part of an offering of
common stock by Hartcourt to Swartz,  for a maximum aggregate offering amount of
$25,000,000.  These funds will be used to satisfy  Hartcourt's  working  capital
requirements  and  complete  acquisitions  of Internet  related  operations.  On
January 5, 2000, Hartcourt and Swartz agreed to increase the equity line funding
to $35,000,000 to provide working capital and planned  acquisitions of Hartcourt
subsidiaries. As of June 30, 2003, Hartcourt has not utilized this equity credit
line.

PYR  Management  LLC  ("PYR") - It is a company  incorporated  in  Delaware.  On
January 26, 2000,  Hartcourt  completed a private  placement of 227,445 Units of
equity,  each unit of equity consisting of a Class I and a Class II Warrant,  to
PYR for $3,000,000 pursuant to a Regulation D Subscription Agreement. On January
27, 2000,  Hartcourt received $2,743,000 from PYR to be used for working capital
requirements  of Hartcourt.  On February 4, 2000 Hartcourt filed a Form 8-K with
the SEC. On February  21,  2001,  Hartcourt  and PYR  Management  entered into a
Letter  Agreement  whereby the parties agreed on the maximum number of Units PYR
can receive under the reset provisions of the Subscription  Agreement.  Pursuant
to the terms of the  agreement,  the quantity of Units and the exercise price of
the warrants will no longer reset.  The final amount of Units that can be issued
shall be 4,000,000  shares of common stock and 4,000,000  Class I Warrants.  The
cap amount shall be 8,000,000  shares of common stock (on a "post-split"  basis)
including Class I warrants. As a result of reset calculations,  Hartcourt issued
on March 6, 2001 an additional  930,784 shares and on May 18, 2001 an additional
1,035,308  shares of common stock for a total of 4,000,000 shares as of June 30,
2003 and 4,000,000  warrants  exercisable at $0.69375 per share of common stock.
No warrants  have been  exercised to convert  into common  shares as of June 30,
2003.

Edda Limited ("Edda"):  On December 26, 2000, Hartcourt and Edda, a BVI company,
signed a Stock  Sale  Agreement  (Agreement)  whereby  Hartcourt  agreed to sell
4,000,000 restricted shares of its common stock as a block to Edda at the agreed
price of fifty cents ($0.50) per share.  Pursuant to the terms of the Agreement,
Hartcourt will deliver to Edda the requisite number of common shares  restricted
under the Rule 144 of SEC  regulations  upon  receipt  of the full and  complete
purchase  price in the amount of  $2,000,000.  On October  31,  2001,  Hartcourt
issued an  additional  1,363,636  common  shares valued at $0.22 per share for a
subscription receivable of $300,000. On March 4, 2002, Hartcourt and Edda signed
a new Stock Sale Agreement whereby Hartcourt agreed to sell 5,000,000 restricted
shares  of its  common  stock as a block to Edda at the  agreed  price of twelve
cents  ($0.12) per share or  $600,000.  The  accompanying  financial  statements
reflect that Hartcourt received $2,326,819 from Edda as of December 31, 2002.

However,  during the 2002 audit,  Hartcourt  found that the issued  share prices
should have been  calculated  differently  according  to the  agreement  and its
addendum.  Therefore, the correct price of 4,000,000 restricted shares issued on
December 26, 2000 and the 1,363,636 restricted shares issued on October 31, 2001
and 5,000,000  restricted shares issued on March 4, 2002 should have been $0.28,
$0.095 and $0.085 per share  respectively.  As a result,  Hartcourt has adjusted
the additional  paid-in capital and subscription  receivable  respectively as of
December 31, 2002. No share has been issued during the year of 2003.


                                       F-21

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

Enlight Corporation ("Enlight"):  On May 9, 2002, Hartcourt and Enlight signed a
Stock Purchase  Agreement whereby Hartcourt agreed to sell 5,000,000  restricted
shares of its common  stock as a block to  Enlight  at the price of eight  cents
($0.08) per share.  However,  as Hartcourt share price kept decreasing,  the two
sides have agreed to revise the  agreement on 10 October  2002.  Pursuant to the
terms of the new  agreement,  Enlight will purchase  $1,000,000  worth of common
shares of Hartcourt,  restricted  under Rule 144 and/or Reg S  regulation,  at a
discount to current  market price.  As of June 30, 2003,  Hartcourt has received
$1,000,000  from  Enlight  and agreed to issue  2,417,520  restricted  shares to
Enlight each month starting  December  2002. As of June 30, 2003,  Hartcourt has
issued  seven  installments  (16,922,640  shares)  of the  restricted  shares to
Enlight as in accordance with the agreement.

