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

                                   FORM 10-QSB


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

                  For the quarterly period ended: June 30, 2002

    [ ]   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.)

           19222 Pioneer Blvd., Suite 100, Cerritos, California 90703
                    (Address of principal executive offices)

                                 (562) 653-0400
                           (Issuer's telephone number)

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

As of June 30, 2002,  The Hartcourt  Companies,  Inc. had  82,148,360  shares of
Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                        Yes [  ]                 No [X ]





                                       F-1

<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                              Report on Form 10-QSB
                                For quarter ended
                                  June 30, 2002
                                                                      Page
                                                                      ----
PART 1   FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets at June 30, 2002
         (Unaudited) and December 31, 2001                            F-3

         Consolidated Statements of Operations for the Three
         Months and Six Months ended June 30, 2002 and 2001
         (Unaudited)                                                  F-5

         Consolidated Statements of Shareholders' Equity for
         the Six Months ended June 30, 2002 (Unaudited)               F-6

         Consolidated Statements of Cash Flows for the Six
         Months ended June 30, 2002 and 2001 (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-26


PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                           F-31

Item 2.  Changes in Securities                                       F-31

Item 3.  Defaults upon Senior Securities                             F-31

Item 4.  Submission of Matters to Vote of Security Holders           F-31

Item 5.  Other Information                                           F-32

Item 6.  Exhibits and Reports on Form 8-K                            F-33

Signatures                                                           F-34










                                      F-2
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


Part I
Item 1

                                                 June 30, 2002    December 31,
                                                  (Unaudited)        2001
                                                 -------------   -------------
ASSETS

Current assets:
   Cash and cash equivalents                     $    105,824    $    281,563
   Accounts receivable, net                         1,094,155       1,443,673
   Inventory                                           16,936          15,882
   Notes receivable, current portion                  709,759         896,874
   Prepaid expenses and other                         688,182         734,598
   Due from related parties                         1,025,234       1,494,730
                                                 ------------    ------------
Total current assets                                3,640,090       4,867,320
                                                 ------------    ------------
Property and equipment, net                         1,699,221       2,445,432

Investments, net                                      410,837         400,000

Other assets
   Goodwill, net                                    4,372,289       5,257,649
   Intangibles, net                                 1,076,113       1,191,959
   Investment in ETNS Singapore Pte., Ltd.            202,120         209,490
   Notes receivable                                 2,508,286       2,608,286
                                                 ------------    ------------
Total other assets                                  8,158,808       9,267,384
                                                 ------------    ------------
Total assets                                     $ 13,908,956    $ 16,980,136
                                                 ============    ============

















          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                 June 30, 2002   December 31,
                                                  (Unaudited)         2001
                                                 -------------   -------------
LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
 Cash overdraft                                  $    200,614    $     82,030
 Accounts payable                                   3,532,439       4,607,238
 Deferred revenue                                     253,939         616,254
 Notes payable, current portion                     1,088,025       1,339,517
 Capital lease liability, current portion              51,977          84,642
 Due to factor                                        198,205         198,205
 Due to related parties                             1,182,984       1,350,997
 Accrued expenses and other current liabilities       754,920         478,216
                                                 ------------    ------------
Total current liabilities                           7,263,103       8,757,099

Long term Liabilities:
 Notes payable                                        431,556         433,299
 Capital lease liability                               27,837          28,596
                                                 ------------    ------------
Total liabilities                                   7,722,496       9,218,994
                                                 ------------    ------------
Contingencies

Minority interests                                  1,543,473       2,280,199

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; 82,148,360 shares and
  73,885,656 shares issued and outstanding
  at June 30, 2002 and December 31, 2001               82,149          73,886
 Stock subscriptions receivable                      (473,181)       (139,865)
 Treasury stock, at cost, 2,198,561 and
  2,418,367 shares at June 30, 2002 and
  December 31, 2001                                (1,559,586)     (1,662,233)
 Additional paid-in capital                        56,988,383      55,774,225
 Other comprehensive loss                             (71,092)        (61,687)
 Accumulated deficit                              (50,323,696)    (48,503,393)
                                                 ------------    ------------
Total shareholders' equity                          4,642,987       5,480,943
                                                 ------------    ------------
Total liabilities and shareholders' equity       $ 13,908,956    $ 16,980,136
                                                 ============    ============



          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S>                                                           <C>           <C>           <C>           <C>
                                                              For the Three Months Ended   For the Six Months Ended
                                                                       June 30                       June 30
                                                              --------------------------- ---------------------------
                                                                   2002          2001         2002           2001
                                                              ------------- ------------- ------------- -------------
Net sales                                                     $  1,795,965  $  1,877,865  $  5,343,564  $  2,131,226
Cost of sales                                                    1,433,692     1,294,404     4,456,656     1,299,244
                                                              ------------  ------------  ------------  ------------
Gross profit                                                       362,273       583,461       886,908       831,982
                                                              ------------  ------------  ------------  ------------
Operating expenses:
 Selling, general and administrative                               807,772     1,885,000     1,886,928     2,762,480
 Depreciation and amortization                                   1,167,619       232,657     1,530,363       378,941
                                                              ------------  ------------  ------------  ------------
Total operating expenses                                         1,975,391     2,117,657     3,417,291     3,141,421
                                                              ------------  ------------  ------------  ------------
Loss from continuing operations                                 (1,613,118)   (1,534,196)   (2,530,383)   (2,309,439)

Other income (expense):
 Equity in earnings (loss) of affiliate                                514             -         7,554      (183,536)
 Loss on abandonment of property and equipment                     (50,082)            -      (164,973)            -
 Interest expense                                                  (14,487)      (38,145)      (47,413)      (78,656)
 Interest income                                                    65,681        22,100       119,299        25,261
 Other                                                              58,887       367,205        58,887       370,766
                                                              ------------  ------------  ------------  ------------
Total other income (expense)                                        60,513       351,160       (26,646)      133,835
                                                              ------------  ------------  ------------  ------------
Loss from continuing operations before minority interest        (1,552,605)   (1,183,036)   (2,557,029)   (2,175,604)

Less: loss in subsidiary attributed to minority interest           514,131       261,056       736,726       282,954
                                                              ------------  ------------  ------------  ------------
Loss before discontinued operations                             (1,038,474)     (921,980)   (1,820,303)   (1,892,650)

Discontinued operations:
 Loss from discontinued operations                                       -       (57,255)            -      (312,416)
                                                              ------------  ------------  ------------  ------------
Net loss                                                      $ (1,038,474) $   (979,235) $ (1,820,303) $ (2,205,066)
                                                              ------------  ------------  ------------  ------------
Other comprehensive loss:
 Foreign currency translation loss                          (22,711)            -        (9,405)            -
                                                              ------------  ------------  ------------  ------------
Comprehensive loss                                            $ (1,061,185) $   (979,235) $ (1,829,708) $ (2,205,066)
                                                              ============  ============  ============  ============
Basic and fully diluted loss per common share:
 Loss from continuing operations                              $      (0.01) $      (0.01) $      (0.02) $      (0.03)
 Loss from discontinued operations                                       -             -             -             -
                                                              ------------  ------------  ------------  ------------
 Loss per share                                               $      (0.01) $      (0.01) $      (0.02) $      (0.03)
                                                              ------------  ------------  ------------  ------------
Weighted average number of shares outstanding                   80,033,267    67,214,678    77,108,098    65,163,663
  - Basic and fully diluted                                   ============  ============  ============  ============
</TABLE>









          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<S>                           <C>         <C>         <C>         <C>         <C>           <C>
                                                                                               Common
                                    Common Stock          Preferred Stock     Additional        Stock
                              ----------------------  ----------------------   Paid-In      Subscriptions
        Description             Shares      Amount      Shares      Amount     Capital       Receivable
----------------------------  ----------  ----------  ----------  ----------  ------------  -------------
Balance - December 31, 2001   73,885,656  $   73,886       1,000  $       10  $ 55,774,225  $   (139,865)

Shares issued for
  consulting services            900,000         900           -           -       181,920             -
Stock subscriptions received           -           -           -           -             -       139,865
Shares issued to directors
  in lieu of compensation
  and for services             2,362,704       2,363           -           -       437,238             -
Sale of treasury stock                 -           -           -           -             -             -
Shares issued for
  subscriptions receivable     5,000,000       5,000           -           -       595,000      (473,181)
Other comprehensive gain               -           -           -           -             -
Net loss                               -           -           -           -             -             -
                               ---------- ----------  ----------  ----------  ------------  ------------
Balance - June 30, 2002        82,148,360 $   82,149       1,000  $       10  $ 56,988,383  $   (473,181)
                               ========== ==========  ==========  ==========  ============  ============
</TABLE>



<TABLE>
<S>                            <C>          <C>            <C>            <C>            <C>
                                      Treasury Stock          Other                          Total
                               --------------------------  Comprehensive   Accumulated   Shareholders'
        Description              Shares         Amount        Loss           Deficit        Equity
----------------------------   -----------  -------------  -------------  -------------  -------------
Balance - December 31, 2001     2,418,367   $ (1,662,233)  $   (61,687)   $(48,503,393)  $  5,480,943

Shares issued for
  consulting services                   -              -             -               -        182,820
Stock subscriptions received            -              -             -               -        139,865
Shares issued to directors
  in lieu of compensation
  and for services                      -              -             -               -        439,601
Sale of treasury stock           (219,806)       102,647             -               -        102,647
Shares issued for
  subscriptions receivable              -              -             -               -        126,819
Other comprehensive gain                                        (9,405)              -         (9,405)
Net loss                                -              -                    (1,820,303)    (1,820,303)
                               ----------   ------------   -----------    ------------   ------------
Balance - June 30, 2002         2,198,561   $ (1,559,586)  $   (71,092)   $(50,323,696)  $  4,642,987
                               ==========   ============   ===========    ============   ============
</TABLE>






          See accompanying notes to consolidated financial statements.

