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

                                   FORM 10-QSB


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

                 For the quarterly period ended: March 31, 2001


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

        For the transition period from ______________ to _______________


                        Commission File Number: 001-12671


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

                                      Utah
         (State or other jurisdiction of incorporation or organization)

                                   87-0400541
                        (IRS Employer Identification No.)

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

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days: Yes [ X ] No [ ].

As of March 31, 2001, The Hartcourt  Companies,  Inc. had  66,565,374  shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                                            Yes [  ]                 No [ X ]








                                      F-1
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                              Report on Form 10-QSB
                                For quarter ended
                                 March 31, 2001
                                                                         Page
                                                                         ----
PART 1    FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets at March 31, 2001 (Unaudited)
          and December 31, 2000                                           F-3

          Consolidated Statements of Operations for the Three Months
          ended March 31, 2001 and 2000 (Unaudited)                       F-5

          Consolidated Statements of Shareholders' Equity for the
          Three Months ended March 31, 2001 (Unaudited)                   F-6

          Consolidated Statements of Cash Flows for the Three Months
          ended March 31, 2001 and 2000 (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-25


PART II  OTHER INFORMATION

Item 1.       Legal Proceedings                                          F-28

Item 2.       Changes in Securities                                      F-30

Item 3.       Defaults upon Senior Securities                            F-30

Item 4.       Submission of Matters to Vote of Security Holders          F-30

Item 5.       Other Information                                          F-30

Item 6.       Exhibits and Reports on Form 8-K                           F-30

Signatures                                                               F-31











                                      F-2
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

Part I
Item 1


                                                March 31, 2001    December 31,
                                                  (Unaudited)         2000
                                                --------------   --------------


ASSETS

Current assets:
   Cash and cash equivalents                     $     154,802    $     402,993
   Accounts receivable, net                            198,373          146,891
   Inventory                                            60,159           66,331
   Note receivable                                      70,000           70,000
   Prepaid expenses and other                          116,692           56,378
   Due from related parties                            157,401          176,697
                                                --------------   --------------

Total current assets                                   757,427          919,290
                                                --------------   --------------

Property and equipment, net                            682,869          736,259

Investments, net                                     1,074,514        1,258,050

Other Assets
   Advances pursuant to mergers                      3,721,168        3,019,884
   Goodwill, net                                     2,780,508        2,856,786
   Computer software costs, net                        912,040          970,172
                                                --------------   --------------

Total other assets                                   7,413,716        6,846,842
                                                --------------   --------------


Total assets                                     $   9,928,526    $   9,760,441
                                                --------------   --------------



          See accompanying notes to consolidated financial statements.









                                      F-3
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                March 31, 2001    December 31,
                                                  (Unaudited)         2000
                                                --------------   --------------


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                               $     669,889    $     723,647
  Deferred revenue                                     220,278          112,456
  Notes payable, current portion                        23,777           33,788
  Accrued expenses and other current liabilities       121,642          130,632
  Payables to related parties                        2,351,012        2,146,454
                                                --------------   --------------

Total current liabilities                            3,386,598        3,146,977

Notes payable, net of current portion                  609,867          609,867
                                                --------------   --------------

Total liabilities                                    3,996,465        3,756,844
                                                --------------   --------------

Contingencies

Minority interest                                      649,682          757,475

Shareholders' Equity
 Preferred stock:
 Original preferred stock,  $0.01  par value
   1,000 authorized,  issued and outstanding                10               10
 Common stock, $0.001 par value, 100,000,000
   shares authorized;  64,516,646 shares and            64,517           62,176
   62,176,044 shares issued  and outstanding
   at March 31, 2001 and December 31, 2000
 Common stock  to be issued 4,000,000 shares
   at March 31, 2001 and December 31, 2000               4,000            4,000
 Stock subscriptions receivable                    (11,687,179)     (12,192,094)
 Treasury stock, at cost, 3,557,832 shares at
   March 31, 2001 and December 31, 2000             (1,918,634)      (1,918,634)
 Additional paid-in capital                         63,219,481       62,464,649
   Accumulated deficit                             (44,399,816)     (43,173,985)
                                                --------------   --------------

Total shareholders' equity                           5,282,379        5,246,122
                                                --------------   --------------

Total liabilities and shareholders' equity       $   9,928,526    $   9,760,441
                                                ==============   ==============


          See accompanying notes to consolidated financial statements.





                                      F-4
<PAGE>

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

                                                       Three Months Ended
                                                            March 31,
                                                -------------------------------
                                                     2001             2000
                                                --------------   --------------

Net sales                                        $     253,361    $     348,228

Cost of sales                                            4,840          116,541
                                                --------------   --------------

Gross profit                                           248,521          231,687
                                                --------------   --------------

Operating expenses:
   Selling, general and administrative               1,245,240        1,804,237
   Depreciation and amortization                       133,133          105,228
   Impairments                                               -                -
                                                --------------   --------------

Total operating expenses                             1,378,373        1,909,465
                                                --------------   --------------

Loss from continuing operations                     (1,129,852)      (1,677,778)

Other income (expense):
   Equity in loss of affiliate                        (183,536)         (41,651)
   Interest expense                                    (40,511)         (38,249)
   Interest income                                       5,979            8,231
   Other                                                14,296            9,007
                                                --------------   --------------

Total other income (expense)                          (203,772)         (62,662)
                                                --------------   --------------
Loss from continuing operations
  before minority interest                          (1,333,624)      (1,740,440)

Less:loss in subsidiary attributed
  to minority interest                                 107,793           69,302
                                                --------------   --------------
Loss before income taxes                            (1,225,831)      (1,671,138)

Income taxes                                                 -                -
                                                --------------   --------------
Net loss                                         $  (1,225,831)   $  (1,671,138)
                                                ==============   ==============
Basic and fully diluted loss per
  common share                                   $       (0.02)   $       (0.03)
                                                ==============   ==============
Weighted average number of shares                   63,086,642       52,661,376
  outstanding - Basic and fully diluted         ==============   ==============

          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>           <C>       <C>         <C>            <C>


                                                                     Common
                                                        Additional    Stock                                                Total
                           Common Stock  Preferred Stock  Paid-In  Subscriptions     Treasury Stock       Accumulated  Shareholders'
                      ------------------ ---------------                          ---------------------
   Description         Shares    Amount  Shares  Amount   Capital   Receivable     Shares      Amount       Deficit       Equity
--------------------  --------- -------- ------- ------ ----------- ------------  --------- -----------   -----------  -------------
Balance -
December 31, 2000    66,176,044 $ 66,176   1,000 $   10 $62,464,649 $(12,192,094) 3,557,832 $(1,918,634) $(43,173,985)  $ 5,246,122

Shares issued for
 consulting services     86,054       86       -      -     152,087            -          -           -             -       152,173
Stock subscriptions
 received                              -       -      -           -      504,915                                            504,915
Shares issued to
 investors              930,784      931       -      -        (931)           -          -           -             -             -
Shares issued in
 connection with        805,802      806       -      -     499,194            -          -           -             -       500,000
 acquisitions
Shares issued to
 directors in lieu      117,962      118       -      -     104,882            -          -           -             -       105,000
 of compensation and
 for services
Shares issued in
 connection with        400,000      400       -      -        (400)           -          -           -             -             -
 cashless exercise
 of warrants in
 settlement of
 litigation
Net loss                      -        -       -      -           -            -          -           -    (1,225,831)   (1,225,831)
                     ---------- -------- ------- ------ ----------- ------------  --------- -----------   -----------  -------------
Balance -            68,516,646 $ 68,517   1,000 $   10 $63,219,481 $(11,687,179) 3,557,832 $(1,918,634) $(44,399,816)  $ 5,282,379
March 31, 2001       ========== ======== ======= ====== =========== ============  ========= ===========   ===========  =============
</TABLE>


          See accompanying notes to consolidated financial statements.