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

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 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 2002 Form 10-KSB.

During  the  second  quarter  ended on June 30,  2003,  the  Company  acquired a
controlling  interest  in  both  of  NewHuaSun  and  GuoWei.  Through  the  same
complicated  mechanism as used by Hartcourt in the acquisition of Huaqing in the
first quarter ended on March 31 2003, this  acquisition  also  consummated via a
proxy  exercise.  Hartcourt  obtained  voting  rights proxy for 10% of the total
equity interests of each recently acquired  companies from few shareholders in a
Shareholders and Board of Directors meeting,  in addition to the purchase of 45%
of the total equity  interests of each companies.  Management  believes with the
10% proxy right and 45% equity  interest  purchased,  Hartcourt can  demonstrate
control  over  those  recently  acquired   companies  and  treats  them  as  its
controlling  subsidiaries  (See Note # 4, Operating  Risks).  In accordance with
FASB  #  94,  these  recently  acquired  companies'   financial  statements  are
consolidated  under the operations of Hartcourt (see Note # 1,  Organization and
Nature of Operations).  The acquisition has a significant  financial implication
to Hartcourt's  operations as to Hartcourt's sales operating results, and assets
(See Note # 3, Key Factors on the  Company).  As the Company is a public  traded
entity in the United States, it is required to disclose such a major acquisition
event on Form 8-K with the Securities and Exchange  Commission under the federal
securities  laws of the United  States.  The disclosure  should include  audited
financial  statements of NewHuaSun and GuoWei, the recently acquired entity, for
the two most recent  fiscal years and any interim  periods  prior to the date of
such  an  acquisition.  Such a  disclosure  should  also  include  in pro  forma
financial  information  showing  the effect of the  acquisition.  As of June 30,


                                       F-22

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

2003,  such required  audited  financial  statements and the pro forma financial
information have not been filed with the SEC.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present  fairly the Balance  Sheets of The  Hartcourt
Companies,  Inc. and its subsidiaries as of June 30, 2003 and December 31, 2002,
and the results of their  operations  and their cash flows for the three  months
and six  months  ended  June 30,  2003 and  2002,  respectively.  The  financial
statements for the three and six months ended June 30, 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  (Disposed  off in June of  2003),  its 45%  owned
subsidiary  HuaQing  Corporate  Development  Co.,  Ltd.,  45%  owned  subsidiary
GuangDong  NewHuaSun  Computer Co., Ltd., 45% owned  subsidiary  Shanghai GuoWei
Science and  Technology  Co.,  Ltd.  and its wholly owned  subsidiary  Hartcourt
Capital Inc.

The  financial  statements  for the three and six months ended June 30, 2002 are
consolidated  to include the  accounts of The  Hartcourt  Companies,  Inc.,  its
58.53% owned subsidiary Financial Telecom Limited, its 85% owned subsidiary Asia
Top of StreamingAsia  Limited Group,  its 51.7% owned  subsidiary  Elephant Talk
Communications,  Inc., its wholly owned  subsidiary  Sinobull.com  Inc., and its
66.7% owned subsidiary HCTV.

The results of  operations  for the three and six months ended June 30, 2003 are
not necessarily indicative of the results to be expected for the entire year.

Certain  2002  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, 2002.

Note 3.   Key Factors on the Company

As of June 30, 2003, the Company has obtained  irreversible  voting rights proxy
(See  Note  11,  Irreversible  Proxy  Statements)  for 10% of the  total  equity
interests of HuaQing, NewHuasun and GuoWei, covers over a period of three years,
from few  shareholders  in a  Shareholders  and Board of Directors  meeting,  in
addition to its purchased of 45% of the equity interests from each of them (Note
# 1 Organization  and Nature of Operations).  Management  believes that with the
proxy rights and 45% equity interest,  the Company can demonstrate  control over
these newly acquired companies and treats them as its controlling  subsidiaries.
In accordance with FASB # 94, these three companies are  consolidated  under the
operations of Hartcourt.

This  consolidation  has a  significant  financial  implication  to  Hartcourt's
operations.   The  accompanied  consolidated  financial  statements  contain  an
aggregate amount of $28,047,163 (99.8% of sales in the group) sales and $185,862

                                       F-23

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

(40% of  operating  profit in the  group)  operating  profit of the three  newly
acquired  companies  for the three months ended June 30, 2003,  and  $33,541,888
(99.1% of sales in the group) sales and $242,588  (87.7% of operating  profit in
the group) operating profit of these three newly acquired  companies for the six
months ended June 30, 2003. In addition, the accompanied  consolidated financial
statements  contain an aggregate  amount of $21,473,746  (63.2% of assets in the
group) assets of these three controlling subsidiaries on June 30, 2003.