                                      F-6

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

                                                      Six Months Ended June 30,
                                                     ---------------------------
                                                          2002          2001
                                                     ------------- -------------
Cash flows from operating activities:
 Net loss                                            $ (1,820,303) $ (2,205,066)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
   Loss on abandonment of property and equipment          164,973             -
   Depreciation and amortization                        1,530,363       459,987
   Gain on debt extinguishment                                  -       355,777
   Minority interest in loss of subsidiaries             (714,828)     (389,208)
   Equity in loss of affiliate                              7,370       183,536
   Shares issued in lieu of compensation and services     622,420       346,813
   Changes in operating assets and liabilities:
     (Increase) decrease in:
     Accounts receivable                                  349,518      (337,722)
     Inventory                                             (1,054)       (3,463)
     Prepaid expenses and other                            46,416       (80,100)
     Cash overdraft                                       118,584       344,401
     Accounts payable                                  (1,114,799)       56,523
     Accrued expenses, other current liabilities
       and miscellaneous items                            466,662        94,398
     Deferred revenue                                    (362,315)       29,602
                                                     ------------  ------------
Net cash used in operating activities                    (706,993)   (1,144,522)
                                                     ------------  ------------
Cash flows from investing activities:
   Proceeds on notes receivable                           287,115             -
   Cash paid for investments                              (10,837)            -
   Cash acquired in acquisitions                                -       690,202
   Purchase of property and equipment                     (97,877)       (3,465)
                                                     ------------  ------------
Net cash provided by investing activities                 178,401       686,737
                                                     ------------  ------------
Cash flows from financing activities:
   Proceeds on stock subscriptions                        326,487       564,916
   Payments on loans and lines of credit                        -        (5,098)
   Proceeds from related parties, net                     301,483       629,424
   Payments on notes payable                             (241,883)     (407,377)
   Payments on capital leases                             (33,424)            -
                                                     ------------  ------------
Net cash provided by financing activities                 352,663       781,865
                                                     ------------  ------------
Foreign currency translation                                  190             -

Net increase (decrease) in cash and cash equivalents     (175,739)      324,080

Cash and cash equivalents, beginning of period            281,563       402,993
                                                     ------------  ------------
Cash and cash equivalents, end of period             $    105,824  $    727,073
                                                     ============  ============

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Item 1

Note 1:  Organization and Nature of Operations:

The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is a holding and  development  enterprise  that is  building a broad  network of
Internet,   media,  and   telecommunication   companies  in  Greater  China.  In
partnership  with  leading  Chinese   entrepreneurs   and   government-sponsored
entities,  Hartcourt is developing and investing in emerging  technologies while
building an  integrated  commercial  framework  for its  subsidiaries  and their
partners.  Hartcourt's  operative  business  strategy is  designed to  establish
market-leading  position and facilitate a series of venture divestitures via IPO
or public mergers in its five main business divisions to fully realize the value
of these assets for its  investors.  The five  business  divisions  are Sinobull
Financial  Group,  Media  Services  Group,  Broadband/Telecommunications  Group,
E-learning Group and Hartcourt Capital Group.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified and profitable revenue base throughout its operations. The
company is aggressively identifying and pursuing the best business opportunities
available.  Through a continued  refinement  of  operational  efficiencies,  and
increasing   revenue  margins,   the  Company  is  providing  a  clear  path  to
profitability for its current and future businesses.

Hartcourt is developing  extensive business operations  throughout Greater China
to  position  itself to take full  advantage  of the  substantial  opportunities
presented by the emergence of the worlds largest consumer and business  markets,
and  China's  upcoming  entry  into  the  WTO.  Hartcourt's  ability  to  obtain
government  approved  licenses and its wide array of well  established  business
relationships  is  greatly  facilitating  these  goals and making  Hartcourt  an
attractive  entry point for many  corporations  seeking access to these markets.
Current  government  customers and partnerships of its subsidiaries and business
investments include: China Bank of Communications, China Central TV, Beijing TV,
Guangdong TV, Phoenix TV, Shenzhen  Radio,  Zhejiang Cable TV,  Innostar Hi Tech
Enterprises,  Northern Jiaotong University,  China Securities  (Huaxia),  Guosen
Securities,  Xiangcai Securities,  Anshan Securities, Huaan Securities,  Peoples
Daily, and China Telecom;  for the Hong Kong Government:  Stock Exchange of Hong
Kong (SEHK),  Hong Kong Exchanges and Clearing  Limited  (HKEx),  Securities and
Futures Commission, and Department of Printing. Other business partners include;
Yahoo!, Equis/Reuters,  Legend, IBM, Sifft/Nokia,  YesMobile,  Comstock/Standard
and Poor's, and the University of California/Fullerton.

Sinobull  Financial  Group:  This group consists of Financial  Telecom  Limited,
Sinobull  Information  Company  Limited  (formerly  Shanghai  Guo Mao  Science &
Technology Co. Ltd.),  Sinobull  Network  Technology  Company Limited  (formally
Beijing Net  Technologies  Center  Company,  Ltd.),  Tongbo  Software Ltd., HCTV
Financial  TV Ltd.,  Sinobull  Magazine  Ltd.  and  Hartcourt's  investments  in
Shanghai Wind  Information  Company Limited.  The Sinobull  Financial Group is a
leading financial content provider,  develops technologically advanced financial
services platforms,  and operates a financial Internet portal. Sinobull provides
mainland  brokerages  and  financial  institutions  the  hardware,  software and

                                      F-8
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Internet platforms to enable their customers' access to a comprehensive suite of
quality  financial  news,   real-time  market  data,   financial   analysis  and
professional  market  commentary.   Sinobull.com,  its  financial  services  and
information  portal,  is one of China's  most  popular  financial  portals.  The
company's  E-Finance  platform is an integration of the most advanced  Internet,
telecommunication and wireless access systems available on the market today. The
service  platform and collateral  content is offered via subscription to leading
securities  brokerages,  investment firms, banks, and media companies throughout
Greater China.

Broadband/Telecommunications Group: This group is centered around its subsidiary
Elephant  Talk  Communications,  Inc. of Hong Kong.  The group is focused on the
development and delivery of comprehensive  telecommunication services, broadband
content,  broadband  enabling  technology  and the  management  of  services  on
broadband  infrastructure.  In  addition,  these  broadband  efforts  are  being
designed  to  provide   expanded   revenue  sources  for  Hartcourt's   existing
subsidiary's  products  and  services.  Hartcourt is  continuing  its efforts to
identify and actuate strategic investments in the development of web hosting and
data  warehouse   solutions;   providing  secure  Internet  services  for  China
businesses in e-commerce,  IP telephony,  Internet exchange centers,  high speed
wireless platforms, and ISP/content services.

Media  Services  Group:  AI-Asia  Inc.  is a  holding  and  development  company
established  by Hartcourt  to acquire  assets and  companies in the  multi-media
technology  and services  sector.  Its  objective is to identify,  develop,  and
maintain  first-mover  technologies,  products and services  for  corporate  and
consumer  Internet  deployment.  AI-Asia plans to provide its  clientele  with a
comprehensive   range  of  Internet  enabling   solutions,   preparing  them  to
participate  in the rapidly  emerging  streaming  and  broadband  communications
revolution.  The  operating  companies  in this group  include  LogicSpace  Asia
Limited.  The group provides  comprehensive  real-time  audio and video delivery
(Streaming  Media) solutions along with Internet  consulting and web application
development for businesses, professionals,  organizations, web sites and content
publishers.  The Media  Services  Group's  network  infrastructure  enables  the
streaming of superior-quality  multimedia  advertising,  live event broadcasting
and  on-demand  audio and video  content over the  Internet to target  audiences
throughout Asia and globally.

E-learning  Group:  This  group  was  formed  in  a  partnership   agreement  in
cooperation  with Northern  Jiaotong  University and California State University
Fullerton to jointly develop  education  projects and introduce  American career
training courses and post-graduate  business programs in China. The project will
offer prestigious  American  education  programs in China,  utilizing one of the
first online education  licenses  awarded by China's Ministry of Education.  The
project is offering both  certificate and degree programs with courses  designed
for relevance in today's business world.

Coursework will initially be offered in the classroom and later expanded online.
Hartcourt  plans  to  extend  its  program  to  other  potential   partners  and
institutions in the future.



                                      F-9
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Hartcourt  Capital  Group:  Hartcourt  recently  formed  under  this group a new
company  Hartcourt  Capital Inc., an  investment-banking  arm to act as a bridge
between high-growth Chinese companies and the U.S. capital markets.  The company
will provide a wide range of strategic and financial  advisory services covering
mergers and acquisitions,  fund raising, private placement,  restructuring,  and
public market listings.

History of the Company:

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" entity with no assets,  business or operations.  Subsequent to the
acquisition of Hartcourt Investments, Stardust changed its name to The Hartcourt
Companies, Inc.

OPERATIONS BY BUSINESS DIVISIONS

SINOBULL FINANCIAL GROUP:


The Sinobull  Financial  Group  ("Group")  was formed in November  1999 with the
intention to consolidate  various related businesses  acquired or expected to be
acquired by Hartcourt or Sinobull.com Inc. ("Sinobull"),  the holding company of
the Group incorporated in British Virgin Islands. On May 16, 2002,  Sinobull.com
Inc.  changed its name to Hartcourt  Companies  Limited.  In the text hereafter,
Hartcourt Companies Limited  is  referred  to as  "Sinobull".  On April 2, 2001,
Sinobull's  one share  issued  and  outstanding  held by Mr.  Tang Wing On,  was
formally transferred to Hartcourt, and Sinobull became a wholly owned subsidiary
of  Hartcourt.  On October 2, 2001,  Hartcourt  announced its intent to publicly
divest the Sinobull Group in a merger with Global Telephone  Communications Inc.
(OTC Bulletin Board:  GTCI).  The reverse merger will allow Sinobull to actively
trade on the equity markets and unlock its value for Hartcourt  investors.  GTCI
shareholders have approved the merger. Hartcourt is ready to complete its merger
as soon as GTCI resolves certain disputes with its creditors.