                                      F-6
<PAGE>

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

                                                    Three Months Ended March 31,
                                                   -----------------------------
                                                        2001             2000
                                                   -------------- --------------
Cash flows from operating activities:
 Net loss                                            $(1,225,831)  $ (1,671,138)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization                         191,265        105,228
   Minority interest in loss of subsidiaries            (107,793)       (27,651)
   Equity in loss of affiliate                           183,536              -
   Shares issued in lieu of compensation and services    257,172      4,646,480
   Changes in operating assets and liabilities:
     (Increase) decrease in:
     Accounts receivable                                 (51,482)       (25,106)
     Inventory                                             6,172         (5,436)
     Prepaid expenses and other                          (60,314)        50,037
     Accounts payable                                    (53,758)       (33,034)
     Accrued expenses and other current liabilities       (8,990)    (3,339,100)
     Deferred revenue                                    107,822         11,094
                                                      ----------    -----------
Net cash used by operating activities                   (762,201)      (288,626)
                                                      ----------    -----------
Cash flows from investing activities:
 Advance towards investment                             (201,284)             -
 Purchase of property and equipment                       (3,465)       (50,747)
                                                      ----------    -----------
Net cash used in investing activities                   (204,749)       (50,747)
                                                      ----------    -----------
Cash flows from financing activities:
 Proceeds on sale of common stock                              -      2,743,000
 Proceeds on exercise of options and warrants                  -         75,750
 Proceeds on stock subscriptions                         504,916              -
 Proceeds from (payments to) to related parties          223,854     (1,316,811)
 Payments on note payable                                (10,011)      (113,718)
 Payments on loans from shareholders                           -        (13,251)
                                                      ----------    -----------
Net cash provided by financing activities                718,759      1,374,970

Net increase (decrease) in cash                         (248,191)     1,035,597

Cash and cash equivalents, beginning of period           402,993        331,057
                                                      ----------    -----------
Cash and cash equivalents, end of period             $   154,802   $  1,366,654
                                                      ==========    ===========


          See accompanying notes to consolidated financial statements.




                                      F-7
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

Item 1

Note 1:  Organization and Nature of Operations:

The Hartcourt Companies, Inc. and its subsidiaries ("Hartcourt") are involved in
Internet  joint  ventures in Asia to  facilitate  the  expansion of the People's
Republic of China's  ("China") first commercial  e-trade  financial  network and
Internet Service Provider.  Hartcourt  intends to create the premiere  financial
portal in the  Chinese  market by building a network of  Internet  companies  in
partnership  with  young  Chinese  enterprenuers  as  well as  government  owned
entities.  Its mission is to become one of the  leading  Internet  companies  in
Asia.  In order to  achieve  its  mission,  Hartcourt  decided to  spin-off  its
investment in domestic  operations and entered into a series of Agreements  with
Chinese  and Hong Kong  based  companies  to become a leading  Internet  service
provider in Asia.

Currently,  Hartcourt is in a transition from a holding and development  company
model into a few revenue-driven  independent  operational entities. By continued
efforts  in  building  a  network  of  Internet  and  telecommunication  service
companies in China and Hong Kong,  Hartcourt is developing  closer  partnerships
with  Chinese  entrepreneurs  as  well  as  Chinese  government-owned  entities.
Hartcourt's  business  goal over the next three years is to complete a series of
initial  public  offerings or spin-offs and focus on  restructuring  the company
into four main divisions:  the Hong Kong-based  streaming content  (video/audio)
web-casting and web hosting Group; the Sinobull Financial Group, the multi-media
financial data provider and online securities  trading  platform;  the Broadband
ISP and Internet Infrastructure Group; and Hartcourt Capital Inc., the E-Finance
transactions platform offering online banking, securities,  insurance, equipment
leasing, credit, and B2B transaction settlements.  Through the combined services
of the four divisions, Hartcourt intends to create a premier financial portal of
Chinese  Internet with a  comprehensive  Web site and supporting  utilities that
will be capable of  executing  securities  transactions  on-line in a timely and
efficient manner while providing  real-time quotes,  research,  charts and other
collateral information regarding stocks, bonds,  currencies and other markets in
China and other Asian markets.

Stardust,   Inc.-Production-recording-Promotion   ("Stardust"),   a  corporation
organized under the laws of the State of Utah in September 1983, acquired all of
the  outstanding  shares of Hartcourt  Investments,  a Nevada  corporation,  for
6,110,337  shares of Stardust  common stock (after taking into account a reverse
stock  split  and  stock  dividend)   pursuant  to  an  Agreement  and  Plan  of
Reorganization dated November 5, 1994. At the time of this acquisition, Stardust
was a "shell" corporation with no assets, business or operations.  Subsequent to
the  acquisition  of  Hartcourt  Investments,  Stardust  changed its name to The
Hartcourt Companies, Inc.

                                      F-8
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

On February 1, 1999, pursuant to a Share Purchase Agreement,  Hartcourt acquired
one (1)  share of  common  stock  of Enova  Holdings  Inc.  ("Enova"),  a Nevada
corporation  representing 100% of the total issued and outstanding capital stock
of Enova,  making  Enova a  wholly-owned  subsidiary.  Effective  March 1, 1999,
Hartcourt  and Enova  executed an  Exchange  Agreement  (the "Enova  Agreement")
whereby   Hartcourt   exchanged  all  of  its  ownership  in  two   wholly-owned
subsidiaries,  Pego  Systems,  Inc.  ("Pego")  and  Electronics  Components  and
Systems, Inc. ("ECS"), for 5,213,594 additional shares of common stock of Enova.
On March 24, 1999,  Hartcourt entered into a Distribution  Agreement pursuant to
which Hartcourt  agreed to distribute to all the shareholders of record on March
31, 1999,  the 5,213,595  shares of common stock of Enova and to file,  within a
reasonable period of time following such distribution,  a Registration Statement
on Form 10-SB to cause the  distributed  shares of Enova to be registered  under
the  Securities  Exchange Act of 1934.  Enova's  Registration  Statement on Form
10-SB was filed under the  Securities  Exchange Act of 1934 on January 24, 2000.
As a result  of the  Share  Purchase  Agreement,  the  Enova  Agreement  and the
Distribution  Agreement,  each  shareholder  of record of Hartcourt on March 31,
1999  received  one (1)  share of Enova  for  every  four  (4)  shares  owned of
Hartcourt.  Following the  distribution of the Enova shares,  both Hartcourt and
Enova continue to operate as separate companies.

On August 17, 1999,  Hartcourt  entered  into a stock  purchase  agreement  with
Financial  Telecom  Limited  ("FTL"),  a  Hong  Kong  corporation,  to  purchase
4,964,990 shares of common stock,  representing 58.53% of the total common stock
outstanding. The purchase price was agreed to be HK $4.713 (US$ 0.604) per share
for a total of HK$23.4  million or US$3.0  million,  payable 50% in cash and the
remaining  balance in Hartcourt common shares.  The acquisition was completed on
October 4, 1999 with Hartcourt making total cash payments of $801,860,  recorded
a payable for $797,140 and issued  1,500,000  shares of its common stock to FTL.
The  stock  purchase  agreement  required  a  post-closing  adjustment  for  any
deficiency  to be paid to FTL in the event the final closing net worth as of the
closing date shall be more than $5,000 over and above the net worth  reported in
calculating the purchase price. As a result of the post-closing adjustment,  the
purchase price was revised to  HK$25,563,842  or  US$3,277,412.  At December 31,
1999,  Hartcourt  recorded  the  increase in  purchase  price as a result of the
post-closing adjustment,  as a note payable to FTL of $138,706 and a payable for
the  issuance of 148,512  shares of common  stock of  Hartcourt.  On January 18,
2000,  Hartcourt  issued  254,552  additional  shares of common  stock to FTL in
settlement of the post-closing adjustment.  The 1,754,552 shares of common stock
issued to FTL are  reflected as treasury  shares in the  accompanying  financial
statements since FTL is a subsidiary of Hartcourt. As of May 11, 2001, Hartcourt
has fully  settled  its  amounts  payable  to FTL for the  acquisition  of FTL's
shares.