Note 4.   Operating risks

The Company's operations are solely conducted in China, 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 ours.

Although the SARS (Severe  Acute  Respiratory  Syndrome)  epidermis has been
controlled  in China,  it is  difficult to assess the  actual/possible  economic
severely impact on the SARS, which incurred between January, 2003 to July, 2003.
Such adverse impact may severely affect the business of China, which Hartcourt's
operations are located.

Note 5.  Foreign Exchange Risks

The Company  prepares its  consolidated  financial  statements  using the United
States Dollars as the reporting currency.  However,  its operations in China are
conducting  their  activities in the 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
significant negative or positive implication.

Note 6.  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 7.  Foreign Corrupt Practices Act

There has been no violation of Foreign Corrupt Practices Act.






                                       F-24

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

Note 8.  Supplemental Disclosure of Non-Cash Financing Activities

                                                    Six Months        Six Months
                                                      Ended             Ended
                                                     June 30,          June 30,
                                                       2003              2002
Cash paid for:                                    -----------       -----------
  Interest                                        $    79,742       $    92,891
  Taxes                                                  --                --
                                                  ===========       ===========

Non-cash operating and financing activities:
  Shares issued to directors or officers for
  compensation and services                       $    48,500       $   439,601
  Shares issued for consulting services               136,054           182,820
  Shares issued for subscription payable              455,000              --
  Shares issued in connection with
  acquisitions (See Note # 1)                       9,852,659              --


Note 9.  Loss per Share
<TABLE>
<CAPTION>
                                             Three Months         Three Months         Six Months         Six Months
                                                Ended                Ended                Ended             Ended
                                            June 30, 2003        June 30, 2002        June 30, 2003     June 30, 2002
                                        ------------------   ------------------    -----------------   ---------------

<S>                                     <C>                  <C>                   <C>                 <C>
Net gain/(loss)                         $          463,387   $       (1,038,474)   $         276,471   $    (1,820,303)
Effects of dilutive securities                         -                     -

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

Weighted average shares outstanding            124,149,929           80,033,267          112,891,929        77,108,098
                                        ==================   ==================    =================   ===============

Basic and dilutive earnings per share   $            0.004   $           (0.013)   $           0.003   $        (0.024)
                                        ==================   ==================    =================   ===============
</TABLE>

At June 30, 2003 and 2002, the Company had 9,733,530 and 4,733,530  warrants and
options   outstanding,   each  exercisable  into  one  share  of  common  stock,
respectively.

Note 10.  Segment and Related Information:

The  Company's  operations  are all  located in China.  The Company has five (5)
reportable  segments with revenues  generated in China (See Note # 4,  Operating
Risks and Note # 5 Foreign Exchange Risks). Each segment is a strategic business
that the Company  manages  separately  because each business  develops and sells
products to a specific  market.  The reportable  segments are as follows:  a) IT
Products Marketing Group,  provides services to customers to build their own PCs
with components,  technology and after sales support;  b) Financial  Information
Services Group,  provides  financial  content through various sources  including
television,   internet  and  wireless  access  systems;  c)  Telecommunications,
provides comprehensive  telecommunications services, which was divested in 2002;
d) Media  Technology  Group,  provides  internet  related  software  development
services with an expertise in audio and video  streaming to  businesses.  e) The

                                       F-25

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

Consulting,  Online  Education  Group and  Hartcourt  Capital  Groups  operating
segments do not meet the quantitative threshold for a reportable segment and are
therefore  included in the "Other" category.  The principal market and operation
for the  Company's  products  and services is located in China.  Foreign  sales,
primarily in China amounted to $33,541,888  during the six months ended June 30,
2003 (see Note # 1, HuaQing,  NewHuaSun and GuoWei's acquisition,  and Note # 2.
Basis  of  Presentation,  Note # 3 Key  Factors  on the  Company).  The  Chinese
operations  account for $21,473,746 of consolidated  total assets as of June 30,
2003 (See Note # 1 HuaQing,  NewHuaSun and GuoWei's  acquisition).  As Hartcourt
divested its  relationship  with Elephant Talk  Communications  Inc.  (ETCI),  a
former  controlling  subsidiary on October 23, 2002, the segment  information of
the  first  six  months  ended  June 30,  2003 does not  include  any  financial
information  of ETCI.  The  accounting  policies of the segments are the same as
described in the summary of significant accounting policies.

The Company  evaluates  segment  performance  based on income  from  prospective
operations.   All  inter  company   transactions   between  segments  have  been
eliminated.  As a result,  the  components of operating loss for one segment may
not be comparable to another segment.