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



                                      F-10
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

portal  featuring  stock  trading,  real-time  quotes and company data banks for
investors  in China and Hong Kong.  These  investors  include  major  investment
houses, banks, securities firms and mutual fund houses.

On August 17, 1999,  Hartcourt entered into a stock purchase agreement with FTL,
a  Hong  Kong  corporation,  to  purchase  4,964,990  shares  of  common  stock,
representing  58.53% of the total common stock  outstanding.  The purchase price
was agreed to be HK $4.713 (US$ 0.604) per share for a total of HK$25,563,842 or
US$3,277,412,  payable 50% in cash and the remaining balance in Hartcourt common
shares.  The acquisition was completed on October 4, 1999.  Hartcourt made total
cash payments of $1,638,706 and issued  1,754,552  shares of its common stock to
FTL. During the quarter ended June 30, 2002, FTL sold 12,742 shares of Hartcourt
common  stock for  approximately  $1,211 to  satisfy  certain  obligations.  The
remaining  344,031  shares  of  common  stock  held by FTL at June 30,  2002 are
reflected as treasury shares in the  accompanying  financial  statements at June
30, 2002.

On March 27, 2000, FTL entered into a Memorandum of Understanding with NiceVoice
Investment  Holdings  Limited  (NiceVoice)  to form a joint venture named Fintel
Wireless  Internet Limited (FWL) for the purpose of establishing and operating a
financial paging service network in Hong Kong on the FLEX transmission  protocol
on a PDA receiver device. FTL agreed to invest cash by phases, to the amount not
to exceed HK$4,000,000 (approximately US$512,800) in exchange for a total of 51%
ownership  interest in the joint  venture,  and Nice Voice agreed to  contribute
certain assets in FWL. After the completion of due diligence, the parties signed
the formal joint venture agreement on April 28, 2000 and FWL became a subsidiary
of FTL. Although NiceVoice has contributed certain assets in 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 as of June 30, 2002 reflect FTL's
investment of 51% ownership  interest in FWL. FWL ceased  operations on March 1,
2002 after all its  customers  were sold to a third party.  As of June 30, 2002,
FTL had advanced approximately  HK$4,216,162 (US$540,534) towards its investment
in FWL.

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

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  revising  the  terms  of the  Term  Sheet
Agreement signed on December 18, 1999. The terms of the revised agreement stated

                                      F-11
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

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,  acquired  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 issued 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  as the  consideration  for 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  transferred without any pledge
and debt,  all tangible and  intangible  assets in relation to computer  network
information  services to Sinobull  Network,  and transferred to Hartcourt 40% of
the ownership interest in Tiandi. On December 28, 2000, Sinobull, Tiandi, and Li
Chun Ying  (representative of the owners of Shangdi) signed a Share Subscription
and Sale and Purchase  Agreement  whereby,  Sinobull  owned 51% of Tiandi and Li
Chun Ying owned 49% of Tiandi  after  payment of  consideration  to Shangdi  for
purchase of all tangible and intangible assets. Sinobull through an advance from
Hartcourt, had paid $1,000,000 in cash towards the purchase of its 51% ownership
interest  of which  $670,000  was  distributed  to the owners of Shangdi and the
remaining  $330,000  was deemed as capital  contribution  in  Sinobull  Network.
Sinobull Network ceased its operations as of May 16, 2001.

Shanghai Sinobull Information Company Limited (Sinobull  Information):  Formally
known as Shanghai Guo Mao Science & Technology  Co. Ltd.  ("Guo Mao").  Sinobull
Information  is a major  real-time  financial  data provider in Shanghai using a
satellite network to transmit data specializes in stock quotes, futures, indexes
and commodities data that compliments the financial  information database of Hua
Xia Info and the financial data delivery  systems of FTL.  Association  with Guo
Mao gives  Sinobull a distinct edge over any  competitive  financial  portals in
China. On December 1, 1999,  Sinobull signed a Term Sheet Agreement with Guo Mao
whereby Guo Mao agreed to issue new shares for a total  proceeds  of  $1,000,000
which will represent 50% of the expanded capital of Guo Mao.  Sinobull agreed to
subscribe  for all the new shares  issued by Guo Mao. On May 16, 2000,  Sinobull
and Hopeful Internet Technologies  Limited ("Hopeful") entered into an agreement
whereby  Hopeful,  an investment  holding  company  incorporated  in the British
Virgin  Islands,  will  acquire  through its  wholly-owned  subsidiary  Shanghai
Sinobull  Information  Company  Limited  ("Sinobull  Information"),  all  of the
operating assets and business of Guo Mao. To finance this  acquisition,  Hopeful
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


                                      F-12
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

own 51%  ownership  in  Hopeful  and Lee Lu Ping  will own 49% of  ownership  in
Hopeful after payment of  consideration  to Guo Mao for purchase of all tangible
and  intangible  assets.  Sinobull  has  paid  $500,000  in cash  received  from
Hartcourt  towards  the  purchase  of new shares of Hopeful  and issued  805,802
shares of Hartcourt's common stock valued at $500,000 to Sinobull Information in
February  2001.  The 805,802  common shares issued to Sinobull  Information  are
reflected as treasury  shares in the  accompanying  financial  statements  since
Sinobull Information became a subsidiary of Hartcourt.

Tongbo  Software:   specializes  in  custom-made   software  solutions  for  the
securities market,  especially in commodity and currency trading. On November 6,
2000, Sinobull Information and Ningbo Shiji TongBao Software Limited ("TongBao")
agreed to form an alliance in creating  software  solutions  for the  securities
industry.  The parties agreed to a stock swap whereby TongBao agreed to issue an
additional 150% of its existing share capital to Sinobull Information  resulting
in Sinobull Information  becoming a 60% owner of TongBao. In exchange,  Sinobull
Information  agreed to  exchange  RMB100,000  worth of its shares  valued at the
share price at the time when Sinobull Information goes for public listing to the
remaining  40% original  shareholders  of TongBao.  Upon  issuance of RMB100,000
worth of its shares,  TongBao will become a wholly owned  subsidiary of Sinobull
Information.  During  2001,  Ningbo Shiji  TongBao  Software  Limited  moved its
operations  to  Shanghai  and merged  all its  assets,  liabilities  and all its
operations in a newly formed  company named  Shanghai  Yuanhe  Computer  Limited
(Tongbo).

On  October 1,  2001,  Tongbo  signed a Letter of  Understanding  with  Sinobull
Information whereby Tongbo assigned to Sinobull  Information all of its revenues
and revenue sources  including past due,  accrued and to be earned in the future
in exchange for  Sinobull  Information  assuming  all  ordinary  and  reasonable
operational  expenses of Tongbo  commencing  October 1, 2001.  The  accompanying
financial  statements of Sinobull  Information at June 30, 2002 reflect combined
revenues and expenses of Tongbo.

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

On September 7, 2000,  Hartcourt  signed a joint venture  agreement with Hopeman
Computer  Services  Corporation  Limited  (Hopeman")  to form a joint venture in
Shanghai and jointly develop and market a 24-hour financial  television  program
and/or provide  financial  data services to  existing/new  financial  television
programs for China  market.  The new joint  venture was named "Haike  Caijin TV"
means  Hartcourt  Financial  Television  (HCTV)  in  English.  HCTV  was  to  be
registered in Shanghai with a funding of $1.0 million. The agreement defined the

                                      F-13
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

first phase joint venture investment terms for the period from September 2000 to
December  2000. In February  2001,  HCTV Joint Venture  Company was formed and a
temporary  license was  obtained to conduct  the  business of the joint  venture
pending  issuance  of a  new  license  upon  China's  entry  into  the  WTO  and
contribution  of $200,000 as the  subscribed  capital of the HCTV Joint  Venture
Company.  As of June 30,  2002,  Hopeman  has  invested  $50,000  for its  33.3%
investment  and  Hartcourt  has  invested  $100,000  towards  its  66.7%  equity
ownership in the HCTV joint venture. The temporary license issued by the Chinese
authorities  expired on February  14, 2002 pending  injection  of an  additional
$50,000  towards the capital  subscription.  Hopeman and Hartcourt are currently
negotiating  with the Chinese  authorities to renew the temporary  license until
such time as additional  $50,000 is injected in the joint venture company.  HCTV
operating results are consolidated with Hartcourt in the accompanying  financial
statements as of June 30, 2002. As of August 10, 2002, neither party contributed
any additional funds towards the registered capital.

Beijing UAC Stock Trading  Online Co. Ltd. (UAC Trading):  UAC Trading  operates
one of the leading  nationwide online securities  trading network called 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.  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.  On June 20, 1999  Hartcourt  entered  into an  agreement  with UAC
Trading to form a joint venture  company  Beijing UAC Stock Exchange  Online Co.
Ltd. ("UAC Exchange").  Under the terms of the agreement,  Hartcourt invested in
cash and stock  $2,868,000  for the  purchase of 51%  ownership  interest in UAC
Exchange.   In  September  2000,  the  Chinese  government  allowed  all  online
transactions  to be conducted via  Internet.  It caused UAC Exchange to lose its
competitiveness  as the  efficiencies  of 162 Network was not  compatible to the
Internet.  Therefore, UAC Exchange started converting its operations to Internet
based operations.

