UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form 10-Q





[X]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE
              SECURITIES
                EXCHANGE ACT OF
                1934.
              For
                the quarterly period ended November 30,
                2007


[_]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE
              SECURITIES
                EXCHANGE ACT OF
                1934.





Commission
      file number: 001-12671




The
      Hartcourt Companies, Inc.


(Exact
      name of registrant as specified in its charter)




Utah
            
            87-0400541(State
                or other jurisdiction of
            
            (IRS
                Employerincorporation
                or organization)
            
            Identification
                No.)





Room
                1405, China Enterprise Tower Complex,No.
                2, Hua Shan Road, Shanghai, China
            
            200040(Address
                of principal executive offices)
            
            (Zip
                Code)




(011)
      (86 21) 62723088


(Registrant’s
      telephone number including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 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 xNo 
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act (Check one).




Large
                  accelerated filer o
              
              Accelerated
                  filer o
              
              Non-accelerated
                  filer x


Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.   Yes  oNo x




The
      number of shares of common stock outstanding as of the latest practicable date,
      January [11], 2008, was 205,465,117.









TABLE
      OF
      CONTENTS







PART
                I: FINANCIAL INFORMATION
            3Item 1.
            Financial
                Statements
            3Unaudited
                Consolidated Balance Sheet - November 30, 2007 and May 31,
                2007
            3-4Unaudited
                Consolidated Statements of Operations - Three-month and six-month
                periods
                ended November 30, 2007 and November 30, 2006
            5-6Unaudited
                Consolidated Statements of Cash Flows - Six-month periods ended November
                30, 2007 and November 30, 2006
            7-8Notes
                to Unaudited Consolidated Financial Statements
            9-26Item 2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            26Item 3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            33Item 4.
            Controls
                and Procedures
            34PART
                II: OTHER INFORMATION
            34Item 1
            Legal
                Proceedings
            34Item
                1A
            Risk
                Factors Affecting Future Results
            35Item 2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            35Item 3
            Defaults
                Upon Senior Securities
            35Item 4
            Submission
                of Matters to a Vote of Security Holders
            35Item 5
            Other
                Information
            35Item 6.
            Exhibits
            35Signatures
            36

















2






PART
      I FINANCIAL INFORMATION






Item
      1.  Financial Statements




THE
        HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED
        BALANCE SHEETS
 
 November
                  30,
                2007
              
              
              May
                  31,
                2007Unaudited
              
              
              AuditedASSETSCash
                  and cash equivalents
              
              $
              1,819
              
              
              $
              20,611Prepaid
                  expenses and other assets
              
              
              44,982
              
              
              
              41,549TOTAL
                  CURRENT ASSETS
              
              
              46,801
              
              
              
              62,160PROPERTY
                  & EQUIPMENT - NET
              
              
              28,292
              
              
              
              26,423OTHER
                  RECEIVABLE
              
              
              334,693
              
              
              
              675,969GOODWILL
              
              
              -
              
              
              
              651,082TOTAL
                  ASSETS
              
              $
              409,786
              
              
              $
              1,415,634LIABILITIES
                  AND SHAREHOLDERS' EQUITY(DEFICIT)CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              412,101
              
              
              $
              510,203Accrued
                  expenses and other current liabilities
              
              
              705,214
              
              
              
              572,792Due
                  to directors
              
              
              124,769
              
              
              
              136,452TOTAL
                  CURRENT LIABILITIES
              
              
              1,242,084
              
              
              
              1,219,447






3





SHAREHOLDERS'
                  EQUITYPreferred
                  Stock:Original
                  preferred stock, $0.01 par value, 1,000 shares authorized, issued
                  and
                  cancelledClass
                  A preferred stock, 10,000,000 shares authorized, none issued and
                  outstanding$
              -
              
              
              $
              -Common
                  stock:$0.001
                  par value, 424,999,000 authorizedNovember
                  30, 2007: 207,513,845 issued  205,465,117
                  outstandingMay
                  31, 2007: 207,130,725 issued 205,081,997 outstanding
              
              
              205,465
              
              
              
              205,082Additional
                  paid in capital
              
              
              71,709,746
              
              
              
              71,570,246Treasury
                  stock, at cost, 48,728 shares
              
              
              (48,728
              )
              
              
              (48,728
              )Other
                  comprehensive loss
              
              
              (25,678
              )
              
              
              (34,598
              )Accumulated
                  deficit
              
              
              (72,673,103
              )
              
              
              (71,495,815
              )TOTAL
                  SHAREHOLDERS' EQUITY (DEFICIT)
              
              
              (832,298
              )
              
              
              196,187TOTAL
                  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
              
              $
              409,786
              
              
              $
              1,415,634
  The
      accompanying notes form an integral part of these unaudited consolidated
      financial statements.