FTL was  established in 1983 as a financial data bank providing  real-time stock
quotes  and  financial  information  of Hong Kong  listed  companies  as well as
information  on other  international  stock  exchanges in the U.S. and Europe to
institutional  and retail  investors.  FTL is also acting as the marketing agent
for Standard & Poor's Comstock, a division of McGraw Hill, in Hong Kong. FTL was
the first company in Hong Kong to transmit  real-time  financial  services via a

                                      F-9
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

network of wireless system for  dissemination  of data. This was considered as a
major  breakthrough in the information and communication  industry in Hong Kong.
Investors  were no longer  restricted  to fixed line  terminals  and could use a
wireless  network,  such as  financial  pager,  to  access  real-time  financial
information.  At  present,  FTL  maintains a financial  portal  featuring  stock
trading, real-time quotes and company data banks for investors in China and Hong
Kong. These investors include major investment houses,  banks,  securities firms
and mutual fund houses.

On 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.  Subject to verification of total costs to be incurred
in  erection  of FLEX  transmission  network,  design of  financial  information
broadcast system, sourcing, testing and tuning of PDA receiver devices, etc. and
signing of formal joint venture agreement,  FTL 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. After the completion
of due diligence, the parties signed the formal joint venture agreement on April
28, 2000 and FWL became a subsidiary of FTL. Although  NiceVoice has contributed
certain  assets in the FWL, due to the method of funding these assets  NiceVoice
does not  presently  have legal  ownership  title to such assets until the final
dollar  payment  has  been  made on these  assets.  The  accompanying  financial
statements reflect FTL's investment of 51% ownership interest in FWL as of March
31,  2001.  As of May 11,  2001,  FTL had  advanced  approximately  HK$2,814,573
(US$360,843) towards its investment in FWL.

On June 20, 1999,  Hartcourt  entered  into an agreement  with Beijing UAC Stock
Trading Online Co., Ltd. ("UAC  Trading") to form a joint venture  company under
the laws of China.  The name of the joint  venture  company is Beijing UAC Stock
Exchange  Online Company  Limited.  ("UAC  Exchange"),  a company  registered in
Beijing.  Under the terms of the agreement,  for a 35% interest in UAC Exchange,
Hartcourt  agreed to invest  $1,000,000 in UAC Exchange,  pay  $1,700,000 to the
owners of UAC Trading and transfer  1,000,000  common shares of Hartcourt to UAC
Exchange.  200,000 of these common shares will be transferred to UAC Trading for
an existing  loan of $200,000 and 800,000  common  shares are still to be issued
and will be recorded as a loan from Hartcourt to UAC Exchange upon issuance.  On
August 9, 1999,  Hartcourt and UAC Trading  agreed to convert the Hartcourt loan
of $200,000 into an option to purchase an additional  15% ownership  interest in
UAC  Exchange  from  UAC  Trading.  In July  2000,  Hartcourt  and  UAC  Trading
transferred all of their ownership  interest in UAC Exchange to UAC Stock Online
Company  Limited ("UAC BVI"), a company  incorporated in British Virgin Islands.
On September  1, 2000,  Hartcourt  exercised  its option for an  additional  15%
ownership interest in UAC Exchange making Hartcourt's total ownership - interest
in UAC Exchange to 50%. Subsequently,  on December 28, 2000, Hartcourt, UAC BVI,
UAC Trading and K.C. Tan (representative of the owners of UAC Trading), signed a
Share Subscription and Sale and Purchase Agreement whereby,  Hartcourt agreed to
own 51% of the UAC BVI and K. C.  Tan  agreed  to own 49% of UAC BVI  after  all


                                      F-10
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

tangible and  intangible  assets had been  transferred  into UAC Exchange by UAC
Trading.  The accompanying  financial  statements reflect Hartcourt's  ownership
interest in UAC BVI at 51% as of March 31, 2001.

UAC Exchange operates the first and leading nationwide online securities trading
network,  UAC 162  Network,  connecting  investors  with their  stock  brokerage
offices via China Pac. China Pac is the nationwide  packet  switched  network in
China owned by China Telecom since 1991. UAC 162 Network consists of proprietary
server software and user interface,  servers,  gateways and other  communication
hardware.  Through a PC,  investors can dial a local number 162 from anywhere in
China to trade stocks  online.  Once  connected to the network,  users can check
real time stock quotes, trade stocks and other securities,  access news bulletin
and other related information. In May 1999, UAC Trading was granted a license by
the  Chinese  government  and  signed a  contract  with  China  Telecom to start
building the network. This license was subsequently assigned to UAC Exchange. As
the first and leading China Pac operating agent designated by China Telecom, UAC
Exchange is in a unique position to market the services of China Pac and UAC 162
Network to all  brokerage  firms in China.  However,  in June 2000,  the Chinese
government  allowed all online  transactions  to be conducted via  Internet.  It
caused UAC  Exchange  to lose its  competitiveness  as the  efficiencies  of 162
Network  are  not  compatible  to  the  Internet.  Therefore,  UAC  Exchange  is
converting its operations to Internet based operations.

Beijing Innostar Hi-Tech Enterprises,  Ltd.  ("Innostar") - On October 20, 1999,
Hartcourt signed a Joint Venture Agreement with Innostar to establish a wireless
nationwide  Internet service provider network and IP phone services in China via
a Chinese satellite. The total amount of investment in the joint venture company
will be $24.0 million of which $14.0 million will be contributed by Innostar for
65%  ownership  interest  and  $10.0  million  by  Hartcourt  for 35%  ownership
interest. Innostar provides wireless ISP network and IP phone service in Beijing
in cooperation with Chinese telecom companies.  It provides  high-speed Internet
connections to hotels,  office buildings and apartment complexes using a Chinese
satellite with  bi-directional  data transmission to these commercial users. The
joint venture with Hartcourt and  Innostar's  license for nationwide ISP service
will allow  expansion  to many  other  cities and  individual  users  eventually
reaching users throughout  China. The national license will also allow the joint
venture  to  engage  in  e-commerce  activities  and  other  Internet  services.
Hartcourt and Innostar have agreed to expand the scope of business  model of the
Joint Venture and have re-applied for the grant of business license. The license
is pending government and regulation approval.

In November  1999,  Sinobull  Group  (`Group")  was formed with the intention to
consolidate  various related  businesses  acquired or expected to be acquired by
Hartcourt or Sinobull.com Inc. ("Sinobull").  Sinobull is principally engaged in
the operation of a financial portal and investment holding.  For the purposes of
presenting these  businesses under a unified  structure and strong brand name, a
restructuring of the Group will result in  consolidating  these businesses under
Sinobull,  the  holding  company of the Group  incorporated  in  British  Virgin
Islands.  On April 2, 2001,  Sinobull's one share issued and outstanding held by


                                      F-11
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

Mr. Tang Wing On was formally transferred to Hartcourt, and, therefore, Sinobull
became  a  wholly-owned   subsidiary  of  Hartcourt  effective  April  2,  2001.
Hartcourt,  Sinobull and Mr. Tang have  confirmed  that  Hartcourt  had advanced
funds to Sinobull for various acquisitions made by Sinobull since its formation.
Since the  acquisition of Sinobull was completed on April 2, 2001, the financial
results of Sinobull  will be  consolidated  with  Hartcourt  starting the second
quarter of 2001.

StreamingAsia.Com  Ltd.  ("StreamingAsia")  - StreamingAsia  provides  Internet-
related software  development service with expertise in audio and video delivery
or streaming  solutions to a variety of business and industry,  including  major
financial  institutions.  On April 14, 2000,  Hartcourt  announced that Sinobull
signed a Subscription  and  Shareholders'  Agreement  ("Agreement")  relating to
StreamingAsia,  whereby Sinobull agreed to subscribe  1,200,000 newly issued and
outstanding fully paid shares of StreamingAsia  for HK$7,000,000  (approximately
US$897,500) on behalf of Hartcourt.  Upon subscription of such shares,  Sinobull
will have 50%  ownership  interest in  StreamingAsia.  Sinobull will appoint two
members to the Board of Directors of  StreamingAsia.  Together with the existing
two directors,  the new board shall consist of four directors. In addition, both
Sinobull  and  Hartcourt  agreed  and  confirmed  that as part of the  financing
arrangements  Sinobull  would hold the  subscribed  shares in  StreamingAsia  on
behalf of Hartcourt and those shares were  transferred  to Hartcourt on December
29, 2000. As of December 31, 2000, Sinobull had contributed $897,500 towards the
purchase of  StreamingAsia  that was  advanced by  Hartcourt  to  Sinobull.  The
accompanying    financial   statements   reflect   Hartcourt's   investment   in
StreamingAsia at 50% on March 31, 2001 using the equity method of accounting.