On July 16,  2001,  Hartcourt  and UAC  Trading,  by mutual  consent,  agreed to
rescind the contractual joint venture  agreement named UAC Exchange.  As part of
the rescission,  Hartcourt  agreed to accept a promissory note for the amount of
its net  investment  in UAC Exchange as of the date of  rescission  amounting to
$2,858,286,  bearing  interest  at six per cent  (6%) per anum,  payable  over a
thirty-nine  months  period.  The  parties  mutually  agreed to forego all other
rights  and  benefits   provided   under  the   contractual   joint  venture  as
consideration  for the rescission of the contract.  On September 10, 2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  purchased all
existing  tangible  and  intangible  assets of UAC  Exchange  for the  amount of
Hartcourt's net investment in UAC Exchange,  and signed a promissory note in the
amount of $2,858,286  bearing interest at six per cent (6%) per anum, payable in
quarterly  installments  of $50,000  commencing  November 1, 2001 with a balloon
payment of $2,715,772 due on December 1, 2006. The promissory note is secured by
a security agreement granting to Hartcourt all tangible and intangible  property
of Edda Limited. As of June 30, 2002, Edda paid three quarterly note payments of
$50,000  each,  and paid an  additional  $139,579  towards  interest  due on the
promissory note due to Hartcourt.



                                      F-14
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Shanghai Wind Information Company, Limited ("WindInfo"):  WindInfo is China's #1
financial  research content  provider,  developing  original content through its
nationwide  network.  WindInfo's  flagship  product  is widely  used by  China's
investment  banking and  securities  brokerage  firms.  The  Shanghai  Municipal
Government awarded WindInfo "The High-Tech Model Company" in 1999.  WindInfo has
over 1,000 registered  corporate clients,  including all major investment banks,
securities brokerage firms, and media companies.

On September 18, 2000,  Hartcourt and WindInfo signed a Term Sheet Agreement and
agreed to form a  Joint-Venture  Company  (JVC) to  expand  the  financial  data
service  business in China.  WindInfo 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. On September  18,  2000,  Hartcourt  through its
subsidiary Sinobull loaned $500,000 to WindInfo. Pursuant to the addendum to the
Term Sheet  Agreement,  on January 10, 2001,  Hartcourt  and  WindInfo  signed a
direct  investment  agreement  whereby  Hartcourt  agreed to convert the loan of
$500,000  to a 5%  equity  ownership  in the  JVC  to be  formed.  Upon  further
negotiations between the two parties,  Hartcourt and WindInfo mutually agreed to
terminate  the Term Sheet  Agreement of formation of JVC and WindInfo  agreed to
return  Hartcourt's  contribution of $500,000 towards its investment in the JVC.
As of  June  30,  2002,  WindInfo  returned  RMB630,000  ($76,829)  to  Sinobull
Information on behalf of Hartcourt.  The accompanying financial statements as of
June 30, 2002 reflect Hartcourt's loan of $423,171 to WindInfo. Both parties are
negotiating to an acceptable payment plan for Hartcourt to receive the remainder
of its loan during the year 2002.

Equis  International  Inc.(R),  a wholly owned subsidiary of Reuters  Limited(R)
signed on June 1, 2001, an International  Distribution  Agreement with Hartcourt
including  Sinobull  Group in Shanghai,  Beijing and Hong Kong, a  non-exclusive
distributor  of licensed  products  within the People's  Republic of China (PRC)
except in Hong Kong and Taiwan,  and grants to Hartcourt a  non-exclusive  right
and license to market,  promote and distribute the licensed  products in the PRC
to  sub-distributors,  resellers and end users to localize Equis'  award-winning
family of MetaStock(R)  products and market them to over 10 million investors in
the Greater  China area.  The initial term of the  agreement is for three years.
Under the terms of the agreement Equis International also granted Sinobull Group
conditional  territory exclusivity for a period of twelve months for the Chinese
versions of MetaStock  products  within the Greater  China  market.  Hartcourt's
remuneration  for the sale of licensed  products will be the difference  between
the selling price to its customers and Hartcourt's  discounted purchase price as
agreed  between  Hartcourt  and Equis.  During the quarter  ended June 30, 2002,
Hartcourt and its affiliates sold 22 copies of the Equis's licensed products for
HK$95,000  (US$12,179) and recorded data feed income of HK$45,600 (US$5,846) for
MetaStock products, since the inception of this agreement.

YesMobile  Inc.  incorporated  in Hong  Kong,  is  currently  a leading  Chinese
Wireless Application Protocol (WAP) portal with open-standard and multi-platform
compatibility  in  Asia.  Sinobull.com  HK Ltd.  has  signed a  revenue  sharing


                                      F-15
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

agreement with YesMobile whereby,  Sinobull agreed to provide financial contents
to YesMobile in China. The data will include real time stock quotes, commodities
and currencies  contracts,  economic news,  commentaries  and research  reports.
Pursuant to the terms of the  agreement,  Sinobull  will share 70% and YesMobile
will  share  30% of  the  revenue  received  from  the  users  of  the  Wireless
Application  Protocol  (WAP)  portal  and the  Short  Message  Service  (SMS) of
YesMobile.  Users will access these contents via their mobile phones, as well as
PDAs and other wireless devices. YesMobile is currently providing these services
to over 105 million users of China Mobile.  As of August 10, 2002,  Sinobull has
not received any revenues under the revenue sharing agreement.

BROADBAND/TELECOM GROUP:

The   Broadband/Telecom   Group   currently   consists  of  only  Elephant  Talk
Communications,  Inc.  The group is  focused  on  development  and  delivery  of
comprehensive  telecommunication services, broadband content, broadband enabling
technology  and the  management  of services  on  broadband  infrastructure.  In
addition, these broadband efforts are being designed to provide expanded revenue
sources for Hartcourt's existing subsidiary's  products and services.  Hartcourt
is continuing its efforts to identify and actuate  strategic  investments in the
development  of web  hosting  and data  warehouse  solutions;  providing  secure
internet  services for China  businesses in e-commerce,  IP telephony,  internet
exchange centers,  high speed wireless platforms,  and ISP/Content  services. On
September 25, 2001 Hartcourt announced its intent to merge Elephant Talk Limited
subsidiary with Staruni  Corporation (OTC Bulletin Board: SRUN), in an effort to
take  Broadband/Telecom  Group public.  On January 4, 2002 Elephant Talk Limited
completed its merger with Staruni Corporation and commenced trading on OTC:BB on
January 22, 2002 under the ticker symbol ETLK.

Elephant  Talk  Communications  Inc.  (formerly  known as Elephant  Talk Limited
"ElephantTalk   or   ET"):    ElephantTalk   (OTC:BB   ETLK),   is   a   leading
telecommunications  company  located and  operated in Hong Kong with  offices in
Cerritos,  California and switching facilities in China, Hong Kong, U.S., Taiwan
and Singapore. ElephantTalk operates international long distance service on both
sides of the Pacific to over 220 foreign cities. They enable  telecommunications
carriers and other service providers the ability to offer long distance,  voice,
data/fax,  calling card, and  voice-over-internet-phone  (VOIP) services through
advanced,  scaleable  networks.  ElephantTalk  is expanding its networks and has
international operating agreements with telecommunications  carriers,  including
AT&T Corp.,  Cignal Global Ltd., Frontier Telecom Ltd. and MCI WorldCom Inc. Its
customers include the largest first and second tier telecommunications  carriers
in the U.S. and Asia,  including two of the four fixed network operators in Hong
Kong; New T&T and New World Telephone.

On May 16,  2001,  Hartcourt  and  ElephantTalk  executed  a Sale  and  Purchase
Agreement  whereby  Hartcourt   acquired  51%  of  the  ownership   interest  in
ElephantTalk for a total consideration of $4,194,000.

Pursuant to an Agreement of Merger and Plan of Reorganization,  effective August
27, 2001, and through the subsequent transaction that closed on January 4, 2002,

                                      F-16
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Staruni Corporation, a California corporation merged with Elephant Talk Limited.
Staruni was the surviving  corporation  and  continued  its corporate  existence
under the laws of California. On January 9, 2002, Staruni filed a Certificate of
Amendment of Articles of  Incorporation  to amend its corporate name to Elephant
Talk Communications,  Inc. (ETCI). This name change was done in conjunction with
the merger, and to emphasize that the new focus of the ETCI will be the business
of Elephant  Talk Limited.  Pursuant to the terms of the merger,  each holder of
ordinary shares of ElephantTalk  common stock,  par value of HK$1 (One Hong Kong
Dollar) immediately prior to the effective time of the merger date, by virtue of
the merger and without any action on the part of such holder, received as of the
merger date, such number of shares of common stock of ETCI, no par value, as the
number of shares of  ElephantTalk  common  stock  owned by such holder as of the
merger  date.  Collectively,   following  the  merger,  the  former  holders  of
ElephantTalk common stock held an aggregate of 90% of the issued and outstanding
shares of ETCI's common stock.  The merger caused no change in any of the shares
of the  ETCI's  common  stock  outstanding  on the  merger  date,  and no  other
securities were converted as a result of the merger.  Prior to the completion of
the merger  with  Staruni,  on January 2, 2002,  Hartcourt  purchased  7,500,000
shares of  Elephant  Talk  Limited  from a  shareholder  for a note  payable  of
$140,595  bearing an annual  interest rate of 8%, due September 15, 2002. At the
conclusion  of the  merger  on  January  4,  2002,  Hartcourt  retained  a 51.7%
ownership in ETCI. The accompanying  consolidated  financial  statements include
the operating results of ETCI for the period presented.