4





THE
        HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 UNAUDITED
        CONSOLIDATED STATEMENTS OF OPERATIONS
  For
                  the three month periods ended
                November
                  302007
              
              
              2006Net
                  revenue
              
              $
              -
              
              
              $
              -Operating
                  expenses:General
                  and administrative expenses
              
              
              230,582
              
              
              
              388,371Depreciation
                  and amortization
              
              
              3,413
              
              
              
              713Impairment
                  of goodwill
              
              
              666,471Total
                  operating expenses
              
              
              900,466
              
              
              
              389,084Loss
                  from continuing operationsbefore
                  other income (expenses)
              
              
              (900,466
              )
              
              
              (389,084
              )Other
                  income (expenses)Interest
                  income (expense)
              
              (191
              )
              
              
              161Loss
                  from continuing operations
              
              
              (900,657
              )
              
              
              (388,923
              )Discontinued
                  operations:Loss
                  from discontinued operations
              
              
              -
              
              
              
              (639,057
              )Loss
                  from discontinued operations
              
              
              -
              
              
              
              (639,057
              )NET
                  LOSS
              
              
              (900,657
              )
              
              
              (1,027,980
              )OTHER
                  COMPREHENSIVE ITEM:Foreign
                  currency translation gain
              
              
              3,594
              
              
              
              28,831NET
                  COMPREHENSIVE LOSS
              
              $
              (897,063
              )
              
              $
              (999,149
              )BASIC
                  AND DILUTED EARNINGS/(LOSSES)PER
                  COMMON SHARE:Loss
                  from continuing operations
              
              $
              (0.00
              )
              
              $
              (0.00
              )Loss from
                  discontinued operations
              
              $
              -
              
              
              $
              (0.00
              )Loss
                  per share
              
              $
              (0.00
              )
              
              $
              (0.00
              )*
                  Basic and fully diluted weighted average number of shares
                  outstanding
              
              
              205,440,208
              
              
              
              195,443,459
  The
        accompanying notes form an integral part of these unaudited consolidated
        financial statements.
  *
        Weighted average number of shares used to compute basic and diluted loss
        per
        share is the same as the effect of dilutive securities are anti
        dilutive.




5


THE
        HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 UNAUDITED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 
 For
                  the six month periods ended
                November
                  302007
              
              
              2006Net
                  revenue
              
              $
              -
              
              
              $
              -Operating
                  expenses:General
                  and administrative expenses
              
              
              537,069
              
              
              
              713,081Depreciation
                  and amortization
              
              
              5,833
              
              
              
              4,240Impairment
                  of goodwill
              
              
              666,471
              
              
              
              -Total
                  operating expenses
              
              
              1,209,373
              
              
              
              717,321Loss
                  from continuing operations before other income
              
              
              (1,209,373
              )
              
              
              (717,321
              )Other
                  incomeInterest
                  income
              
              
              5,189
              
              
              
              1,155Others
              
              
              34,433Total
                  other income
              
              
              39,622
              
              
              
              1,155Loss
                  from continuing operations
              
              
              (1,169,751
              )
              
              
              (716,166
              )Discontinued
                  operations:Income/(loss)
                  from discontinued operations
              
              
              22,878
              
              
              
              (438,555
              )NET
                  LOSS
              
              
              (1,146,873
              )
              
              
              (1,154,721
              )OTHER
                  COMPREHENSIVE ITEM:Foreign
                  currency translation gain
              
              
              8,920
              
              
              
              48,787NET
                  COMPREHENSIVE LOSS
              
              $
              (1,137,953
              )
              
              $
              (1,105,934
              )BASIC
                  AND DILUTED LOSSESPER
                  COMMON SHARE:Loss
                  from continuing operations
              
              $
              (0.01
              )
              
              $
              (0.00
              )Income
                  (loss) from discontinued operations
              
              $
              0.00
              
              
              $
              0.00Loss
                  per share
              
              $
              (0.01
              )
              
              $
              (0.00
              )*
                  Basic and fully diluted weighted average number of shares
                  outstanding
              
              
              205,363,457
              
              
              
              195,293,311
   The
        accompanying notes form an integral part of these unaudited consolidated
        financial statements.
 
 *
        Weighted average number of shares used to compute basic and diluted loss
        per
        share is the same as the effect of dilutive securities are anti
        dilutive.





6


THE
        HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 UNAUDITED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 For
                  the six month periods ended
                Nov
                  302007
              
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (1,146,873
              )
              
              $
              (1,154,721
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
              
              
              5,846
              
              
              
              4,240Goodwill
                  impairment
              
              
              666,471Stock
                  options issued for service
              
              
              114,884
              
              
              
              256,466Stock
                  issued for services and compensations
              
              
              24,999
              
              
              
              29,874Changes
                  in operating assets and liabilities:Prepaid
                  expenses and other receivables
              
              
              (33,849
              )
              
              
              182,884Accounts
                  payable
              
              
              
              
              
              
              (11,870
              )Accrued
                  expenses and other current liabilities
              
              
              34,320
              
              
              
              36,264NET
                  CASH USED IN OPERATING ACTIVITIES OF CONTINUED OPERATIONS
              
              
              (334,202
              )
              
              
              (656,863
              )NET
                  CASH PROVIDED BY OPERATING ACTIVITIES OF DISCONTINUED
                  OPERATIONS
              
              
              
              
              
              
              438,555NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (334,202
              )
              
              
              (218,308
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (7,714
              )
              
              
              -NET
                  CASH PROVIDED BY INVESTING
              
              
              
              
              
              
              -ACTIVITIES
                  OF DISCONTINUED OPERATIONS
              
              
              293,956
              
              
              
              --
              
              
              
              -NET
                  CASH PROVIDED BY INVESTING ACTIVITIES
              
              
              286,242
              
              
              
              -
 
 The
        accompanying notes form an integral part of these consolidated financial
        statements.