Segment results for the six months ended June 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                    IT-Products      Tele-           Financial      Streaming       Other        Total
                                     Marketing     Communication     Services        Media
                                    -----------    -------------    ----------   --------------   --------   -------------
<S>                                <C>            <C>              <C>            <C>           <C>          <C>

2003
----
Net sales                          $ 33,541,888   $    --          $  241,211     $     --      $    51,359  $ 33,834,458

Gain/(loss) from operations             242,588        --            (122,681)      (26,861)        183,425       276,471

Depreciation and amortization             9,773        --              34,348           --            3,129        47,250

Assets                               21,473,746        --           1,730,148        41,461      10,745,231    33,990,586

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

2002
----
Net sales                               --        $  4,208,553     $    705,207   $  99,865     $   329,939  $  5,343,564

Loss from operations                    --          (1,304,705)        (186,450)   (380,031)       (685,843)   (2,557,029)

Depreciation and amortization           --             424,313          845,650     250,421           9,979     1,530,363

Assets                                  --           7,560,119        3,487,282      20,526       2,841,029    13,908,956

Capital expenditures                    --             (72,576)         (25,301)       --              --         (97,877)
                                    --------------------------------------------------------------------------------------
</TABLE>

Note 11.  Irreversible Proxy Statement

Hartcourt has entered into the irreversible proxy statements with Li Zhengzheng,
Zhou Jian and Kan Xiaoming,  who are Chinese  citizens and are  shareholders and
directors of HuaQing,  GuoWei and NewHuaSun  respectively.  Legal opinion on the
irreversible  proxy  statements from Zhong Lun Law Firm, a Chinese law firm, was
obtained.  The legal  opinion  stated that in general  practice of contract  law

                                       F-26

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

under the Laws of People's Republic of China (PRC), despite the proxy statements
are irreversible, the above named persons are still legally entitled to withdraw
the authorizations made under the Statements,  but on the other hand,  Hartcourt
has the rights to sue for the economic and legal  liabilities of the above named
person accordingly.

Note 12.  Litigations

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

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

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of Pego's  alleged  obligation  on a  promissory  note that is asserted to be in
non-financial default. The complaint alleges that Hartcourt executed a guarantee
of obligation of Pego which obligation went into non-financial default. Comerica
entered the stipulation for entry of judgment to enforce a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated  to pay down the debt.  The case is ongoing  and the  Company has not
accrued any of the  guaranteed  payments in its financial  statements as of June
30, 2003.

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

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.
Hogue via check in the amount of $40,500 for such  finder's  fee,  but Mr. Hogue
demanded  that he be paid in shares of  Hartcourt  with the  amount of shares in
dispute.  Hartcourt's  counsel in Florida failed to timely file an Answer to the
complaint,  and default  judgment in the amount of $2,901,752 was entered in the
trial court on January 31, 2001  without a trial and despite  serious  questions
raised by Hartcourt as to the propriety of the exercise of jurisdiction  over it
by a Florida court.  Hartcourt brought a motion to set aside the default,  which
was  denied.  Hartcourt  appealed  the  judgment  entered by the trial  court on
multiple grounds. On June 7, 2002, the Florida Appellate Court ruled in favor of
Hartcourt and reversed the judgment in its  entirety,  finding that Florida does
not have jurisdiction over Hartcourt. The case is no longer active.

Apollo  Financial  Network,  LLC v. The Hartcourt  Companies,  Inc., Los Angeles
Superior Court Case No. BC 245398, filed on February 21, 2001,

Apollo Financial Network filed an action for breach of contract arising out of a
consulting agreement, which was canceled in January 1999. The matter was settled
when the Company  stipulated  to entry of  judgment  against it in the amount of
$11,500.00,  which  represented  an  amount  less  than the  projected  costs of
defense. Judgment in such amount was entered against the Company on November 20,
2002.  The case is ongoing and the Company has not accrued any of the guaranteed
payments in its financial statements as of June 30, 2003.

                                       F-27

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2003 (UNAUDITED)

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.  The company's Reply to the
complaint is due on August 5, 2003.  The company plans on vigorously  contesting
these allegations,  but realizing the significant defense costs involved,  it is
offering a settlement equaling the approximate costs of defense.

Manu Ohri v. The Hartcourt Companies, Inc., et al., California Labor Commission

Manu  Ohri,  the  former  CFO of  Hartcourt,  has  filed  a labor  claim  in the
approximate amount of $52,000 with the California Labor Commission.  The Company
has contested this claim and is confident that the Labor Commission will deem it
without merit.