On October 8, 2001 ET entered  into a reseller  agreement  with  JiTong  Network
Communications  Company  Limited  ("JiTong")  to provide a variety  of  IP-based
telecom services.  JiTong is one of the five government-owned  telecom giants in
China with their own  communication  infrastructure.  It is the famous owner and
operator of the Golden Bridge fiber optics and Internet services. Both companies
will jointly  develop and market new brands of IP  telephony  solutions in major
countries worldwide.  Under the terms of the agreement, ET will interconnect its
global point-of-presence (POPs) with JiTong's network. ET will market and resell
JiTong's  IP-based services  including I-phone and I-fax services,  while JiTong
will be responsible for service provisioning,  technical support and after-sales
services  to  customers.   The  agreement  signifies  the  beginning  of  close,
long-term,  working  partnership  between the two companies.  The details of the
reseller  agreement have been negotiated and the terms  finalized.  ElephantTalk
has expanded their  agreement with JiTong  Networks  Communications  Company and
also signed cross-branding  partnership agreements with China Netcom Corporation
Limited and Great Wall Broadband Network.

MEDIA SERVICES GROUP:

The Media Services Group  consisted of  StreamingAsia  Holdings  Limited,  which
consisted of the operations of  StreamingAsia  Limited,  LogicSpace  Limited and
SyndicateAsia  Limited.  The  Media  Services  Group  provides  a  comprehensive
real-time  audio  and video  delivery  (Streaming  Media)  solution  along  with
Internet   consulting   and   web   application   development   to   businesses,
professionals,  organizations,  web sites and content publishers.  The Streaming
Media Group's network  infrastructure  enables the streaming of superior-quality
multimedia  advertising,  live event  broadcasting and on-demand audio and video
content over the Internet to target audiences  throughout Asia and Globally.  On

                                      F-17
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

August 20, 2001,  Hartcourt  established a new wholly owned  subsidiary  AI-Asia
Inc. to hold and develop assets of the Media Services Group. AI-Asia's objective
is  identify,  develop,  and  maintain  first-mover  technologies,  products and
services  for  corporate  and consumer  Internet  deployment.  AI-Asia  plans to
provide its clientele with a comprehensive range of Internet enabling solutions,
preparing them to participate  in the rapidly  emerging  streaming and broadband
communications  revolution.  AI-Asia  will  create  synergy  not only  among its
streaming technology companies but will coordinate with other Hartcourt Groups.

StreamingAsia Holdings Limited  ("StreamingAsia  Group"):  StreamingAsia Limited
provides  Internet-related  software  development  service  with an 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 subscribed 1,200,000 newly
issued  and  outstanding   fully  paid  shares  of  StreamingAsia   Limited  for
HK$7,000,000   (approximately   US$897,500)   on  behalf  of   Hartcourt.   Upon
subscription  of such  shares,  Sinobull  acquired  50%  ownership  interest  in
StreamingAsia  Limited and contributed $897,500 towards its purchase.  Hartcourt
advanced  such funds to  Sinobull  for  StreamingAsia  Limited  acquisition.  In
addition,
both  Sinobull and Hartcourt  agreed and confirmed that as part of the financing
arrangements  Sinobull held the subscribed  shares in  StreamingAsia  Limited on
behalf of Hartcourt and those shares were  transferred  to Hartcourt on December
29,  2000.  On  December  30,  2000,  as  part  of  the  reorganization  of  the
StreamingAsia   Holdings   Limited,   the  beneficial   ownership   interest  in
StreamingAsia  Limited was transferred to Asia Top Finance Limited ("Asia Top"),
a company organized under the laws of British Virgin Islands. As a result of the
above transfer,  Hartcourt owned 50% of the Asia Top and remaining 50% ownership
interest was held by the selling shareholders of StreamingAsia Limited.

LogicSpace  Limited  ("LogicSpace"):  LogicSpace,  a wholly-owned  subsidiary of
StreamingAsia Limited, is an Internet consulting and web application development
company  that  provides a wide range of  Internet  services  including  web page
design,  system  architecture  and solution  implementation.  LogicSpace  offers
cost-effective  and one-stop shop Internet  solutions  that enable  companies to
achieve  smooth  results in doing  business on the Internet.  Solutions  include
top-notch  eBusiness  & Internet  consultation,  B2B/B2C  Portal  Development  &
Implementation,   Web-Based  &  Wireless   application   design  and  "know-how"
implementation.  The  operating  results of  LogicSpace  are  consolidated  with
StreamingAsia  Limited in the accompanying  financial  statements as of June 30,
2002

SyndicateAsia Limited  ("SyndicateAsia"):  SyndicateAsia,  is pioneer in content
distribution,   providing  the   marketplace   for   exchanging,   managing  and
distributing   content  media  across  the  Asian  region.   The   revolutionary
SyndicateAsia  platform  offers  flexibility  to providers and content buyers to
transform formats (Web to WAP) and exchange content,  including text, graphical,
audio  and  video,   across  a  wide  range  of  sources  in  the  Asia  region.
SyndicateAsia's  mission is to serve as the bridge between the content providers
and end users by  providing  the foremost  syndication  solution for delivery of

                                      F-18
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

multi-media  content on cross  devices and  platforms,  including the World Wide
Web,  wireless,  and streaming media. In December 2000, the StreamingAsia  Group
issued 50% of the enlarged  share  capital of  SyndicateAsia  to  Hartcourt.  On
December 30, 2000, as part of the reorganization of the StreamingAsia Group, the
entire   beneficial   ownership  in  the  share  capital  of  SyndicateAsia  was
transferred to China Top Worldwide Limited ("China Top"), a company incorporated
in the British Virgin Islands.  As a result of the transfer  Hartcourt owned 50%
of the ownership interest in China Top.

On May 16, 2001  Hartcourt  took control over the  management  and operations of
Asia Top and  China  Top,  and  signed a Term  Sheet  Agreement  to  acquire  an
additional 35% ownership  interest in Asia Top and China Top. On August 9, 2001,
Hartcourt  closed the escrow and completed the  acquisition of an additional 35%
ownership interest in Asia Top and China Top for a total purchase  consideration
of  HK$800,000  (US$102,564).  On April 1,  2002,  Asia Top and China Top ceased
operations  and  transferred  its 85%  ownership  in  StreamingAsia  Limited and
Syndicated  Asia  Limited  to  Hartcourt  Companies  Limited.  The  accompanying
financial  statements at June 30, 2002 reflect  Hartcourt's  ownership of 85% of
the  StreamingAsia  Limited  and  Syndicate  Asia  Limited  and its  results  of
operations from the date of acquisition are consolidated with Hartcourt.

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 for the 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  converted  its loan into an  investment  of 5% in TSS.
Hartcourt has not exercised its right to subscribe for the additional 55% of the
ownership  interest in the JVC and such right has subsequently been lapsed.  The
accompanying  financial statements reflect Hartcourt's loan of $70,000 to TSS as
of June 30, 2002. Hartcourt does not intend to acquire any ownership interest in
TSS at this time.

Beijing Kangrunjiayuan  Technology Co., Limited ("Kangrun"):  On March 22, 2002,
AI-Asia entered into an agreement with Kangrun Technology Co., Limited (BVI) and
Control  Techniques,  Limited  (BVI),  herein  collectively  referred  to as the
"subscribers". The subscribers agreed to subscribe for certain shares in AI-Asia
and  AI-Asia  has  agreed to  transfer  to the  subscribers  the said  shares in
consideration for the subscribers  procuring Beijing  Kangrunjiayuan  Technology
Co.,  Limited  ("Kangrun")  (www.kangrun.com)  and  Kangtai  Shitong  Technology
Development  Company Limited ("CTC")  entering into a Revenue Sharing  Agreement
between them and a wholly owned  subsidiary of AI-Asia.  Kangrun provides system
integration, networking solutions, modular networking products, computer systems
and storage  devices to  corporate  enterprises  in China.  Two major  strategic



                                      F-19
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

partnerships   of   Kangrun   are   IBM-China    (www.ibm.com)   and   Ortronics
(www.ortronics.com).  The company is also a distributor  for Hewlett Packard and
Cisco Systems  products.  The  agreement is subject to certain  conditions to be
fulfilled  by the  relevant  parties.  The  parties  have  completed  their  due
diligence and are negotiating the final terms of the agreement.  The transaction
is expected to be completed by September 30, 2002.

E-LEARNING GROUP:

On June 18, 2001,  Hartcourt executed a Revenue Sharing Agreement in cooperation
with Northern Jiaotong University and California State  University-Fullerton  to
jointly  develop  education  projects and  introduce  American  career  training
courses  and  post-graduate  business  programs  in China.  The  project  offers
prestigious  American  education  programs in China,  utilizing one of the first
online education licenses awarded by China's Ministry of Education.  The project
offers both  certificate and degree programs with courses designed for relevance
in today's business world. Coursework will be offered initially in the classroom
and later  expanded  online.  Hartcourt  plans to extend  its  program  to other
potential  partners  and  institutions  in the future.  Hartcourt  has  advanced
$100,000  towards the working  capital for its  investment in this project as of
June 30, 2002. The accompanying financial statements as of June 30, 2002 reflect
Hartcourt's investment of $100,000 in the education project. The total financial
commitments  of  Hartcourt  and terms of payment on this  project are  currently
being negotiated between the parties and expect to be finalized by September 30,
2002.

OTHER VENTURES:

eMPACT Solutions,  Inc.  ("eMPACT") - eMPACT,  development stage enterprise,  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 April 30,
2000, Harcourt executed a Subscription  Agreement and Investment  Representation
and agreed to  subscribe  and  purchase  three  hundred  (300) shares of Class B
Convertible  Preferred Stock, par value $0.001 per share of eMPACT for $300,000.
Hartcourt has determined  that at this time to increase its investment in eMPACT
would not be advantageous to the company or its  shareholders.  The accompanying
financial  statements at June 30, 2002 reflect Hartcourt's  investment in eMPACT
of $300,000.  On January 7, 2002, eMPACT received $7,500,000 as the second round
of funding  from the  venture  capital  partners  for further  expansion  of the
company's Internet related business.