7




THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES


UNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(continued)




For
                  the six month periods ended
                Nov
                  302007
              
              
              2006CASH
                  FLOWS FROM FINANCING ACTIVITIESSales
                  of treasury stock
              
              
              47,319
              
              
              
              189,872Proceeds
                  from (payments to) related parties-net
              
              
              (11,683
              )
              
              
              12,353NET
                  CASH PROVIDED BY FINANCINGACTIVITIES
                  OF CONTINUED OPERATIONS
              
              
              35,636
              
              
              
              202,225NET
                  CASH PROVIDED BY FINANCINGACTIVITIES
                  OF DISCONTINUED OPERATIONS
              
              
              -
              
              
              
              -NET
                  CASH PROVIDED BY FINANCIING ACTIVITIES
              
              
              35,636
              
              
              
              202,225EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALANTS
              
              
              (6,468
              )
              
              
              26,285NET
                  INCREASE / (DECREASE) IN CASH AND CASH EQUIVALANTS
              
              
              (18,792
              )
              
              
              10,202CASH
                  AND CASH EQUIVALENTS -BEGINNING
                  BALANCE
              
              
              20,611
              
              
              
              123,117CASH
                  AND CASH EQUIVALENTS – ENDING BALANCE
              
              $
              1,819
              
              
              $
              133,319SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOWSCash
                  paid for interest
              
              $
              -
              
              
              $
              -Cash
                  paid for income taxes
              
              $
              -
              
              
              $
              -
  The
        accompanying notes form an integral part of these unaudited consolidated
        financial statements.






8




THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES


NOTES
      TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


November
      30, 2007 AND 2006








NOTE
      1GENERAL





The
        Hartcourt Companies, Inc. ("Hartcourt" “We/Our”or the "Company"), was
        incorporated in Utah in 1983.  Previously, we
        were a distributor of internationally
        well known brand named IT hardware products and
        related services in
        the People’s
        Republic ofChina.In
        August 2006, we announced our
        intention to change our business by focusing on thevocational/training
        and education marketplace in
        the People’s
        Republic ofChina.
  On
        December 28, 2006, we entered into a definitive agreement to acquire a 51%
        equity interest in Taishun Yucai Senior School (“Yucai”), a high school
        education and vocational training service provider located in Wenzhou, Zheijiang
        PRC. The remaining 49% of the equity interests in Yucai will be held by Yucai’s
        current shareholders. Under the terms of the purchase agreement, we agreed
        to
        pay US$2,000,000 and 5,500,000 shares of our restricted common stock in order
        to
        acquire a 51% equity interest in Yucai. Pursuant to the purchase agreement,
        the
        US$2,000,000 will be payable in three installments within one year after
        closing
        of the acquisition and the 5,500,000 shares will be payable upon closing
        of the
        acquisition. The lead selling shareholder and his fellow selling shareholders
        together with Yucai have jointly guaranteed that we will receive a minimum
        of
        US$554,487 (RMB 4,325,000) in profit and management fees for each of the
        three
        years following the closing. In the event that the net profit is less than
        the
        guaranteed amount to the Company for a given year, the lead selling shareholder
        and his fellow selling shareholders shall make up the discrepancy before
        December 31 of each year in respect thereof.  We have guaranteed that
        the average three-day closing price of our shares on the days immediately
        prior
        to the one-year anniversary of the closing date will be not less than US$0.50
        per share.  In the event that the share price is less than US$0.50, we
        shall credit additional cash or issue new restricted shares. The transaction
        is
        subject to government approval. We cannot predict whether or when such approval
        will be obtained.


On
      May 15, 2007, we completed the purchase of 100% of the equity interests in
      China Princely Education Technology Development Company Limited (“China
      Princely”), an authorized accrediting organization for China vocational
      education located in Beijing, PRC. Under the terms of the purchase agreement,
      we
      paid to the shareholders of China Princely 5,400,000 shares of our restricted
      common stock at closing.  Cash consideration of US$39,180 (RMB300,000)
      and a capital infusion of US$274,258 (RMB2,100,000) in China Princely were
      also
      due at closing.  As of the date of this report, by mutual agreement of
      the parties, we have not paid these amounts.  The primary current
      shareholder of China Princely has personally guaranteed that the net profit
      of
      China Princely will be not less than US$256,000 (RMB2,000,000) for the calendar
      year 2007, while we have guaranteed that the average three-day closing price
      of
      our shares on the days immediately prior to the one year anniversary of the
      closing date will be not less than US$0.50 per share. In the event that the
      share price is less than US$0.50, we shall, at our option, pay additional cash
      or issue new restricted shares. After closing, we changed the name of China
      Princely to Hartcourt Princely Education Technology Development (Beijing) Co.,
      Ltd.