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

As  mentioned  in Note # 1,  Organization  and  Nature of  Operations,  that the
Company ceased the operations of many subsidiaries,  during the year of 2002 and
2001. These companies,  not being legally dissolved, are still legal entities as
of June 30,  2003.  The  Company's  subsidiaries  located in various  geographic
locations  in  Hong  Kong,  China  and  BVI,  are  subject  to  different  legal
jurisdictions  and laws.  Each of the  subsidiaries  may  subject  to  potential
claims, or has un-fulfilled obligations or/and litigations due to the cessations
of  operations  and/or  dismissals  of  employees.  No  risk-exposure  study was
performed to identify the related  financial risks and potential  liabilities to
the Company as of June 30, 2003.  The Company  management  and its legal advisor
were neither able to provide a legal  opinion nor an analysis on legal status of
each of these ceased entities.  The financial statements for the period ended on
June 30, 2003 do not include any  adjustments  for the possible  results of this
uncertainty. Potential risks or liabilities exposures of in this area related to
the ceased operating subsidiaries call for a special attention, when reading the
Company's review report for the period ended in June 30, 2003.

Note 13.  Subsequent Events

In July, 2003, the Company starts to have advertising  income generated from its
China Report Magazine.


                                      F-28

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2003 (UNAUDITED)


Part I

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

General

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

Plan of Operation

The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is an  investment  holding and  corporate  development  company  focusing on the
acquisition  of  private  companies  within  high-growth  industries  in  China.
Hartcourt's   strategy  is  to  obtain  operating  profits  via  the  continuing
acquisition  of  controlling  interests  of  existing  companies,   leverage  on
obtaining proxy rights from few shareholders of such private companies (See Note
# 1 Organization and Nature of Operation, Note # 3, Key Factors on the Company).
Hartcourt had accumulated  strategic investments over the past years in a number
of  areas  in China  including:  IT  Product  Marketing,  Financial  Information
Provider,  Media Technology Services,  and Online Education.  Hartcourt plans to
dispose  of all these  operating  divisions,  except  the IT  Product  Marketing
business.

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

Since  mid-1999,  Hartcourt  had been  focused on  assembling  a  collection  of
companies  and services  that  provided  citizens of China with next  generation
communication  services.  Due to limited  resources,  the Company has decided to
focus solely on the IT product  distribution and marketing  business in the next

                                       F-29

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2003 (UNAUDITED)

few years. Other portfolio companies will be divested and dividends,  if any, is
to be distributed back to  shareholders.  During 2003,  Hartcourt  continued its
plan to acquire profitable companies that were in established  industries with a
history of growth. In February 2003, Hartcourt  successfully acquired HuaQing, a
profitable and growing IT service related company, leverage on proxy rights from
few shareholders. In April 2003, Hartcourt signed definite agreements to acquire
NewHuaSun and GuoWei, PC distributors and retailers,  to further consolidate the
marketing position and improve the operating result of the whole Company.  These
acquisitions  are based on 3 years'  "irreversible"  proxy rights (See Note # 1,
Organization  and Nature of  Operations,  Note # 3, Key Factors on the Company).
Management  believes that the uncertainties have been monitored,  when the three
(3) years' proxy right expires.  When  appropriate,  Hartcourt will seek ways to
make  these  entities  become  public  companies  to give  shareholders  optimal
returns.

The  operations  of Hartcourt for the three months and six months ended June 30,
2003 consisted of the operations of FTL (58.53% ownership  interest),  Hartcourt
Companies  Limited  (formerly  known  as  Sinobull.com   Inc.)  (100%  ownership
interest), Ai-Asia Inc. (100% ownership interest), HuaQing Corporate Development
Co., Ltd. (45% ownership interest),  GuangDong NewHuaSun Computer Co., Ltd. (45%
ownership  interest),  Shanghai  GuoWei  Science and  Technology  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.  The  operations  of  StreamingAsia  Limited,  SyndicateAsia  Limited  and
LogicSapce Asia Limited were  discontinued  and disposed off and therefore,  are
shown separately  under  discontinued  operations in the accompanying  financial
statements as of June 30, 2003. The operations of Hartcourt for the three months
and six months ended June 30, 2002  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),  Elephant  Talk  Communications,   Inc.  (51.7%  ownership
interest),  HCTV  (66.7%  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 $28,112,109 and
$33,834,458 for the three months and six months ended June 30, 2003, compared to
$1,795,965  and  $5,343,564  for the same periods in 2002.  Net sales during the
three months and six months ended June 30, 2003 primarily  consisted of 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.  Net sales also  include sale of rental of  equipment,  and the related
Internet  and  telephone  services  provided by FTL; and  consultation  services
rendered by Hartcourt  Capital  Inc..  Net sales during the three months and six
months  ended  June 30,  2002  primarily  consisted  of  revenues  derived  from
providing  telecommunication  services relating to voice, data transmission like
IDD,  pre-paid  calling  cards and ISP  services  to a wide  range of  customers
including major telecommunication  companies in US and Hong Kong. Net sales also
include sale of wireless pagers,  rental of equipment,  and the related Internet
and  telephone  services  provided by FTL;  real-time  financial  data  services
provided by Sinobull  Information  using a  satellite  network to transmit  data