Acquisitions and Partnerships Disclaimer:

Hartcourt's  partners  in the  joint  ventures  discussed  above  are  expecting
Hartcourt to provide key elements in these joint ventures:  Internet  technology
and  investment  capital.   Hartcourt  management  has  hired  individuals  with
extensive  experience and expertise in relevant industry sectors, and intends to
provide  Internet  technology  by merging  with or acquiring  companies  already
active in these  businesses.  On the financial  side,  Hartcourt  plans to raise
substantial  funds  necessary to carry out the plans of its venture  partners by


                                      F-20
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

selling its own common  shares to selected  investors/partners  and  bringing in
partners  whose  contributions  to each joint venture will include the necessary
cash  contributions.  If  Hartcourt  is not able to raise  the  necessary  funds
indicated  in  the  agreements,  the  agreements  may  need  to be  modified  or
cancelled.

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

Funding:

PYR Management LLC ("PYR") - On January 26, 2000,  Hartcourt completed a private
placement of 227,445  Units,  each unit  consisting  of a Class I and a Class II
Warrant,  to  PYR  for  $3,000,000  pursuant  to  a  Regulation  D  Subscription
Agreement.  On January 27, 2000,  Hartcourt  received  $2,743,000 from PYR to be
used for  working  capital  requirements  of  Hartcourt.  On  February  4,  2000
Hartcourt filed a Form 8-K with the SEC. On February 21, 2001, Hartcourt and PYR
Management  entered into a Letter  Agreement  whereby the parties  agreed on the
maximum  number of Units PYR can  receive  under  the  reset  provisions  of the
Subscription Agreement.  Pursuant to the terms of the agreement, the quantity of
Units and the exercise  price of the warrants  will no longer  reset.  The final
amount of Units that can be issued shall be 4,000,000 shares of common stock and
4,000,000 Class I Warrants.  The cap amount shall be 8,000,000  shares of common
stock (on a "post-split" basis) including Class I warrants. As a result of reset
calculations, Hartcourt issued on March 6, 2001 an additional 930,784 shares and
on May 18, 2001 an  additional  1,035,308  shares of common stock for a total of
4,000,000  shares as December 31, 2001 and  4,000,000  warrants  exercisable  at
$0.69375 per share of common stock.  No warrants have been  exercised to convert
into common shares as of August 10, 2002.

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.  Pursuant  to the terms of the  Agreement,  Hartcourt  will
deliver to Edda the requisite number of common shares  restricted under the Rule
144 of SEC regulations  upon receipt of the full and complete  purchase price in
the amount of $2,000,000.  On October 31, 2001,  Hartcourt  issued an additional
1,363,636 common shares valued at $0.22 per share for a subscription  receivable
of  $300,000.  On March 4,  2002,  Hartcourt  and Edda  signed a new Stock  Sale
Agreement  whereby  Hartcourt agreed to sell 5,000,000  restricted shares of its
common stock as a block to Edda at the agreed price of twelve cents  ($0.12) per
share or $600,000.  The accompanying financial statements reflect that Hartcourt
received  $2,426,819  from Edda as of June 30, 2002. The balance of $473,181 has
been  recorded  as  subscriptions   receivable  in  the  accompanying  financial
statements as of June 30, 2002.

Enlight Corporation ("Enlight"):  On May 9, 2002, Hartcourt and Enlight signed a
Stock Sale  Agreement  whereby  Hartcourt  agreed to sell  5,000,000  restricted
shares of its common stock as a block to Edda at the agreed price of eight cents

                                      F-21
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

($0.08)  per  share.  Pursuant  to the terms of the  Agreement,  Hartcourt  will
deliver to Enlight the requisite  number of common shares  restricted  under the
Rule 144 of SEC regulations upon receipt of the full and complete purchase price
in the amount of $400,000.  As of June 30, 2002,  Hartcourt  did not receive any
payments  from  Enlight  towards  purchase  of common  shares and no shares were
issued to Enlight as of August 10, 2002.

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

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 2001 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 its subsidiaries as of June 30, 2002 and December 31, 2001,
and the  results  of their  operations  for the three  months and six months and
their cash flows for the six months ended June 30, 2002 and 2001,  respectively.
The  financial  statements  for  the  three  months  ended  June  30,  2002  are
consolidated to include the accounts of The Hartcourt Companies Inc., its 58.53%
owned  subsidiary   Financial  Telecom  Limited,  its  wholly  owned  subsidiary
Hartcourt Companies Limited (formerly known as Sinobull.com Inc.) which owns 85%
of  StreamingAsia  Limited  Group,  its 51.7%  owned  subsidiary  Elephant  Talk
Communications,  Inc., its wholly owned subsidiary  Hartcourt  Capital Inc., and
its 66.7% owned subsidiary HCTV.

The  financial  statements  for  the  three  months  ended  June  30,  2001  are
consolidated  to include the  accounts of The  Hartcourt  Companies,  Inc.,  its
58.53% owned  subsidiary  Financial  Telecom  Limited,  its 50% owned subsidiary
StreamingAsia Limited Group, its 51% owned subsidiary Elephant Talk Limited, its
wholly  owned   subsidiary   Hartcourt  Companies Limited   (formerly  known  as
Sinobull.com  Inc.) and its 66.7% owned  subsidiary  HCTV. The operations of UAC
Exchange were discontinued and disposed off and therefore,  are shown separately
under discontinued operations in the accompanying financial statements.

The  results of  operations  for the three  months  ended June 30,  2002 are not
necessarily indicative of the results to be expected for the entire year.

Certain  2001  amounts  have been  reclassified  to conform  to  current  period
presentation.  These reclassifications have no effect on previously reported net
income.

                                      F-22
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

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, 2001.

Note 3.  Supplemental Disclosure of Non-Cash Financing Activities

                                                      Six Months    Six Months
                                                         Ended        Ended
                                                        June 30,     June 30,
                                                          2002         2001
                                                     ------------- ------------
Cash paid for:
  Interest                                           $     47,413  $    78,656
  Taxes                                                         -            -
                                                     ============  ===========
Non-cash operating and financing activities:
  Shares issued to directors for compensation
  and services                                       $    439,601  $   194,640
  Shares issued for consulting services                   182,820      152,173
  Shares issued in connection with acquisitions                 -    2,325,000


Note 4.  Loss per Share
<TABLE>
<S>                                     <C>           <C>           <C>           <C>
                                        Three Months  Three Months   Six Months     Six Months
                                            Ended         Ended         Ended         Ended
                                        June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
                                        ------------- ------------- ------------- -------------
Net loss                                $  1,038,474  $    979,235  $  1,820,303  $  2,205,066
Effects of dilutive securities                     -             -
                                        ------------  ------------  ------------  ------------
Weighted average shares outstanding       80,033,267    67,214,678    77,108,098    65,163,663
                                        ============  ============  ============  ============
Basic and dilutive earnings per share   $      (0.01) $      (0.01) $      (0.02) $      (0.03)
                                        ============  ============  ============  ============
</TABLE>

At June 30, 2002 and 2001, the Company had 4,733,530 and 4,528,640  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.

Note 5.  Accounting change - Goodwill amortization

Effective January 1, 2002,  Hartcourt adopted SFAS No. 142,  "Goodwill and Other
Intangible Assets", under which goodwill is no longer amortized.  Following is a
reconciliation  of previously  reported net loss to pro forma net loss excluding
goodwill amortization for the six months ended June 30, 2001:



                                      F-23
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

                                              2002          2001
                                         ------------  ------------
Net loss as reported                     $ (1,820,303) $ (2,205,066)
Goodwill amortization, net of tax                   -       140,646
                                         ------------  ------------
Pro forma net loss                       $ (1,820,303) $ (2,064,420)
                                         ============  ============

Note 6.  Segment and related information:

The Company has four reportable  segments.  Each segment is a strategic business
that the Company  manages  separately  because each business  develops and sells
products  to  a  specific  market.  The  reportable  segments  are  as  follows:
Telecommunications,    provides   comprehensive   telecommunications   services;
Financial Services, provides financial content through various sources including
television,  internet and wireless access  systems;  Streaming  Media,  provides
internet  related software  development  services with an expertise in audio and
video  streaming to businesses.  The  Consulting,  E-learning  Group and Capital
Groups  operating  segments  do  not  meet  the  quantitative  threshold  for  a
reportable  segment and are  therefore  included in the  "Other"  category.  The
principal market for the Company's products is China.  Foreign sales,  primarily
in China  amounted to $5,266,272  during the six months ended June 30, 2002. The
Chinese  operations  account for $13,598,121 of consolidated  total assets as of
June 30, 2002. The accounting policies of the segments are the same as described
in the summary of significant accounting policies. The Company evaluates segment
performance  based on income  from  prospective  operations.  All inter  company
transactions between segments have been eliminated.  As a result, the components
of operating loss for one segment may not be comparable to another segment.

