9




As
      of
      November 30, 2007, the Company owns 100% of three (3) British Virgin Island
      (“BVI”) incorporated companies: (1) Hartcourt China Inc., (2) Hartcourt Capital
      Inc., and (3) AI-Asia Inc. All three of these BVI subsidiaries are holding
      companies for assets located in China.





As
      of
      November 30, 2007, Hartcourt Capital Inc. owns 100% of the equity interest
      of
      Hartcourt Hi-Tech Investment (Shanghai) Inc. while Hartcourt Hi-Tech Investment
      (Shanghai) Inc., through nominee shareholder, owns 100% of the equity interest
      of Shanghai Jiumeng Information Technology Co., Ltd. These two companies are
      located in Shanghai, China. In April 2007, the Company decided to wind up
      Hartcourt Hi-Tech Investment (Shanghai) Inc. As of November 30, 2007, the
      wind-up process was completed.





As
      of
      November 30, 2007, AI-Asia, Inc., the third holding company, owns 100% of the
      equity interest of Hartcourt Education Investment Management Consulting
      (Shanghai) Co., Ltd (former name is AI-Asia (Shanghai) Information Technology,
      Inc), located in Shanghai, China, and owns 100% of the equity interest of
      Hartcourt Princely.




As
      a
      result of our business decision to move away from the IT distribution business,
      in September 2006, we entered into a definitive sales and purchase agreement
      to
      sell our interest in Besteffort Investments Ltd (“Besteffort”). In October 2006,
      the Company completed the transfer of legal ownership of Besteffort to the
      purchaser. As of the close of our fiscal quarter ended November 30, 2007, we
      have already received US$229,635 in connection with the sale of our IT
      distribution business and the remaining balance of US$70,365 is held for assets
      receivable. Prior to this sale, Besteffort Investments Ltd indirectly held
      90%
      equity interest in Shanghai Control Tech, which was a distributor of Radvision
      video conference products in China. Shanghai Control Tech had ceased its
      operations on January 1, 2006 primarily as a result of Radvision’s
      termination of its distribution agreement with Shanghai Control
      Tech.  The revenue of Shanghai Control Tech had been derived almost
      exclusively from the Radvision business.




On
        February 26, 2007, the Board of Directors approved a resolution to dispose
        of
        the operations of Shanghai Jiumeng Information Technology Co., Ltd. (“Shanghai
        Jiumeng”).  The Hartcourt Companies, Inc. entered into a Sales &
Purchase Agreement with Shanghai Shiheng Architecture Consulting Co., Ltd
        (the
“Purchaser”) to sell 100% of the equity interests in Shanghai
        Jiumeng.  Shanghai Jiumeng holds 51% of the equity interest in
        Shanghai Huaqing Corporation Development Ltd. (“Shanghai
        Huaqing”).  On June 11, 2007, the Purchaser terminated this Sales
& Purchase Agreement.  The Purchaser refused to consummate the
        transaction for the agreed upon purchase price.
  On
        June
        13, 2007, the Board of Directors of the Company authorized the disposal of
        its
        51% interest in Shanghai Huaqing to its minority shareholders. The agreement
        is
        subject to the receipt of required third party consents and approvals if
        required by applicable law. The contemplated purchase price is US$528,419.
        In
        addition, a shareholder of Huaqing Shanghai will return 997,550 shares of
        our
        common stock to the individual or entity designated by us. During the three
        months ended November 30, 2007, RMB 1,000,000 (US$132,348) was received.
        As of
        November 30, 2007, total RMB 2,000,000 (US$263,721) and 997,550 shares of
        the
        Company’s common stock were received and the remaining balance of US$264,697 is
        part of other receivable.
  As
        of
        November 30, 2007, the Company has classified the Shanghai Huaqing business
        as
        discontinued operation. (See note 12)


10




NOTE
      2SUMMARY
      OF
      SIGNIFICANT ACCOUNTING POLICIES





a) Basis
      of
      Presentation





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with the rules and regulations of the Securities and Exchange
      Commission for the presentation of financial information, but do not include
      all
      the information and footnotes required by accounting principles generally
      accepted in the United States for complete financial statements. The audited
      consolidated financial statements for the fiscal year ended May 31, 2007 were
      filed on September 13, 2007 with the Securities and Exchange Commission and
      are
      hereby referenced. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included. Operating results for
      the
      three-month period ended November 30, 2007 are not necessarily indicative of
      the
      results that may be expected for the year ended May 31, 2008.