Beijing Shangdi Net Technologies Center Company,  Ltd. ("Shangdi") - On December
18,  1999,  Sinobull  signed a Term Sheet  Agreement  with Shangdi to form a new
corporation in Beijing.  Sinobull shall have 40% interest and Shangdi shall have
60% interest in the new corporation.  On April 12, 2000,  Sinobull signed a Term
Sheet  Agreement  with Shangdi  revising  the terms of the Term Sheet  Agreement
signed on December 18, 1999. The terms of the revised  agreement stated Sinobull
and Tiandi Hulian Technologies Limited ("Tiandi"), an investment holding company
incorporated  in  the  British  Virgin  Islands,  holding  the  interest  of the
shareholders  of  Shangdi,  will  acquire  through its  wholly-owned  subsidiary
Sinobull  Network  Technology  Company Limited  (Sinobull  Network"),  a company
registered in Beijing,  all of the operating assets and business of Shangdi.  To
finance this acquisition,  Tiandi will issue new shares to Sinobull equal to 40%
of the expanded capital of Tiandi.  The terms of the revised agreement  required
Sinobull to pay Shangdi  US$670,000 being the  consideration of all tangible and
intangible assets in relation to Shangdi's computer network information services
excluding  cash and debts;  invest  US$1,000,000  in  Sinobull  Network  for its
working capital needs;  issue 140,000  restricted  common shares of Hartcourt to
Shangdi and 60,000 restricted common shares of Hartcourt to Sinobull Network for
its working capital needs. In exchange,  Shangdi agreed to transfer  without any
pledge and debt,  all  tangible  and  intangible  assets in relation to computer
network information  services to Sinobull Network, and transfer to Hartcourt 40%
of the ownership  interest in Tiandi.  On December 28, 2000,  Sinobull,  Tiandi,
Shangdi  and Li Chun Ying  (representative  of the owners of  Shangdi)  signed a
Share Subscription and Sale and Purchase  Agreement  whereby,  Sinobull will own
51% of  Tiandi  and Li  Chun  Ying  will  own 49% of  Tiandi  after  payment  of

                                      F-12
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

consideration to Shangdi for purchase of all tangible and intangible  assets. As
of March  31,  2001,  Sinobull, through  an  advance  from Hartcourt,  has  paid
$1,000,000  in cash  towards  the  purchase  of  Shangdi of which  $670,000  was
distributed  to the owners of Shangdi and the  remaining  $330,000 was deemed as
capital contribution in Sinobull Network. In addition, no Hartcourt common stock
has been issued to either Shangdi or Sinobull Network as of March 31, 2001.

Shangdi is  principally  engaged  in the business of data broadcasting in China.
Its main activities include research,  development and sale of data broadcasting
hardware  and  software.  Shandgi is a major  shareholder  of Hua Xia Info,  the
financial  data  provider  of Hua  Xia  Securities,  the  second  largest  stock
brokerage  firm in China.  Hua Xia Info has its own financial  reporters for its
data broadcasting network via cable TV and magazine.  Through this relationship,
Sinobull will operate accounts through Hua Xia Securities Brokerages nationwide.
Shangdi has recently completed a software program for cable set top boxes, which
enable users to trade stock online from their home television  sets.  Shangdi is
also a major shareholder of Orient Research, a well respected stock research and
analysis firm in Shanghai.

Shanghai  Guo Mao Science &  Technology  Co.  Ltd.  ("Guo Mao") - On December 1,
1999,  Sinobull signed  Term Sheet Agreement with Guo Mao whereby Guo Mao agreed
to issue new shares for a total proceeds of $1,000,000  which will represent 50%
of the expanded capital of Guo Mao. Sinobull agreed to subscribe for all the new
shares  issued  by Guo Mao.  On May 16,  2000,  Sinobull  and  Hopeful  Internet
Technologies  Limited  ("Hopeful") entered into an agreement whereby Hopeful, an
investment  holding company  incorporated  in the British Virgin  Islands,  will
acquire  through  its  wholly-owned  subsidiary  Shanghai  Sinobull  Information
Company  Limited  ("Sinobull  Information"),  all of the  operating  assets  and
business of Guo Mao. To finance this acquisition,  Hopeful will issue new shares
to  Sinobull  equal  to 40% of the  expanded  capital  of  Hopeful  for a  total
consideration  of $1,000,000.  The terms of payment by Sinobull for the purchase
of new shares will be: $200,000 in cash upon signing of the agreement;  $150,000
in cash within 30 days of signing of the  agreement;  $150,000 in cash 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 in cash $400,000  received from Hartcourt towards the purchase
of new shares of Hopeful and  recorded  $100,000  payable to Hopeful as of March
31, 2001.  In addition,  Hartcourt has issued 805,802 shares of its common stock
valued at $500,000 to Sinobull Information in February 2001.

Guo  Mao,  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  portal in
China.


                                      F-13
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

Recent Events

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  any 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 these agreements.

Hartcourt's  partners  in the  joint  ventures  discussed  below  are  expecting
Hartcourt  to  provide  two 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  will  need  to be  modified  or
cancelled.

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

PYR Management LLC ("PYR") - On January 26, 2000,  Hartcourt completed a private
placement of 227,445 Units and a Class II Warrant to PYR for $3,000,000 pursuant
to a Regulation D  Subscription  Agreement.  Each Unit  consists of one share of
Hartcourt common stock and a Class I Warrant to purchase one additional share of
Hartcourt  common stock at the Unit Price,  subject to  adjustment  upon certain
events.  The Class II Warrant  entitles  PYR to  purchase  additional  shares of
Hartcourt  common  stock at par value  solely  upon the  occurrence  of  certain
events.  Hartcourt has also agreed under a Registration Rights Agreement to file
a  registration  statement  to register the shares of  Hartcourt  common  stock,
including the shares assumable upon exercise of the Class I Warrant and Class II
Warrant,  under  the  Securities  Act of 1933  for  sale by PYR.  As part of the
Agreement,  Hartcourt  granted  PYR an option to purchase  up to  $5,000,000  of
additional  Units and a Class II Warrant  within five (5) trading days after the
effectiveness  of the  registration  statement.  On January 27, 2000,  Hartcourt
received  $2,743,000  from PYR to be  used for working capital  requirements  of

                                      F-14
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)


Hartcourt.  On  February 4, 2000  Hartcourt  filed a Form 8-K with the SEC. As a
result of  provisions  of the reset  calculations  pursuant to the  Subscription
Agreement,  on February 20, 2001,  Hartcourt issued in total 2,964,682 shares of
its common  stock,  2,509,802  of Class I  warrants  and  1,035,308  of Class II
warrants  exercisable  at $0.69375  per share of common  stock.  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 Letter
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 and
Class II warrants.

eMPACT Solutions, Inc. ("eMPACT") - eMPACT, an e-commerce systems management and
consulting  company,  specializes in providing  back-office  infrastructure  for
Internet companies. The services include technology selection, system design and
management,  transaction performance  monitoring,  resource utilization tracking
and security  monitoring.  On February 9, 2000,  Hartcourt  entered into a Stock
Purchase  Agreement Term Sheet to purchase 30% of the authorized and outstanding
shares of eMPACT's new shares of common stock.  The purchase price was agreed to
be  $2,000,000,  payable  $1,000,000  in cash at the  date of  closing,  and the
remainder  $1,000,000 in cash within ninety days of closing.  On April 10, 2000,
Hartcourt paid $300,000 as an advance towards the purchase of its 30% investment
in eMPACT.