                                      F-24
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Segment results for the six months ended June 30, 2002 and 2001 are as follows:
<TABLE>
<S>                           <C>            <C>          <C>         <C>          <C>
                                   Tele-       Financial   Streaming
                              Communications   Services      Media         Other       Total
                              -------------- ------------ ----------  -----------  -----------
2002
----
Net sales                     $ 4,208,553    $   705,207  $   99,865  $   329,939  $ 5,343,564

Loss from operations             (727,269)       (27,160)   (380,031)    (685,843)  (1,820,303)

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

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

Capital expenditures              (72,576)       (25,301)          -            -      (97,877)
                              -----------    -----------  ----------  -----------  -----------
2001
----
Net sales                     $   952,437    $   763,220  $  206,809  $   208,760  $ 2,131,226

Loss from operations              (85,557)      (666,237)   (244,852)  (1,208,420)  (2,205,066)

Depreciation and amortization      31,468        242,913      33,162       71,398      378,941

Assets                          6,721,120      6,849,315   1,164,825    3,229,723   17,964,983

Capital expenditures                    -         (3,465)          -            -       (3,465)
                              -----------    -----------  ----------  -----------  -----------
</TABLE>

Note 7.  Litigations

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

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of Pego's  alleged  obligation  on a  promissory  note that is asserted to be in
non-financial default. The complaint alleges that Hartcourt executed a guarantee
of obligation of Pego which obligation went into non-financial default. Comerica
entered the stipulation for entry of judgment to enforce a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated  to pay down the debt.  The case is ongoing  and the  Company has not
accrued any of the  guaranteed  payments in its financial  statements as of June
30, 2002.



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


                                      F-24
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            JUNE 30, 2002 (UNAUDITED)

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.
Hogue via check in the amount of $40,500 for such  finder's  fee,  but Mr. Hogue
demanded  that he be paid in shares of  Hartcourt  with the  amount of shares in
dispute.  Hartcourt's  counsel in Florida failed to timely file an Answer to the
complaint,  and default  judgment in the amount of $2,901,752 was entered in the
trial court on January 31, 2001  without a trial and despite  serious  questions
raised by Hartcourt as to the propriety of the exercise of jurisdiction  over it
by a Florida court.  Hartcourt brought a motion to set aside the default,  which
was  denied.  Hartcourt  appealed  the  judgment  entered by the trial  court on
multiple grounds. On June 7, 2002, the Florida Appellate Court ruled in favor of
Hartcourt and reversed the judgment in its  entirety,  finding that Florida does
not have jurisdiction over Hartcourt. The case is no longer active.
The Company is party to various claims and legal proceedings  arising out of the
normal  course  of its  business.  These  claims  and legal  proceedings  relate
primarily to contractual rights and obligations,  and employment matters.  While
there can be no  assurance  that an adverse  determination  of any such  matters
could not have a material  adverse impact in any future period,  management does
not believe,  based upon  information  known to it, that the final resolution of
any of these  matters  will have a material  adverse  effect upon the  Company's
consolidated financial position and annual results of operations and cash flows.
































                                      F-25
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)

Part I

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

General

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

Plan of Operation

The Hartcourt  Companies,  Inc. is a holding and development  enterprise that is
building a broad network of Internet, media, and telecommunication  companies in
Greater  China.   In  partnership   with  leading  Chinese   entrepreneurs   and
government-sponsored entities, Hartcourt is developing and investing in emerging
technologies  while  building  an  integrated   commercial   framework  for  its
subsidiaries  and their partners.  Hartcourt's  operative  business  strategy is
designed to establish market-leading position and facilitate a series of venture
divestitures  via IPO or public  mergers in its five main business  divisions to
fully  realize the value of these assets for its  investors.  The five  business
divisions   are   Sinobull    Financial    Group,    Media    Services    Group,
Broadband/Telecommunications Group, E-learning Group and Hartcourt Capital.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified and profitable revenue base throughout its operations. The
company is aggressively identifying and pursuing the best business opportunities
available.  Through a continued  refinement  of  operational  efficiencies,  and
increasing   revenue  margins,   the  Company  is  providing  a  clear  path  to
profitability for its current and future businesses."

Results of Operations

During 2002,  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.  The Company signed underwriting  agreements for the initial
public offerings of shares of its two most developed investments,  both of which
were planned in the year 2001.  On January 4, 2002,  pursuant to an Agreement of
Merger and Plan of Reorganization, Hartcourt's subsidiary Elephant Talk  Limited

                                      F-26
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)

merged with Staruni Corporation,  a California corporation,  organized under the
laws of  California  and  listed on the over the  counter on  bulletin  board of
NASDAQ  exchange.  Prior to the  conclusion  of the merger,  Hartcourt  acquired
additional  equity in Elephant  Talk Limited and  retained a 51.7%  ownership in
ETCI  upon  conclusion  of  the  merger.  Hartcourt's  division  Sinobull  Group
anticipates completion of its merger with Global Telephone Communications,  Inc.
("GTCI") by September 2002 pending  resolution of disputes  between GTCI and its
creditors.  Hartcourt  plans to eventually  build all of 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 May 16, 2001, Hartcourt acquired 51% ownership interest in Elephant
Talk Limited.  On July 16, 2001  Hartcourt  entered into a rescission  agreement
with UAC Trading and sold its 51%  ownership  interest in UAC  Exchange  for its
original  investment of  $2,858,286.  On August 9, 2001,  Hartcourt  acquired an
additional 35% ownership  interest in  StreamingAsia  Ltd. and its  subsidiaries
increasing its ownership interest to 85%. On January 2, 2002, Hartcourt acquired
an  additional  20%  ownership  in Elephant  Talk Limited for an  investment  of
$140,595.

The  operations  of Hartcourt for the three months and six months ended June 30,
2002 consisted of the operations of FTL (58.53% ownership  interest),  Hartcourt
Capital Limited (formerly known as Sinobull.com Inc.) (100% ownership  interest)
which holds 85% ownership  interest in StreamingAsia  Limited and Syndicate Asia
Limited,   Ai-Asia   Limited   (100%   ownership   interest),    Elephant   Talk
Communications,   Inc.  (51.7%  ownership   interest),   HCTV  (66.7%  ownership
interest),  Hartcourt  Capital Inc. (100% ownership  interest),  and Hartcourt's
investment and advances to other entities in US, China and Hong Kong. Operations
for the three months and six months ended June 30, 2001  consisted of operations
of FTL (58.53%  ownership  interest),  StreamingAsia  Limited and Syndicate Asia
Limited (50% equity investment  interest),  Elephant Talk Limited (51% ownership
interest),  Hartcourt Companies Limited (100% ownership  interest),  HCTV (66.7%
ownership  interest),  and  Hartcourt's  investment  and  advances to  Hartcourt
Companies Limited for acquisitions in China and Hong Kong. The operations of UAC
Exchange were discontinued and disposed off and therefore,  are shown separately
under discontinued operations in the accompanying financial statements.

Net sales and cost of sales:  The Company  recorded net sales of $1,795,965  and
$5,343,564 for the three months and six months ended June 30, 2002,  compared to
$1,877,865  and  $2,131,266  for the same periods in 2001.  Net sales during the
three months ended June 30, 2002  primarily  consisted of revenues  derived from
providing  telecommunication  services relating to voice, data transmission like
IDD,  pre-paid  calling  cards and ISP  services  to a wide  range of  customers
including major telecommunication  companies in US and Hong Kong. Net sales also
include sale of wireless pagers,  rental of equipment,  and the related Internet
and  telephone  services  provided by FTL;  real-time  financial  data  services
provided by Sinobull Financial Information using a satellite network to transmit
data  specializes  in stock  quotes,  futures,  indexes and  commodities  to its


                                      F-27
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)

customers  in China;  and  StreamingAsia  providing  web  hosting  and  software
development  services in audio and video  delivery or streaming  solutions.  Net
sales for the three months ended June 30, 2001 consisted of the revenues derived
from Elephant Talk providing voice,  data  transmission,  pre-paid calling cards
and ISP  services to  customers in Hong Kong and China,  FTL  providing  sale of
wireless  pagers,  rental  of  equipment  and  related  Internet  and  telephone
services.

Cost of sales for the three months and six months  ended June 30, 2002  amounted
to $1,433,692 and $4,456,656  compared to $1,294,404 and $1,299,244 for the same
periods  in  2001.  Cost of sales  for the  three  months  ended  June 30,  2002
primarily included the costs in providing resale arrangements with long distance
providers,  cost  of  leasing  transmission  facilities,  international  gateway
switches voice,  data  transmission  and ISP services  offered by Elephant Talk;
cost of wireless pagers,  cost of transmission and Internet services provided to
FTL and FWL customers;  costs  incurred in providing  financial data services in
stock quotes,  futures and commodities by Hartcourt  Capital Limited;  and costs
incurred in  providing  audio and video  delivery  and  streaming  solutions  by
StreamingAsia.  Cost of sales for the three months ended June 30, 2001 consisted
of cost of sales in providing resale arrangements with long distance carriers of
Elephant Talk Limited,  cost of leasing transmission  facilities,  international
gateway switches voice,  data  transmission and ISP services offered by Elephant
Talk,  cost of a very small number of wireless  pagers in  circulation,  cost of
transmission  and  Internet   services   provided  to  FTL  and  FWL  customers.
Operational  margins continued to show sustained  improvements  during the first
and second  quarters of 2002 when  compared to the third and fourth  quarters of
2001.

Selling,  general and  administrative  expenses  (SG&A):  SG&A were $807,772 and
$1,886,928  for the three months and six months ended June 30, 2002  compared to
$1,885,000  and $2,762,480 for the same periods in 2001. The decrease in SG&A is
primarily attributed to reduction in consulting,  legal and administrative costs
incurred  during the three and six months ended June 30, 2002 as compared to the
same periods in 2001.  Hartcourt  completed  the  acquisition  of Elephant  Talk
Limited in May 2001 which required significant legal and administrative  expense
to complete the  acquisition.  Hartcourt has taken drastic cost cutting measures
and  deliberately  slowed down the development  process of all projects on hand.
The Company  recorded an impairment  of $465,377  during three months ended June
30, 2002 to write down its  investments  in FTL and  StreamingAsia  Group.  Such
expense  was not  included in the SG&A  during the three  months  ended June 30,
2001.  Hartcourt  continued  to  eliminate  less  productive  units and  reduced
consulting  and legal costs  associated  due to  restructuring  of the Company's
business in Hong Kong and China.