                                       F-30

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2003 (UNAUDITED)

specializes in stock quotes,  futures,  indexes and commodities to its customers
in China;  and  StreamingAsia  providing  web hosting and  software  development
services in audio and video  delivery or  streaming  solutions.  The increase of
sales was mainly  attributed  due to the sales of HuaQing,  NewHuaSun and GuoWei
acquired  in  February  and  April  2003,  although  the  accompanied  financial
statements only include two month's operating result of NewHuaSun and GuoWei.

Cost of sales amounted to $27,012,645  and  $32,343,510 for the three months and
six months ended June 30, 2003 compared to  $1,433,692  and  $4,456,656  for the
same  period in 2002.  Cost of sales for the three  months and six months  ended
June 30, 2003  primarily  included  the costs of IT products  sold to  customers
provided by HuaQing, NewHuaSun and GuoWei; and cost of transmission and Internet
services  provided to FTL customers.  Cost of sales for the three months and six
months ended June 30, 2002  primarily  included  the costs in  providing  resale
arrangements  with  long  distance  providers,   cost  of  leasing  transmission
facilities,  international  gateway  switches voice,  data  transmission and ISP
services offered by ElephantTalk;  cost of wireless pagers, cost of transmission
and  Internet  services  provided to FTL and FWL  customers;  costs  incurred in
providing  financial data services in stock quotes,  futures and  commodities by
Hartcourt  Companies  Limited;  and costs incurred in providing  audio and video
delivery and  streaming  solutions  by  StreamingAsia.  The drop in  operational
margin was mainly  contributed to the lower margin in  distribution  sector when
compared to the margin of telecommunication sector.

Selling,  general and  administrative  expenses  (SG&A):  SG&A were $760,206 and
$1,191,001  for the three months and six months ended June 30, 2003  compared to
$807,772 and  $1,886,928  for the same period in 2002.  Apart from  reduction in
consulting,  legal  and  administrative  costs,  the  significant  decrease  was
primarily  attributed  due to lower expenses  ratio of IT  distribution  sector,
compared to its higher sales amount.

Depreciation and  amortization:  The depreciation and amortization  were $18,550
and $47,250 for the three months and six months ended June 30, 2003  compared to
$1,167,619 and $1,530,363 for the same period in 2002. The significant  decrease
resulted mainly due to the lower equipment  requirements in distribution  sector
in 2003 compared with the higher  equipment  requirements  in  telecommunication
sector in 2002.

Discontinued  operation:  Hartcourt  sold all of its interests in  StreamingAsia
Limited,  SyndicateAsia  Limited  and  LogicSpace  Asia  limited to Yee Fu Laser
Company Limited,  a Hong Kong company,  on June 26, 2003 and recorded a net gain
of $466,655 for the three and six months ended June 30 2003.

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2003 are to fund (by
issuing additional stock) the acquisitions of growth and profitable,  IT related
operating  companies  in  China  (See  Note  # 1,  Organization  and  Nature  of
Operations,  Note # 3, Key Factors on the Company).  During the six months ended
June 30,  2003,  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.

                                       F-31

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2003 (UNAUDITED)

As shown in the accompanying financial statements, Hartcourt incurred a net gain
of $463,387 and $276,471 for the three months and six months ended June 30, 2003
as compared to a net loss of  $1,038,474  and  1,820,303  for the same period in
2002, in addition,  Hartcourt's  current assets exceeded its current liabilities
by  $3,032,598  at June 30,  2003.  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)
dispose all non-profitable assets 3) raise funds in private placements.

Operating  activities:  During the six months ended June 30, 2003, net cash used
by operating  activities increased to $1,305,922 compared to $706,993 during the
same period in 2002. The cash outflow in operating activities resulted primarily
due to the  decrease  of  accounts  payable  of  $4,914,889  and  other  current
liabilities  of $418,949,  netting of the  decrease of  inventory of  $3,867,039
after acquisition of HuaQing, NewHuaSun and GuoWei. There were also gain on sale
of affiliate of $466,655,  increase of accounts  receivable $93,034 and increase
of other receivable  $139,927 by a net gain of $276,471,  loss on abandonment of
property and equipment of $72,371, depreciation of $62,066, minority interest of
$247,504, shares issued in lieu of compensation and increase of deferred revenue
of $17,527.