On April 30, 2000, the provisions of Term Sheet Agreement dated February 9, 2000
was declared null,  void and no further force and effect,  and was replaced by a
Subscription  Agreement  and  Investment  Representation.  Hartcourt  agreed  to
subscribe  and  purchase  three  hundred  (300)  shares  of Class B  Convertible
Preferred  Stock,  par value  $0.001  per share of  eMPACT.  On April 30,  2000,
investment  of $300,000 was applied  towards the purchase of three hundred (300)
shares of Class B Preferred Stock.  Hartcourt had the option until May 30, 2000,
to invest an  additional  $1,700,000  in eMPACT at the same per share  price for
additional  Class B  Preferred  Stock.  After  May 30,  2000,  the  terms of any
additional investment shall be subject to negotiation between the parties. As of
May11,  2001,  Hartcourt  paid a total  consideration  of  $300,000  towards the
purchase of three hundred (300) Class B Preferred Stock of eMPACT.  Hartcourt is
currently negotiating to finalize the remaining investment.

Heads of Agreement:  On April 8, 2000, Hartcourt entered into Heads of Agreement
("Agreement") with DF Ltd.,  Loughborough Ltd., and Express Internet  Investment
Ltd.  (collectively,  "the  Management")  and a fourth  investor to form a joint
venture company for the commercial exploitation of the Publication Rights of the
internet and  production of the content of the website in respect of the laws of
China. Per the terms of the Agreement,  both Hartcourt and the fourth investor's
obligation are to invest  $2,000,000  each, in the joint venture company for 25%
ownership interest and share the  responsibility in providing  funding,  finance



                                      F-15
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

and technological  support.  The obligation of Hartcourt and the fourth investor
is to provide  funding as working  capital for the joint venture company subject
to the conditions  precedent  that the joint venture  company shall have entered
into an  agreement  with  the  relevant  parties  in  China  for the  commercial
exploitation  of the Publication  Rights on the Internet and the website.  As of
May 11, 2001, the joint venture  company was still  negotiating  agreements with
the  relevant  parties  in  China  and has not  been  granted  approval  for the
commercial  exploitation  of the  Publication  Rights  on the  Internet  and the
website.  Therefore,  as of May 11, 2001,  Hartcourt has no payment  obligations
under this Agreement.

Fee Agreement for Introduction  Services:  On April 19, 2000,  Hartcourt entered
into a Fee Agreement for Introduction Services ("Agreement") with Tang Wai Leong
and Thomas Kwok,  (collectively  referred to as the  "Introducers")  whereby the
Introducers  will use their best efforts to search for,  identify and make known
to  Hartcourt   Internet-related   business  and   opportunities  for  potential
acquisition by Hartcourt.  Hartcourt agrees to satisfy the Introducers' time and
expense  incurred,  up to and including the first acquisition by Hartcourt of an
opportunity  introduced  or  arranged  by the  Introducers,  by  granting to the
Introducers options to purchase up to 2,500,000 shares of Hartcourt common stock
at a price of $5.50 per share.  Upon  consummation  of the  introduction  by the
Introducers  and  Hartcourt  completing  the  acquisition,  Hartcourt  agreed to
register  with the SEC under a Form S-8 such  shares  granted  under the  option
agreement,  and shall cause such  registration  statement to remain effective at
all times while the Introducers holds the options.

The Introducers have introduced to Hartcourt a potential acquisition opportunity
and on April 27, 2000,  Hartcourt  signed the necessary  documents to consummate
the purchase of an entity  (Shenzhen Rayes Group Limited).  The Introducers have
subsequently  exercised  their option to acquire  2,500,000  shares of Hartcourt
common stock.  On May 8, 2000, in  accordance  with the terms of the  Agreement,
Hartcourt  filed  a Form  S-8 to  register  with  the  Securities  and  Exchange
Commission the 2,500,000 options granted to the Introducers under the Agreement.
As of  March  31,  2001,  Hartcourt  received  $2,750,000  towards  exercise  of
2,500,000  options  into shares  exercised  by the  Introducers.  The  remaining
balance of $11,000,000 is recorded as subscriptions receivable at March 31, 2001
in the accompanying financial statements.

Shenzhen Rayes Group Limited ("Shenzhen"): On April 27, 2000, Hartcourt signed a
Stock Purchase  Agreement Term Sheet with Shenzhen to form a new entity of which
Hartcourt desired to purchase  fifty-one percent (51%) of the outstanding shares
of the capital  stock and  Shenzhen  agreed to retain the  remaining  forty-nine
percent (49%) of the outstanding shares. Shenzhen being the sole owner of all of
rights,  title and  interest  in an  operating  company  desired  to  contribute
fifty-one  percent  (51%) of its share to the new entity.  The  transaction  was
expected  to  close  no  later  than 45 days  following  the  execution  of this
Agreement  during  which  time  all due  diligence  was to be  completed,  which
included  evaluation  of the third  party and the  operating  company  by Morgan
Stanley,  a legal  opinion of counsel as to the  acceptability  of the  proposed

                                      F-16
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

structure of Hartcourt's  acquisition of fifty-one  percent (51%) of new entity,
financial reviews, et al. The purchase price was not to be less than $50,000,000
in cash and not exceeding  $76,000,000  (including  $50,000,000 in cash together
with  marketable  shares  of up to  $26,000,000  in  value).  The  terms  of the
Agreement required:  a) Hartcourt to deposit $10,000,000 in an escrow account no
later than April 28, 2000 upon  complete  execution  of the  Agreement;  b) upon
completion of all of its due diligence,  including  evaluation by Morgan Stanley
and  confirmation by legal counsel as to acceptable  structure,  Hartcourt shall
deposit such  additional  funds as shall be determined as required in conformity
with the value  established  by Morgan  Stanley.  On April 28,  2000,  Hartcourt
entered into an agreement with another third party who provided a bank guarantee
for  $10,000,000  on behalf of Hartcourt.  The terms of the bank  guarantee have
subsequently  expired and the parties  mutually  agreed to have no obligation to
each other should each of the parties  decide to terminate  the  Agreement.  The
parties  agreed to further  negotiate  and extend the term of the  Agreement and
complete the  transaction to each other's  satisfaction  by June 30, 2001. As of
May 11, 2001, Hartcourt has completed its own due diligence,  however, the terms
of the agreement, including the amounts involved, may be significantly modified.

Koffman Securities Limited ("Koffman"): On June 12, 2000, Hartcourt entered into
a Stock Purchase Agreement Term Sheet with Koffman, a securities brokerage firm,
to purchase  30% of the  expanded  capital  stock of Koffman  for  HK$22,285,000
(approximately US$2,857,050).  The transaction shall close no later than 60 days
following  the  execution of the  Agreement  during which time all due diligence
shall  have  been  completed,  which  shall  include  but not be  limited  to an
evaluation of Koffman by the auditors, appraisers and legal counsel appointed by
Hartcourt  for  this  purpose  and a  legal  opinion  of its  counsel  as to the
acceptability  of the proposed  structure of  Hartcourt's  acquisition of 30% of
Koffman,  financial  reviews,  and other usual and customary due diligence.  The
purchase  price shall be payable as follows:  25% of the purchase price shall be
payable upon  execution  of a definitive  agreement to purchase and sell by both
parties based upon completion of all of its due diligence,  including evaluation
and appraisal and  confirmation by legal counsel as to the  acceptability of the
proposed structure of Hartcourt's  acquisition of 30% of Koffman; and 75% of the
purchase price payable in three successive equal monthly installments.

Hartcourt  has  completed  its due  diligence  review and both the parties  have
mutually agreed to revise the purchase price and execute the purchase  agreement
prior to June 1, 2001.  As of May 11, 2001,  Hartcourt  has not entered into any
formal  purchase  agreement  with  Koffman  and has not made  any  contributions
towards the purchase of Koffman.

Hopeman Computer Services  Corporation  Limited  ("Hopeman"):  - On September 7,
2000,  Hartcourt  signed a joint venture  agreement with Hopeman to form a joint
venture  in  Shanghai  and  jointly  develop  and  market  a  24-hour  financial
television  program  and/or  provide  financial  data  services to  existing/new
financial  television  programs for China market. The new joint venture is named
"Haike Caijin TV" (HCTV) means Hartcourt Financial Television (HCTV) in English.