b) Basis
      of
      Consolidation





The
      Company’s financial statements for the six months ended November 30, 2007 are
      consolidated to include the accounts of The Hartcourt Companies Inc., the wholly
      owned subsidiaries Hartcourt China Inc., Hartcourt Capital Inc., Hartcourt
      Hi-Tech Investment (Shanghai) Inc., Ai-Asia Inc., Hartcourt Education Investment
      Management Consulting (Shanghai) Co., Ltd., Shanghai Jiumeng Information
      Technology Co., Ltd and Hartcourt Princely Education Technology Development
      Company Limited. All significant inter-company accounts and transactions have
      been eliminated in consolidation.





c)Cash
      and Cash
      Equivalents




The
      Company considers as cash equivalents all short-term highly liquid investments
      that are readily convertible to known amounts of cash and have original
      maturities of three months or less. As the Company’s business activities are
      located in China, substantial amounts of cash are deposited in foreign banks
      located in China, which do not carry deposit insurance similar to banks in
      the
      United States.





d) Prepaid
      expenses




Prepaid
      expenses are expenses that are allocated into the period in which they are
      incurred and in subsequent periods, and are amortized within one year
      (inclusive). They include amortization of low-valued consumables, prepaid
      insurance expenses, lump-sum payment for stamps in large amount that need to
      be
      amortized.





Prepaid
      expenses generally will be amortized in equal installments and charged as costs
      or expenses of periods within one year. If certain prepaid expense item cannot
      be amortized, its un-amortized amount is recorded as an expense for the current
      period. Prepaid expenses amounted to US$44,982 at November 30, 2007 and are
      included in “Prepaid expenses and other assets” in the accompanying financial
      statements.





e)Property
      and
      Equipment




Property
      and equipment are recorded at cost. Depreciation is computed using the
      straight-line method over useful lives of 5 to 40 years. The cost of assets
      sold
      or retired and the related amounts of accumulated depreciation are removed
      from
      the accounts in the year of disposal. Any resulting gain or loss is reflected
      in
      current operations. Assets held under capital leases are recorded at the lesser
      of the present value of the future minimum lease payments or the fair value
      of
      the leased property. Expenditures for maintenance and repairs are charged to
      operations as incurred.







11




f)Impairment
      of Long-Lived
      Assets




Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
      144"), which addresses financial accounting and reporting for the impairment
      or
      disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for
      the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
      and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
      the Results of Operations for a Disposal of a Segment of a Business." The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets' carrying amounts. In that event,
      a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of November 30, 2007, there were no significant impairments of its
      long-lived assets used in operations.





g)Income
      Taxes




The
      Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
      the
      recognition of deferred tax assets and liabilities for the expected future
      tax
      consequences of events that have been included in the financial statements
      or
      tax returns. Under this method, deferred income taxes are recognized for the
      tax
      consequences in future years of differences between the tax bases of assets
      and
      liabilities and their financial reporting amounts at each period end based
      on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the
      differences are expected to affect taxable income. Valuation allowances are
      established, when necessary, to reduce deferred tax assets to the amount
      expected to be realized.





h)Stock-Based
      Compensation




The
      Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
      No. 123R”), under the modified-prospective transition method on June 1,
      2006. SFAS No. 123R requires companies to measure and recognize the cost of
      employee services received in exchange for an award of equity instruments based
      on the grant-date fair value. Share-based compensation recognized under the
      modified-prospective transition method of SFAS No. 123R includes
      share-based compensation based on the grant-date fair value determined in
      accordance with the original provisions of SFAS No. 123, Accounting for
      Stock-Based Compensation, for all share-based payments granted prior to and
      not
      yet vested as of June 1, 2006 and share-based compensation based on the
      grant-date fair-value determined in accordance with SFAS No. 123R for all
      share-based payments granted after June 1, 2006. SFAS No. 123R eliminates
      the ability to account for the award of these instruments under the intrinsic
      value method prescribed by Accounting Principles Board (“APB”) Opinion
      No. 25, Accounting for Stock Issued to Employees, and allowed under the
      original provisions of SFAS No. 123. Prior to the adoption of SFAS
      No. 123R, the Company accounted for the Company’s stock option plans using
      the intrinsic value method in accordance with the provisions of APB Opinion
      No. 25 and related interpretations.





i)Foreign
      Currencies
      Translation




Assets
      and liabilities in foreign currency are recorded at the balance sheet date
      at
      the rate prevailing on that date. Items of income statement are recorded at
      the
      average exchange rate. Gain or loss on foreign currency transactions are
      reflected on the income statement. Gain or loss on financial statement
      translation from foreign currency are recorded as a separate component in the
      equity section of the balance sheet, as component of comprehensive income.
      The
      functional currencies of the Company are Chinese Renminbi and Hongkong
      Dollars.







12




j)Basic
      and diluted earning per
      share




Earning
      per share is calculated in accordance with the Statement of financial accounting
      standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
      Accounting Principles Board Opinion No.15 (APB 15). Net earning per share for
      all periods presented has been restated to reflect the adoption of SFAS No.
      128.
      Basic net loss per share is based upon the weighted average number of common
      shares outstanding. Diluted net earning per share is based on the assumption
      that all dilutive convertible shares and stock options were converted or
      exercised. Dilution is computed by applying the treasury stock method. Under
      this method, options and warrants are assumed to be exercised at the beginning
      of the period (or at the time of issuance, if later), and as if funds obtained
      thereby were used to purchase common stock at the average market price during
      the period.





kRecently
      Issued Accounting
      Standards




In
      February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
      Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company's first fiscal year that begins
      after September 15, 2006. Since the Company doesn’t have any financial
      instruments as described above, there is no effect on the financial statements
      impacted by the adoption of these accounting standards.