Investing  activities.  Net cash provided by investing activities during the six
months ended June 30,  2003,  was  $3,221,292  compared to $178,401 for the same
period in 2002.  Cash  provided  during the six months  ended June 30,  2003 was
primarily due to the cash acquired from the  acquisition  of HuaQing,  NewHuaSun
and GuoWei of $2,940,509,  proceeds on notes receivable of $100,000 and proceeds
received on return of  investment  from  investment  of $243,755.  The cash used
during the six months ended June 30, 2003 is due to the purchase of property and
equipment of $30,966 and the cash  decreased  due to Sinobull  Information  Co.,
Limited merged with GTI of $32,006.

Financing  activities.  Net cash provided by financing activities during the six
months ended June 30, 2003 was $4,090,467  compared to $352,663  during the same
period in 2002. Net cash was provided primarily due to proceeds from increase of
bank loans and notes payable amounted to $2,455,749 and $1,354,349 respectively.

As a result of the above activities,  the company  experienced a net increase in
cash of  $6,005,837  for the six  months  ended June 30,  2003.  In spite of the
positive  cashflow  results,  the ability of  Hartcourt  to achieve its on-going
acquisition  strategy is still dependent on its success in obtaining  additional
financing  and  completion of its  re-structuring  plan,  and its  demonstrating
operational  controls over these newly acquired  entities,  via the proxy rights
exercises (See Note # 1,  Organization  and Nature of Operations,  Note # 3, Key
Factors on the Company).





                                       F-32

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2003 (UNAUDITED)


Part II

Item 1.  LEGAL PROCEEDINGS

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

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

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of Pego's  alleged  obligation  on a  promissory  note that is asserted to be in
non-financial default. The complaint alleges that Hartcourt executed a guarantee
of obligation of Pego which obligation went into non-financial default. Comerica
entered the stipulation for entry of judgment to enforce a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated  to pay down the debt.  The case is ongoing  and the  Company has not
accrued any of the  guaranteed  payments in its financial  statements as of June
30, 2003.

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

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.
Hogue via check in the amount of $40,500 for such  finder's  fee,  but Mr. Hogue
demanded  that he be paid in shares of  Hartcourt  with the  amount of shares in
dispute.  Hartcourt's  counsel in Florida failed to timely file an Answer to the
complaint,  and default  judgment in the amount of $2,901,752 was entered in the
trial court on January 31, 2001  without a trial and despite  serious  questions
raised by Hartcourt as to the propriety of the exercise of jurisdiction  over it
by a Florida court.  Hartcourt brought a motion to set aside the default,  which
was  denied.  Hartcourt  appealed  the  judgment  entered by the trial  court on
multiple grounds. On June 7, 2002, the Florida Appellate Court ruled in favor of
Hartcourt and reversed the judgment in its  entirety,  finding that Florida does
not have jurisdiction over Hartcourt. The case is no longer active.

Apollo  Financial  Network,  LLC v. The Hartcourt  Companies,  Inc., Los Angeles
Superior Court Case No. BC 245398, filed on February 21, 2001,

Apollo Financial Network filed an action for breach of contract arising out of a
consulting agreement, which was canceled in January 1999. The matter was settled
when the Company  stipulated  to entry of  judgment  against it in the amount of
$11,500.00,  which  represented  an  amount  less  than the  projected  costs of
defense. Judgment in such amount was entered against the Company on November 20,
2002.  The case is ongoing and the Company has not accrued any of the guaranteed
payments in its financial statements as of June 30, 2003.



                                       F-33

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2003 (UNAUDITED)

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.  The company's Reply to the
complaint is due on August 5, 2003.  The company plans on vigorously  contesting
these allegations,  but realizing the significant defense costs involved,  it is
offering a settlement equaling the approximate costs of defense.

Manu Ohri v. The Hartcourt Companies, Inc., et al., California Labor Commission

Manu  Ohri,  the  former  CFO of  Hartcourt,  has  filed  a labor  claim  in the
approximate amount of $52,000 with the California Labor Commission.  The Company
has contested this claim and is confident that the Labor Commission will deem it
without merit.

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

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
         Audited  financial  statements  of Huaqing  for the year ended 2002 and
         2001 and  un-audited  Pro forma  consolidated  financial  statements of
         Hartcourt for the year ended 2002 and 2001.