                                      F-17
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

HCTV  will be  registered  in  Shanghai  with a  funding  of $1.0  million.  The
agreement defines the first phase joint venture  investment terms for the period
from September  2000 to December 2000. The parties agreed to invest  $150,000 by
September 15, 2000 and another $50,000 by November 30, 2000. Hartcourt agreed to
invest  $100,000 to receive an initial  66.7% of the HCTV equity  ownership  and
Hopeman  agreed to invest  $50,000  for the  remaining  33.3% of the HCTV equity
ownership. Hopeman agreed to identify an investment/strategic partner and commit
$3 million in China as the second round  investment by December 31, 2000. If the
second  round  fund  raising  agreement  with a  strategic  partner is signed by
December 31, 2000,  Hopeman will have the option to invest an additional $50,000
and  increase  its equity  ownership  to 50% and receive the same  ownership  as
Hartcourt.  Both  the  parties  mutually  agreed to a redistribution  of  equity
ownership  with the second round  investors to be negotiated  over the course of
the joint  venture.  HCTV Joint  Venture  Company  has not been  formed and both
Hartcourt and Hopeman have  contributed  $100,000 and $50,000 as advance towards
their  respective  share of the first phase of joint  venture  investment  as of
March 31, 2001.  As of May 11, 2001,  no additional  funds were  contributed  by
either of the parties since December 31, 2000 and no new agreements  were signed
with a new strategic partner for the second round of fund raising.

Beijing Total Solution System,  Ltd. ("TSS"):  On September 15, 2000,  Hartcourt
and TSS signed a Term Sheet  Agreement  to form a Joint  Venture  Company  (JVC)
called TSS Streaming,  Ltd to develop broadband enabling technology for internet
broadcasting  market and develop world leading  web-casting  solution and global
market.  Hartcourt agreed to contribute $2.4 million for 60% ownership  interest
in the JVC and TSS  agreed to  contribute  all of its  tangible  and  intangible
assets of its existing operations in China for its 40% ownership interest in the
JVC.  On  December  1,  2000,  Hartcourt  and TSS  signed a loan  agreement  and
Hartcourt  advanced  $70,000 as a loan to support  TSS's  2000  marketing  plan,
convertible  into an ownership  of 5% shares of TSS.  Upon  contribution  of the
remaining  $2,330,000,  Hartcourt could acquire the additional 55% shares of the
JVC.  Hartcourt has not 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 in the JVC as of March 31, 2001.  Hartcourt does not have any intentions
to acquire any additional ownership percentage in TSS.

Shanghai Wind  Information  Company,  Limited  ("Wind"):  On September 18, 2000,
Hartcourt  and  Wind  signed  a  Term  Sheet  Agreement  and  agreed  to  form a
Joint-Venture  Company  (JVC) to expand the financial  data service  business in
China.  Wind agreed to  transfer  its entire  fixed  assets  excluding  cash and
marketable  securities held at July 31, 2000 and the insurance advisory business
and related  assets,  and is entitled an ownership  interest of sixty-six  point
sixty seven percent (66.67%) in the JVC. Hartcourt agreed to invest $3.0 million
that represented  thirty three point thirty three percent (33.33%)  ownership in
the JVC. Upon  successful  completion  of due diligence by Hartcourt,  Wind will
transfer  all its  assets  except  cash,  marketable  securities  and  insurance
advisory  business and related  assets in the JVC. Wind will be  responsible  to



                                      F-18
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

obtain all relevant  approvals from all  governmental  authorities  and agencies
required to facilitate the new share structure and expanded capitalization. Wind
will be  responsible to have the JVC listed in the public stock market within 15
months from the date of  establishment of the JVC. It is mutually agreed that if
Wind fails to list the JVC on or before such a time frame,  Hartcourt shall have
the management right for listing of the company in the public market.

The  investment  from  Hartcourt  to Wind shall be payable as  follows:  a) upon
completion of the Agreement of JVC by both parties  within 15 days from the date
of the Term Sheet  Agreement  signed,  Hartcourt shall arrange a payment to from
Guo Mao as a loan to Wind in the amount of $500,000;  b) pay  $1,500,000  in the
temporary JVC account within 15 days of the  establishment  of the temporary JVC
bank account; c) pay $1,500,000 into the JVC no later than three months from the
date of  establishment  of the JVC. Upon receipt of all  committed  capital from
Hartcourt,  Wind  will  immediately  pay  back  the  $500,000  loan to Guo  Mao.
Hartcourt has completed its due diligence  review on the  operations of Wind. On
September 18, 2000,  Sinobull  advanced  $500,000 to Guo Mao who loaned the same
amount to Wind on behalf of  Hartcourt.  Pursuant  to the  addendum  to the Term
Sheet  Agreement,  on  January  10,  2001,  Hartcourt  and Wind  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.  The accompanying
financial  statements  as of March 31,  2001,  reflect  Hartcourt's  advance  of
$500,000 for 5% ownership interest in the JVC. The JVC has not been formed as of
May 11, 2001. In addition,  both the parties mutually agreed to extend by twelve
months all defined effective dates per the Term Sheet Agreement of September 18,
2000.

@Family Broadband Networks  Ltd."(@Family"):  On October 25, 2000, Hartcourt and
@Family  signed a Stock  Purchase Term Sheet  Agreement  ("Agreement")  whereby,
Hartcourt agreed to purchase 25% of the authorized and outstanding shares of the
issued and outstanding capital voting stock of @Family for the purchase price of
$1.0 million. The transaction shall close no later than 45 days from the date of
signing of the Agreement,  obtaining governmental approval and upon satisfactory
completion of Hartcourt's  due diligence  which shall include but not limited to
examination of @Family's  business alliances with its affiliates and delivery of
reviewed  financial  statements  of @Family to Hartcourt and approval of same by
Hartcourt before the closing date. The purchase price of $1.0 million in cash is
payable to @Family at the date of closing.  Hartcourt  will have the sole option
to acquire at any time within 12 months  following  the  execution of the formal
agreement  contemplated  herein to acquire an  additional  15% of the issued and
outstanding shares for an additional $2.0 million.  On closing,  Hartcourt shall
have the right to appoint new  directors  so as to no less than 25% of the total
members of the Board of Directors. Hartcourt has completed its due diligence but
the parties have mutually  agreed to postpone the closing of the  transaction to
May 28, 2001.

ThinkersGroup.Com,  Inc.  ("ThinkersGroup"):  On November 6, 2000, Hartcourt and
ThinkersGroup  entered into an  exclusive  marketing  agreement  for a period of
three years whereby,  Hartcourt and its affiliates  will have the exclsive right
in China  and Hong  Kong to  market  ThinkersGroup's  software  products  in the
business of real-time wireless content delivery solutions, specifically software
solutions for gathering and delivering content for Internet business to wireless

                                      F-19
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

appliances.  Hartcourt is currently  stategizing various  alternatives to market
ThinkersGroup's  products and services in China and Hong Kong. Hartcourt and its
affilaites  have not sold any of the  ThinkersGroup  products and services since
the date of this agreement.

Edda Limited ("Edda"):  On December 26, 2000,  Hartcourt and Edda signed a Stock
Sale Agreement (Agreement) whereby Hartcourt agreed to sell 4,000,000 restricted
shares of its common stock as a block to Edda at the agreed price of fifty cents
($0.50)  per  share.  Persuant  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 recipt of the full and complete  purchase price in
the amount of $2,000,000.  The accompanying  financial  statements  reflect that
Hartcourt has received approximately  $1,312,821 from Edda as of March 31, 2001.
The remaining balance of $687,179 has been recorded as subscriptions  receivable
in the  accompanying  financial  statements  as of March 31, 2001. As of May 11,
2001,  Hartcourt has not issued any shares to Edda under this  Agreement and has
received an additional $20,000 in remittances subsequent to March 31, 2001.