In
      March
      2006, FASB issued SFAS 156 "Accounting for Servicing of Financial Assets" this
      Statement amends FASB Statement No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING
      OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, with respect to the
      accounting for separately recognized servicing assets and servicing
      liabilities.





This
      Statement:


1.           
      Requires an entity to recognize a servicing asset or servicing liability each
      time it undertakes an obligation to service a financial asset by entering into
      a
      servicing contract.


2.           
      Requires all separately recognized servicing assets and servicing liabilities
      to
      be initially measured at fair value, if practicable.


3.           
      Permits an entity to choose "Amortization method" or "Fair value measurement
      method" for each class of separately recognized servicing assets and servicing
      liabilities.




13




4.           
      At its initial adoption, permits a one-time reclassification of
      available-for-sale securities to trading securities by entities with recognized
      servicing rights, without calling into question the treatment of other
      available-for-sale securities under Statement 115, provided that the
      available-for-sale securities are identified in some manner as offsetting the
      entity's exposure to changes in fair value of servicing assets or servicing
      liabilities that a servicer elects to subsequently measure at fair
      value.


5.           
      Requires separate presentation of servicing assets and servicing liabilities
      subsequently measured at fair value in the statement of financial position
      and
      additional disclosures for all separately recognized servicing assets and
      servicing liabilities.





This
      Statement is effective as of the beginning of the Company's first fiscal year
      that began after September 15, 2006.





In
      September 2006, FASB issued SFAS 157 “Fair Value Measurements”.
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (GAAP), and expands
      disclosures about fair value measurements. This Statement applies under other
      accounting pronouncements that require or permit fair value measurements, the
      Board having previously concluded in those accounting pronouncements that fair
      value is the relevant measurement attribute. Accordingly, this Statement does
      not require any new fair value measurements. However, for some entities, the
      application of this Statement will change current practice. This Statement
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. Management
      is
      currently evaluating the effect of this pronouncement on financial
      statements.





In
      September 2006, FASB issued SFAS 158 “Employers’ Accounting for Defined Benefit
      Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
      88, 106, and 132(R)” This Statement requires an employer to recognize the
      over-funded or under-funded status of a defined benefit postretirement plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      Statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. An employer with publicly traded equity securities is required
      to
      initially recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after December 15, 2006. An employer without publicly traded equity securities
      is required to recognize the funded status of a defined benefit postretirement
      plan and to provide the required disclosures as of the end of the fiscal year
      ending after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements:





1.
            A
                brief description of the provisions of this
                Statement





2.
            The
                date that adoption is required





3.
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.







14




The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008. Management is currently evaluating
      the effect of this pronouncement on financial statements.





In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FASB 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FASB 159 for their first quarter 2007 financial
      statements.





The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FASB 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities. Management is currently evaluating the effect of this pronouncement
      on financial statements.





In
      December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements—an amendment of ARB No. 51. This Statement
      applies to all entities that prepare consolidated financial statements, except
      not-for-profit organizations, but will affect only those entities that have
      an
      outstanding noncontrolling interest in one or more subsidiaries or that
      deconsolidate a subsidiary. Not-for-profit organizations should continue to
      apply the guidance in Accounting Research Bulletin No. 51, Consolidated
      Financial Statements, before the amendments made by this Statement, and any
      other applicable standards, until the Board issues interpretative guidance.
      This
      Statement is effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
      entities with calendar year-ends). Earlier adoption is prohibited. The effective
      date of this Statement is the same as that of the related Statement 141(R).
      This
      Statement shall be applied prospectively as of the beginning of the fiscal
      year
      in which this Statement is initially applied, except for the presentation and
      disclosure requirements. The presentation and disclosure requirements shall
      be
      applied retrospectively for all periods presented.





NOTE
      3 
EARNINGS / (LOSSES) PER
      SHARE





Basic
      and
      diluted (loss) income per common share is computed as follows:


November
                30,
              2007
            
            
            November
                30,
              2006Net
                income (loss)
            
            $
            (1,146,873
            )
            
            $
            (1,154,721
            )Effects
                of dilutive securities
            
            
            -
            
            
            
            -Weighted
                average shares outstanding
            
            
            205,363,457
            
            
            
            195,293,311Basic
                and dilutive earnings/(losses) per share
            
            $
            (0.01
            )
            
            $
            (0.00
            )







15




As
      of
      November 30, 2007, the Company had 34,600,000 options outstanding, each
      exercisable for one share of our common stock. These instruments were not
      included in the computation of diluted earnings per share for any of the periods
      presented, due to the Company has retained loss as of November 30,
      2007.