                                       F-34

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2003 (UNAUDITED)

    b) Reports on Form 8-K

         On February  25,  2003,  Hartcourt's  acquisition  of 45% of  ownership
         interest in Shanghai HuaQing Corporation Development Co., Ltd. SEC File

         Number  001-12671;   File  Number  03578843.   Incorporated  herein  by
         reference.

         On April 25, 2003, Hartcourt's changes in Board of Directors.  SEC File
         Number  001-12671;   File  Number  03663461.   Incorporated  herein  by
         reference.

         On May 12, 2003,  Hartcourt's  acquisition of 45% of ownership interest
         in GuangDong  NewHuaSun  Computer Co., Ltd. SEC File Number  001-12671;
         File Number 03691622. Incorporated herein by reference.

         On May 20, 2003,  Hartcourt's  acquisition of 45% of ownership interest
         in Shanghai  GuoWei  Science and  Technology  Co., Ltd. SEC File Number
         001-12671; File Number 03711558. Incorporated herein by reference.

         On June 4, 2003,  Sinobull  Information Co., Ltd, one of the subsidiary
         of Hartcourt, merged with Genius Technology International Ltd. SEC File
         Number  001-12671;   File  Number  03732871.   Incorporated  herein  by
         reference.

         On June 5, 2003,  Hartcourt's  changes of certified public accountants.
         SEC File Number 001-12671; File Number 03752052. Incorporated herein by
         reference.



                                   SIGNATURES

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


                                The Hartcourt Companies, Inc.

Date:  August 4, 2003           By: /s/ Alan V. Phan
                                    --------------------------------
                                    Dr. Alan V. Phan
                                    Chairman


Date:  August 4, 2003           By: /s/ David Chen
                                    --------------------------------
                                    David Chen
                                    Chief Executive Officer and
                                    Principal Accounting Officer


                                       F-35

<PAGE>
                                302 CERTIFICATION

I, David Y. Chen, certify that:

1.   I have  reviewed  this  transition  report  on  Form  10-QSB  of  HARTCOURT
     COMPANIES INC;
2.   Based on my knowledge,  this transition  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this transition report;
3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  transition  report,  fairly  present in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     transition report;
4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
          a.   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               transition report is being prepared;

          b.   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this transition  report (the  "Evaluation  Date");
               and
          c.   presented in this  transition  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;
5.   The registrant's  other  certifying officers and I have disclosed, based on
     our  most recent evaluation,  to  the  registrant's  auditors and the audit
     committee of the  registrant's board  of directors  (or  persons performing
     the equivalent functions):
          a.   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and
          b.   any fraud,  whether or not material,  that involves management or
               other  employees who have a significant role in the  registrant's
               internal controls; and
6.   The registrant's  other  certifying  officers and I have  indicated in this
     transition   report  whether  or not  there  were  significant  changes  in
     internal  controls or in  other  factors  that could  significantly  affect
     internal  controls  subsequent  to  the date of our most recent evaluation,
     including any corrective actions with  regard  to  significant deficiencies
     and material weaknesses.


Date:  August 4, 2003              By: /s/ David Chen
                                       --------------------------------
                                       David Chen
                                       Chief Executive Officer and
                                       Principal Accounting Officer


<PAGE>
                                302 CERTIFICATION

I, Richard Yan, certify that:

1.   I have  reviewed  this  transition  report  on  Form  10-QSB  of  HARTCOURT
     COMPANIES INC;
2.   Based on my knowledge,  this transition  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this transition report;
3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  transition  report,  fairly  present in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     transition report;
4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
          a.   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               transition report is being prepared;

          b.   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this transition  report (the  "Evaluation  Date");
               and
          c.   presented in this  transition  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;
5.   The registrant's  other  certifying officers and I have disclosed, based on
     our  most recent evaluation,  to  the  registrant's  auditors and the audit
     committee of the  registrant's board  of directors  (or  persons performing
     the equivalent functions):
          a.   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and
          b.   any fraud,  whether or not material,  that involves management or
               other  employees who have a significant role in the  registrant's
               internal controls; and
6.   The registrant's  other  certifying  officers and I have  indicated in this
     transition   report  whether  or not  there  were  significant  changes  in
     internal  controls or in  other  factors  that could  significantly  affect
     internal  controls  subsequent  to  the date of our most recent evaluation,
     including any corrective actions with  regard  to  significant deficiencies
     and material weaknesses.


Date:  August 4, 2003              By: /s/ Richard Yan
                                       --------------------------------
                                       Richard Yan
                                       Acting Chief Financial Officer and
                                       Financial Controller