Elephant Talk Limited ("ET"): On January 1, 2001,  Hartcourt and ET entered into
a Term Sheet Agreement whereby, Hartcourt agreed to acquire 51% of the ownership
interest  in ET for a  total  consideration  of  $3,825,000.  The  terms  of the
agreement  require ET to increase its authorized  capital from 25,000,000 shares
to 26,400,000 shares and Hartcourt to subscribe to the block of 4,400,000 shares
for a total  consideration  of  $1,500,000  payable  in cash upon  closing,  and
subscribe to another  block of  9,064,000  shares for a total  consideration  of
$2,325,000 payable in Hartcourt shares under Rule 144 or Regulation S of the SEC
regulation.  The number of Hartcourt  shares will be calculated using the 10-day
average bid-ask price prior to the date of closing.  Hartcourt has completed its
due  diligence  and both parties  agreed to revise the payment terms on April 2,
2001. The purchase price will now be payable  $250,000 in cash and $1,250,000 in
promissory  note payable to ET in exchange for 5.0 million new shares of ET, and
$2,325,000  worth of Hartcourt  shares payable to the existing  shareholders for
their ownership  interests for a combined total of 51% ownership interest in ET.
The transaction is expected to close no later than May 31, 2001.
















                                      F-20

<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)





Note 2.    Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions  to Form 10-QSB.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted  accounting  principles for complete  financial  statements and related
notes included in the Company's 2000 Form 10-KSB.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present  fairly the balance  sheets of The  Hartcourt
Companies, Inc. and Subsidiaries as of March 31, 2001 and December 31, 2000, and
the results of their  operations and their cash flows for the three months ended
March 31, 2001 and 2000.  The  financial  statements  for the three months ended
March 31,  2001 are  consolidated  to  include  the  accounts  of The  Hartcourt
Companies Inc., its 58.53% owned subsidiary  Financial Telecom Limited,  its 51%
owned subsidiary UAC Exchange,  and its 50% equity  investment in StreamingAsia.
The  financial  statements  for the  three  months  ended  March  31,  2000  are
consolidated to include only the accounts of The Hartcourt Companies,  Inc., its
58.53% owned subsidiary Financial Telecom Limited, and its 35% equity investment
in UAC Exchange.

The  results of  operations  for the three  months  ended March 31, 2001 are not
necessarily indicative of the results to be expected for the entire year.

Certain  2000  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, 2000.














                                      F-21
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

Note 3.    Supplemental Disclosure of Non-Cash Financing Activities

                                                 Three Months     Three Months
                                                     Ended            Ended
                                                March 31, 2001   March 31, 2000
                                                --------------   --------------
Cash paid for:
   Interest                                      $      40,511    $           -
   Taxes                                                     -                -
                                                ==============   ==============
Non-cash operating and financing activities:
   Shares issued to directors for services       $     105,000    $   3,430,788
   Shares issued for services                          152,172        1,012,147
   Issuance of warrants for services                         -          203,545
   Shares issued in connection with acquisitions       500,000          203,545

Note 4.    Loss per Share
                                                 Three Months     Three Months
                                                     Ended            Ended
                                                March 31, 2001   March 31, 2000
                                                --------------   --------------
Net loss                                         $   1,224,831    $   1,671,138

Effects of dilutive securities                               -                -
                                                --------------   --------------
Weighted average shares outstanding                 63,086,642       52,661,376
                                                ==============   ==============
Basic and dilutive earnings per share            $        (.02)   $        (.03)
                                                ==============   ==============

At March 31, 2001 and 2000,  the Company had 4,528,640 and 463,530  warrants and
options  outstanding,  each  exercisable  into one share of common stock.  These
instruments  were not included in the computation of diluted  earnings per share
for any of the periods presented,  due to their  anti-dilutive  effects based on
the net loss reported for each period.

On  September  14,  2000,  the  Board  of  Directors  of  Hartcourt  approved  a
two-for-one split of the company's common stock to be distributed in the form of
a stock dividend,  payable on October 23, 2000 to the  shareholders of record at
the close of business on October 16, 2000.  All  references in the  consolidated
financial  statements  to shares,  share prices and per share  amounts have been
adjusted retroactively for the split.

Note 5.  Litigations

The Hartcourt  Companies,  Inc. v. Estrellita D. Gonzales,  Los Angeles Superior
Court Case No. BC 222 853:


                                      F-22
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

Hartcourt  has obtained a judgment in the  principal  amount of $28,112  arising
from the defendant's failure to pay according to the terms of a promissory note.
Hartcourt is pursuing collection of this amount.

Harvey  Productions,  Inc. ("Harvey") v. Alan Phan, et al., Los Angeles Superior
Court Case No. SC 060 296:

Hartcourt  and Alan Phan  have been  named as  defendants  along  with two other
corporate  entities  and their  presidents.  This case was filed on January  28,
2000.  Harvey claims that Hartcourt  wrongfully cancelled a share certificate to
Harvey for 50,000 shares and further claims that Hartcourt  committed  breach of
contract   and  fraud.   No   contract   exists   between  the  parties  and  no
representations  were made among the parties.  The case is ongoing and Hartcourt
plans to vigorously contest this case.

Apollo Financial Network, LLC ("Apollo") v. The Hartcourt  Companies,  Inc., Los
Angeles Superior Court Case No. BC 245398:

On February 21, 2001,  Apollo filed an action for breach of contract arising out
of a consulting agreement that was cancelled in January 1999. Hartcourt plans to
vigorously   contest  this  case.   On  March  27,  2001,   Hartcourt   filed  a
cross-complaint  seeking  $25,000 for unpaid rent and expenses from January 1999
through June 1999. The case is ongoing.

ComericaBank 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 another  entity's  ("Pego")  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 the settlement  agreement,  which stipulation calls for certain payments
and transfers of funds by Pego, and a judgement of approximately $800,000 exists
of which  Hartcourt is a  co-guarantor.  The assets of Pego  including  accounts
receivable will be liquidated to pay down the debt.

Charles  Hogue v. The  Hartcourt  Companies,  Inc.,  Circuit  Court of the Ninth
Judicial Circuit, Orange County, Florida Case No. CIO 00-2190:

Charles  Hogue filed a complaint on or about March 22, 2000, 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 on January 31, 2001.  Hartcourt  brought a motion to set
aside the default,  which was denied.  Hartcourt plans to vigorously  appeal the


                                      F-23
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                           MARCH 31, 2001 (UNAUDITED)

ruling.  On or about March 2, 2001, a Notice of Appeal was filed.  Hartcourt has
retained new appellate counsel to aggressively contest the appeal.

Kevin  Quinn,  Go Irish,  Ltd vs. The  Hartcourt  Companies,  Inc.,  Los Angeles
Superior Court Case No. 232720:

On March 28,  2001,  Hartcourt  obtained  a default  judgment  in the  amount of
$154,312 against Kevin Quinn and Go Irish, Ltd. Hartcourt is pursuing collection
of this amount.

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






























                                      F-24
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                           MARCH 31, 2001 (UNAUDITED)


Part I

Item 2

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

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

Results of Operations:

During 2000,  Hartcourt  continued its  previously  implemented  plan to acquire
profitable  companies  that were in  established  industries  with a history  of
growth.  Since mid-1999,  Hartcourt has been focusing on assembling a collection
of  companies  and  services  that  will  provide  citizens  of China  with next
generation  communication services,  including China-focused Internet access and
financial  portals,  online  share  trading  services,  data  broadcasting,  and
financial services.  Hartcourt's current operations are now primarily focused on
its investment in StreamingAsia and its subsidiaries and affiliates. Each of the
companies  that  constitute  Sinobull  Financial  Group and  StreamingAsia  were
independent companies prior to their affiliation with Hartcourt and were brought
into the fold via share  acquisitions  by Hartcourt to fulfill  specific  niches
within  Hartcourt's  current  expansion plans.  The company signed  underwriting
agreements for the initial public  offerings of shares of its two most developed


                                      F-25
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                           MARCH 31, 2001 (UNAUDITED)

investments,  both of which are  planned  in the year 2001.  Hartcourt  plans to
eventually build its current operations into stand-alone entities that will also
be taken public on US and/or Asian Financial markets.

To stay focused and achieve its mission to become a leading  Internet company in
Asia and China,  Hartcourt continued to build a network of Internet companies in
partnership  with  young  Chinese  entrepreneurs  as  well as  government  owned
entities.  On December 28,  2000,  Sinobull  completed  its  acquisition  of 51%
ownership   interest  in  Sinobull   Network  and  51%   ownership  in  Sinobull
Information,  and on April 2, 2001,  Hartcourt completed its acquisition of 100%
ownership interest in Sinobull.