NOTE
      4SHAREHOLDERS’
      EQUITY





a) Capitalization




The
      Company is authorized the authority to issue 434,999,000 shares of stock,
      consisting of 424,999,000 shares of common stock, US$0.001 par value and
      10,000,000 shares of Class A Preferred Stock. The total number of shares of
      the
      Company’s Common Stock outstanding as of November 30, 2007 and November 30, 2006
      are 205,465,117 and 195,529,703, respectively.  No shares of the
      Company’s Class A Preferred Stock were outstanding as of November 30, 2007 and
      November 30, 2006.





b) Original
      Preferred Stock





On
      July,
      14, 2004, the founder of Hartcourt, Dr. Alan V. Phan, converted his 1,000 shares
      of Original Preferred Stock into 2,000,000 shares of Hartcourt Common Stock.
      After the conversion, no Original Preferred Stock was outstanding as of November
      30, 2007.





Until
      December 31, 2010, with respect to the election of directors, holders of
      Original Preferred Stock are entitled to elect the number of directors which
      constitutes three-fifths of the authorized number of members of the Board of
      Directors and, if such three-fifths is not a whole number, then the holders
      of
      Original Preferred Stock are entitled to elect the nearest higher whole number
      of directors.





The
      holders of Original Preferred Stock are entitled to convert each share of
      Original Preferred Stock into 1,000 shares of paid and non-assessable common
      stock. The original preferred shares are owned by the Former Chief Executive
      Officer of the Company.





In
      the
      event of liquidation, dissolution, or winding up of the affairs of the Company
      whether voluntary or involuntary, the holders of record are entitled to be
      paid
      the full par value of Original Preferred Stock. The holders of shares of
      Original Preferred Stock are not entitled to receive any dividends.





c) Class
      A
      Preferred Stock





The
      10,000,000 shares of authorized and un-issued Class A Preferred Stock may be
      split with such designations, power, preferences and other rights and
      qualifications, limitations and restrictions thereof as the Company’s Board of
      Directors elects for a given series. No shares have been issued.





d) Equity
      Transactions





On
      June
      13, 2007, following the signing the definitive sales and purchase agreement,
      997,550 shares of our common stock were returned from Shanghai Huaqing to the
      Company. These shares were valued at US$69,829 which was approximately equal
      to
      the fair market value of the stock at the return date.




On
      July
      1, 2007, the Company issued 310,000 unregistered shares of common stock valued
      at US$22,102 in lieu of cash payment for director service compensation, which
      were approximately equal to the fair market value of the stock at issue
      date.







16




On
        July
        9, 2007, the Company agreed to sale 997,550 unregistered shares of our common
        stock (received on June 13, 2007 on disposal of a subsidiary) in an offshore
        transaction under Regulation S to Yuying Lu for proposed gross proceeds of
        US$49,878 which is subject to signing agreement.




On
      October 1, 2007, we issued 73,120 unregistered shares of our common stock to
      Geoffrey Wei and Wilson Li valued at US$2,824 as of the date of issuance in
      lieu
      of cash compensation for director service.




Stock
      Option Plan





In
      April
      1995, the Company adopted a stock option plan (the Plan) to attract and retain
      qualified persons for positions of substantial responsibility as officers,
      directors, consultants, legal counsel, and other positions of significance
      to
      the Company, the Plan provides for the issuance of both Incentive Stock Options
      and Non-Qualified Stock Options. The Plan, which is administered by the Board
      of
      Directors, provides for the issuance of a maximum of 2,000,000 options to
      purchase shares of common stock at the market price thereof on the date of
      grant. Such options are generally exercisable over a 10-year period from the
      date of grant. Each option lapses 90 days after the optionee has terminated
      his
      continuous activity with the Company, except that if his continuous activity
      with the Company terminates by reason of his death, such option of the deceased
      optionee may be exercised within one year after the death of such optionee.
      Options granted under the Plan are restricted as to sale or transfer. All
      options granted at not less than fair value at the date of grant and have terms
      of 10 years. The Plan expired in March 2005 pursuant to its terms.





In
      November 2005, the Company adopted a new stock option plan to attract and retain
      qualified persons for positions of substantial responsibility as officers,
      directors, consultants, legal counsel, and other positions of significance
      to
      the Company (the “2005 Plan”). The 2005 Plan provides for the issuance of stock
      options, stock appreciation rights, restricted stock, stock units, bonus stock,
      dividend equivalents, other stock-related awards and performance awards that
      may
      be settled in cash, stock, or other property. The total number of shares of
      our
      common stock that may be subject to awards under the 2005 Plan is equal to
      35,000,000 shares, plus (i) the number of shares with respect to which awards
      previously granted under the 2005 Plan that terminates without the issuance
      of
      the shares or where the shares are forfeited or repurchased; (ii) with respect
      to awards granted under the 2005 Plan, the number of shares which are not issued
      as a result of the award being settled for cash or otherwise not issued in
      connection with the exercise or payment of the award and (iii) the number of
      shares that are surrendered or withheld in payment of the exercise price of
      any
      award or any tax withholding requirements in connection with any award granted
      under the 2005 Plan. Unless earlier terminated by our Board of Directors, the
      2005 Plan will terminate on the earlier of (1) ten years after the later of
      (x)
      its adoption by our Board of Directors, or (y) the approval of an increase
      in
      the number of shares reserved under the 2005 Plan by our Board of Directors
      (contingent upon such increase being approved by our shareholders) and (2)
      such
      time as no shares of our common stock remain available for issuance under the
      2005 Plan and we have no further rights or obligations with respect to
      outstanding awards under the 2005 Plan. Options granted under the 2005 Plan
      are
      restricted as to sale or transfer.