Other income and expenses:  Total other income net of other expenses was $60,513
during the three  months  ended June 30, 2002  compared to $351,160 for the same
period in 2001.  Total other  expenses net of income was $26,646  during the six
months ended June 30, 2002 compared to total other income net of other  expenses
of $133,835  for the same period in 2001.  The  decrease in other  income net of
other  expenses  during the three months ended June 30, 2002 resulted  primarily
due to the gain of $355,777 recorded by FTL in the second quarter of 2001 due to


                                      F-28
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)

forgiveness of debt as a result of refinancing  their computer and  transmission
equipment.  During the six months ended June 30, 2002, Hartcourt recorded a loss
of $164,973 due to  abandonment  of property and  equipment due to relocation of
ElephantTalk's  and  StreamingAsia  Group's office facilities and gain of $7,554
due to equity in earnings of its ETNS Singapore, Pte., Ltd affiliate. During the
six months ended June 30, 2001, Hartcourt recorded an equity loss of $183,536 in
loss of its affiliates.  Interest income earned was $65,681 and $119,299 for the
three and six months ended June 30, 2002 compared to $22,100 and $25,261 for the
same  period in 2001.  Interest  income  increased  due to  Hartcourt  receiving
interest  payments  from Edda Limited on a  promissory  note of  $2,856,286  for
acquiring UAC Exchange on August 9, 2001.

Discontinued  operations:  Hartcourt  rescinded its joint venture agreement with
Beijing  UAC  Trading  during  July 2001.  Loss from the  discontinuance  of UAC
Exchange joint venture operations during the three and six months ended June 30,
2001 were  $57,255  and  $312,416.  The  Company  did not have any  discontinued
operations during the three and six months ended June 30, 2002.

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2002 are to fund the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia. During the six months ended June 30, 2002,  Hartcourt raised necessary
funds to carry out its plans of acquisitions by selling its own common shares to
selected  investors  and  bringing  in  business  partners  whose  contributions
included the necessary cash.

As shown in the accompanying financial statements, Hartcourt incurred a net loss
of  $1,820,303  for the six months ended June 30, 2002 as compared to a net loss
of $2,205,066  for the same period in 2001.  Additionally,  Hartcourt's  current
liabilities  exceeded its current  assets by $3,623,013 at June 30, 2002.  These
factors and Hartcourt's inability to meet current 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;
and 2) signed stock sale agreements with accredited investors to raise in excess
of  $1,000,000  over the next six  months.  The Company  plans to actively  seek
funding  sources  once  Hartcourt is able to  discontinue  and  dispose-off  all
non-profitable  assets by selling or spinning-off or  restructuring  to minimize
loss or liability.

Operating  activities.  During the six months ended June 30, 2002, net cash used
by operating  activities  amounted to $706,993 compared to $1,144,522 during the
same period in 2001. The net decrease in operating activities resulted primarily
due to the  decrease  in  loss of  $384,762,  and due to  decrease  in  accounts
receivable and prepaid  expenses,  increase in cash overdraft,  accrued expenses
and other  current  liabilities,  offset by  decrease  in  accounts  payable and
deferred revenues.


                                      F-29
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)



Investing  activities.  Net cash provided by investing activities during the six
months  ended June 30,  2002,  was  $178,401  compared to $686,737  for the same
period in 2001.  Cash  provided  during the six months ended June 30, 2002,  was
primarily  due to payments  received on note  receivables  amounting to $287,115
from third parties on sale of Hartcourt's  ownership interest in UAC Exchange as
compared to cash acquired in acquisition of $690,202 in the corresponding period
of last year.  Cash used during the six months  ended June 30, 2002 for purchase
of property  and  equipment  and  investments  amounted to $97,877 and  $10,837,
respectively.

Financing  activities.  Net cash provided by financing activities during the six
months  ended June 30, 2002 was  $352,663  compared to $781,865  during the same
period in 2001.  Net cash was provided due to proceeds from sale of common stock
and treasury  stock  amounting to $326,487,  proceeds  from related  parties and
shareholders  loan of $301,483.  Cash was decreased by payments on notes payable
and capital leases of $241,883 and $33,424, respectively.

As a result of the above activities,  the company  experienced a net decrease in
cash of $175,739  for the six months ended June 30, 2002 as compared to increase
in cash of  $324,080  for the six months  ended June 30,  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-30
<PAGE>
             THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                            JUNE 30, 2002 (UNAUDITED)

Part II

Item 1.  LEGAL PROCEEDINGS

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

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of Pego's  alleged  obligation  on a  promissory  note that is asserted to be in
non-financial default. The complaint alleges that Hartcourt executed a guarantee
of obligation of Pego which obligation went into non-financial default. Comerica
entered the stipulation for entry of judgment to enforce a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated to pay down the debt. The case is ongoing.

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

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.
Hogue via check in the amount of $40,500 for such  finder's  fee,  but Mr. Hogue
demanded  that he be paid in shares of  Hartcourt  with the  amount of shares in
dispute.  Hartcourt's  counsel in Florida failed to timely file an Answer to the
complaint,  and default  judgment in the amount of $2,901,752 was entered in the
trial court on January 31, 2001  without a trial and despite  serious  questions
raised by Hartcourt as to the propriety of the exercise of jurisdiction  over it
by a Florida court.  Hartcourt brought a motion to set aside the default,  which
was  denied.  Hartcourt  appealed  the  judgment  entered by the trial  court on
multiple grounds. On June 7, 2002, the Florida Appellate Court ruled in favor of
Hartcourt and reversed the judgment in its  entirety,  finding that Florida does
not have jurisdiction over Hartcourt. The case is no longer active.
The Company is party to various claims and legal proceedings  arising out of the
normal  course  of its  business.  These  claims  and legal  proceedings  relate
primarily to contractual rights and obligations,  and employment matters.  While
there can be no  assurance  that an adverse  determination  of any such  matters
could not have a material  adverse impact in any future period,  management does
not believe,  based upon  information  known to it, that the final resolution of
any of these  matters  will have a material  adverse  effect upon the  Company's
consolidated financial position and annual results of operations and cash flows.

Item 2.  CHANGES IN SECURITIES

None

Item 3.  DEFAULTS UPON SENIOR SECURITIES

None

Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

None
                                      F-31
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2002 (UNAUDITED)

Item 5.  OTHER INFORMATION

Changes in Hartcourt's Certifying Accountant

On August 15, 2002,  Hartcourt engaged Loral  International  ("Loral") Certified
Public Accountants,  as Hartcourt's independent auditors to report on the
Company's  consolidated  balance sheet as of December 31, 2002,  and the related
consolidated  statements of income,  stockholders' equity and cash flows for the
year then ended.  The decision to appoint Loral was approved by the Registrant's
Board of Directors.

Hartcourt  dismissed  Weinberg  & Company,  P.A.  ("Weinberg")  as its  auditors
effective August 15, 2002. Weinberg served as Hartcourt's  independent  auditors
for the fiscal  years ended  December  31, 2001 and 2000.  Weinberg's  report on
Hartcourt's consolidated financial statements for the fiscal year ended December
31,  2001 and 2000  (the  "Reports")  did not  contain  an  adverse  opinion  or
disclaimer  of opinion and were not  qualified  or  modified as to  uncertainty,
audit scope or accounting principles,  however, they were modified to include an
explanatory paragraph wherein they expressed substantial doubt about Hartcourt's
ability to continue as a going concern.

During the fiscal years ended  December 31, 2001 and 2000, and during the period
from January 1, 2002 until  Weinberg's  dismissal,  there were no  disagreements
with Weinberg  within the meaning of item 304 of regulation S-K or any matter of
accounting principles or practices,  financial disclosure,  or auditing scope or
procedure, which disagreements if not resolved to Weinberg's satisfaction, would
have  caused   Weinberg  to  make   reference  to  the  subject  matter  of  the
disagreements in connection with its reports.

During the fiscal years ended  December 31, 2001 and 2000, and during the period
from  January  1, 2002 until  Weinberg's  dismissal,  there were no  "reportable
events" (as such term is defined in item 304(a)(1)(iv)(B) of regulation S-K.

During the two most recent fiscal years and any subsequent interim periods prior
to the engagement of Loral,  neither Hartcourt nor anyone on Hartcourt's  behalf
consulted  with  Loral  regarding  either  (i)  the  application  of  accounting
principles to a specified  transaction,  either contemplated or proposed, or the
type of audit opinion that might be rendered on Hartcourt's financial statements
or (ii)  any  matter  that was  either  the  subject  of a  "disagreement"  or a
"reportable event."

Hartcourt has requested  Weinberg to review the disclosure  contained herein and
has  provided  Weinberg  the  opportunity  to  furnish  Hartcourt  with a letter
addressed to the Commission  containing any new  information,  clarification  of
Hartcourt's  expression of Weinberg's  views,  or the respects in which Weinberg
does not agree with the statements contained herein.







                                      F-32
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2002 (UNAUDITED)



Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

    a) Exhibits
        None.

    b) Reports on Form 8-K
        None












































                                      F-33
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                            JUNE 30, 2002 (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:  August 19, 2002                  By: /s/ Alan V. Phan
                                        -------------------------------
                                        Dr. Alan V. Phan
                                        Chairman


Date:  August 19, 2002                  By: /s/ David Chen
                                        --------------------------------
                                        David Chen
                                        Chief Operating Officer and
                                        Principal Accounting Officer
































                                      F-34