The operations of Hartcourt for the three months ended March 31, 2001, consisted
of  operations of FTL (58.53%  ownership  interest),  StreamingAsia  (50% equity
investment  interest),  UAC Exchange (51% ownership interest) and its investment
and advances to Sinobull for acquisitions in China and Hong Kong. Operations for
the three months ended March 31, 2000  consisted  of  operations  of FTL (58.53%
ownership  interest)  and  Hartcourt's  35% equity  investment  interest  in UAC
Exchange.

Net sales and cost of sales:  The Company recorded net sales of $253,361 for the
three months  ended March 31, 2001,  compared to $348,228 for the same period in
2000.  Net sales in 2001  consisted  of the sale of wireless  pagers,  rental of
equipment, and the related Internet and telephone services as FTL switched their
wireless network to a new and improved  transmission  platform in December 2000.
Cost of sales  amounted  to $4,840 for the three  months  ended  March 31,  2001
compared  to $116,541  for the same period in 2000.  Cost of sales for the three
months ended March 31, 2001 included the cost of sales of a very small number of
wireless  pagers in circulation  during the first three months of 2001 since FTL
switched its wireless network to a new transmission platform.

Selling,  general and  administrative  expenses  were  $1,245,240  for the three
months ended March 31, 2001 compared to $1,804,237  for the same period in 2000.
The decrease resulted primarily because of increased  consulting and legal costs
associated with the  restructuring  of Hartcourt's  business in China during the
first  three  months  of  2000,  and  expenses  incurred  in  brokerage  fees in
connection with the issuance of warrants raising working capital.

Other expenses:  Total other expenses net of other income, were $203,772 for the
three  months  ended March 31,  2001  compared to $62,662 for the same period in
2000. The increase in other expenses  resulted  primarily due to the increase in
loss of Hartcourt's equity investment in StreamingAsia.

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2001 are to fund the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia.  During the three months ended March 31,  2001,  Hartcourt  has raised
necessary funds to carry out its plans of acquisitions by selling its own common
shares  to  selected   investors  and  bringing  in  business   partners   whose
contributions included the necessary cash.


                                      F-26
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                           MARCH 31, 2001 (UNAUDITED)

As shown in the accompanying  financial statements,  Hartcourt incurred net loss
of  $1,225,831  for the three  months  ended March 31, 2001 as compared to a net
loss of  $1,671,138  for the  same  period  in 2000.  Additionally,  Hartcourt's
current liabilities exceeded its current assets by $2,629,171 at March 31, 2001.
These  factors,  as well as  negative  cash flows from  operations,  Hartcourt's
inability to meet debt  obligations  and the need to raise  additional  funds to
accomplish its objectives,  create a substantial doubt about Hartcourt's ability
to continue as a going concern.

Hartcourt  has taken  certain  restructuring  steps,  which in the  management's
opinion will provide the  necessary  capital to continue its  operations.  These
steps included: 1) the settlement of certain matters of litigation and disputes;
2) signed an Investment Agreement with Swartz Private Equity,  LLC, which agreed
to purchase  from time to time,  up to $35,000,000 of Hartcourt shares of common
stock. The Investment  Agreement with Swartz is still subject to the approval of
the SEC; 3) raised  $8,374,692 in cash through the issuance of its common shares
since the  beginning  of the year 2000 through  March 31, 2001;  4) common stock
subscriptions receivable of $11,687,179 as March 31, 2001.

Operating  activities.  During the three months  ended March 31, 2001,  net cash
used by operating activities increased to $762,201 during the three months ended
March 31,  2001  compared  to  $288,626  during  the same  period in 2000.  This
increase  is  primarily  due to the  increase in  accounts  receivable,  prepaid
expenses and deferred revenue.

Investing  activities.  Net cash used in investing  activities  during the three
months  ended  March 31,  2001,  was  $204,749  compared to $50,747 for the same
period  in 2000.  Cash  used was  primarily  due to  advances  to  Sinobull  for
investment purposes.

Financing activities. Net cash provided by financing activities during the three
months ended March 31, 2001 was $718,759  compared to $1,374,970 during the same
period in 2000.  Net cash was provided due to proceeds from sale of common stock
amounting  to $504,916,  advances  from related parties of $223,854 and payments
on note payable of $10,011.

As a result of the above activities,  the company  experienced a net decrease in
cash of  $248,191  for the three  months  ended March 31,  2001.  The ability of
Hartcourt  to continue as a going  concern is still  dependent on its success in
obtaining  additional  financing and  fulfilling  its plan of  restructuring  as
outlined above.










                                      F-27
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2001 (UNAUDITED)


Part II

Item 1.    LEGAL PROCEEDINGS

The Hartcourt  Companies,  Inc. v. Estrellita D. Gonzales,  Los Angeles Superior
Court Case No. BC 222 853:

Hartcourt  has obtained a judgment in the  principal  amount of $28,112  arising
from the defendant's failure to pay according to the terms of a promissory note.
Hartcourt is pursuing collection of this amount.

Harvey  Productions,  Inc. ("Harvey") v. Alan Phan, et al., Los Angeles Superior
Court Case No. SC 060 296:

Hartcourt  and Alan Phan  have been  named as  defendants  along  with two other
corporate  entities  and their  presidents.  This case was filed on January  28,
2000. Harvey claims that Hartcourt  wrongfully  cancelled a share certificate to
Harvey for 50,000 shares and further claims that Hartcourt  committed  breach of
contract   and  fraud.   No   contract   exists   between  the  parties  and  no
representations  were made among the parties.  The case is ongoing and Hartcourt
plans to vigorously contest this case.

Apollo Financial Network, LLC ("Apollo") v. The Hartcourt  Companies,  Inc., Los
Angeles Superior Court Case No. BC 245398:

On February 21, 2001,  Apollo filed an action for breach of contract arising out
of a consulting agreement that was cancelled in January 1999. Hartcourt plans to
vigorously   contest  this  case.   On  March  27,  2001,   Hartcourt   filed  a
cross-complaint  seeking  $25,000 for unpaid rent and expenses from January 1999
through June 1999. The case is ongoing.

ComericaBank 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 another  entity's  ("Pego")  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 the settlement  agreement,  which stipulation calls for certain payments
and transfers of funds by Pego, and a judgement of approximately $800,000 exists
of which  Hartcourt is a  co-guarantor.  The assets of Pego  including  accounts
receivable will be liquidated to pay down the debt.

Charles  Hogue v. The  Hartcourt  Companies,  Inc.,  Circuit  Court of the Ninth
Judicial Circuit, Orange County, Florida Case No. CIO 00-2190:


                                      F-28
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2001 (UNAUDITED)

Charles  Hogue filed a complaint on or about March 22, 2000, 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 on January 31, 2001.  Hartcourt  brought a motion to set
aside the default,  which was denied.  Hartcourt plans to vigorously  appeal the
ruling.  On or about March 2, 2001, a Notice of Appeal was filed.  Hartcourt has
retained new appellate counsel to aggressively contest the appeal.

Kevin  Quinn,  Go Irish,  Ltd vs. The  Hartcourt  Companies,  Inc.,  Los Angeles
Superior Court Case No. 232720:

On March 28,  2001,  Hartcourt  obtained  a default  judgment  in the  amount of
$154,312 against Kevin Quinn and Go Irish, Ltd. Hartcourt is pursuing collection
of this amount.

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











                                      F-29
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2001 (UNAUDITED)



Item 2.  CHANGES IN SECURITIES

Not applicable

Item 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable

Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

None

Item 5.  OTHER INFORMATION

None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

       a) Exhibits
           o   27 - Financial Data Schedule

       b) Reports on Form 8-K
           o   On February 9, 2001,  appointment  of Weinberg & Company, P.A. as
               Hartcourt's  independent  Certified Public Accountants,  Film No.
               1529253.  Incorporated herein by reference.

























                                      F-30
<PAGE>

                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                           MARCH 31, 2001 (UNAUDITED)


                                   SIGNATURES

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


                                          The Hartcourt Companies, Inc.

Date:  May 11, 2001                        By: /s/  Dr. Alan V. Phan
                                               ----------------------
                                                    Dr. Alan V. Phan
                                                    Chairman





































                                      F-31