The
      2005
      Plan was approved on November 23, 2005 during the annual shareholders
      meeting.







17




The
      number of shares of common stock reserved and available under the 2005 Plan
      was
      increased from 35,000,000 to 70,000,000 at the annual meeting of shareholders
      on
      February 24, 2007.





On
      May
      31, 2006, the Board of Directors of the Company appointed Mr. Victor Zhou to
      be
      the acting Chief Executive Officer, effective June 1, 2006. Mr. Victor Zhou’s
      employment agreement was signed on June 1, 2006. The compensation includes
      a
      monthly salary of US$8,333. In addition, Mr. Victor Zhou was granted an option
      to purchase 10,000,000 shares of our common stock with exercise price of
      US$0.04. The stock option vesting schedule is as follows:





-
            Option
                to purchase 6,000,000 shares of our common stock to be vested with
                three
                installments of 2,000,000 each upon each successful new business
                acquisition of the Company; and-
            Option
                to purchase 2,000,000 shares of our common stock to be vested upon
                each
                full profitable year.





On
      June 1, 2006, the Company granted Yungeng Hu, CFO & President of the
      Company, an option to purchase total 11,000,000 shares of the Company’s common
      stock at exercise price of US$0.04 according to the following vesting schedule
      and based on the 2005 Plan.





-
            7,500,000
                stock options vest pro rata over the two years of the employment
                contract
                period in equal installments of every six months.-
            2,000,000
                stock options vest upon each successful new business acquisition
                of the
                Company.-
            1,500,000
                stock options vest upon each full profitable
                year





The
      following assumptions were used to calculate the fair value of the options
      granted:


Risk-free
                interest rate
            4.92%Weighted
                average expected life of the options
            6.25
                yearsExpected
                volatility
            57.93%Expected
                dividend yield
            0





On
      July
      4, 2006, the Company granted Billy Wang, Chairman of the Board, an option to
      purchase 5,000,000 shares of the Company’s common stock at exercise price of
      US$0.05. The option vested on September 28, 2007 and is exercisable within
      five
      years time after vesting.





The
      following assumptions were used to calculate the fair value of the options
      granted:


Risk-free
                interest rate
            4.92%Weighted
                average expected life of the options
            5.00
                yearsExpected
                volatility
            57.93%Expected
                dividend yield
            0







18




On
      August
      23, 2006, the Company granted Geoffrey Wei and Wilson Li, independent directors
      of the Company each an option to purchase 1,000,000 shares of the Company’s
      common stock at exercise price of US$0.05. Each option vested on August 23,
      2007
      and is exercisable within five years time after vesting.





The
      following assumptions were used to calculate the fair value of the options
      granted:


Risk-free
                interest rate
            4.92%Expected
                life of the options
            6.00
                yearsExpected
                volatility
            57.93%Expected
                dividend yield
            0





On
      September 1, 2006, the Board of Directors made Victor Zhou the permanent CEO
      of
      the Company and, as a result, granted to Mr. Zhou options to purchase a total
      of
      11,000,000 shares of the Company’s common stock at exercise price of US$0.05
      according to the following vesting schedule and based on the 2005 Plan. These
      options replace the options that were granted on May 31, 2006, which compensated
      Mr. Zhou for his service as Acting Chief Executive Officer. None of the options
      vested during the term when Mr. Zhou was acting CEO of the
      Company.


-
            7,500,000
                stock options vested pro rata over 2 years of the employment contract
                period.-
            2,000,000
                stock options vested upon each successful new business acquisition
                of the
                Company.-
            1,500,000
                stock options vested upon each full profitable
                year.





The
      following assumptions were used to calculate the fair value of the options
      granted:


Risk-free
                interest rate
            4.92%Weighted
                average expected life of the options
            6.25
                yearsExpected
                volatility
            57.93%Expected
                dividend yield
            0





The
      stock
      option granted to ex-CEO Carrie Hartwick to purchase total 15,000,000 shares
      of
      the Company’s common stock was terminated 90 days after her departure on June 1,
      2006 from the Company. The stock option granted to ex-Vice President Zhou Jing
      Jing to purchase 1,000,000 shares of the Company’s common stock was terminated
      90 days after his departure on June 9, 2006 from the Company.





The
      following table summarizes the activity of stock options:


Number
                  of
                Options
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Aggregate
                Intrinsic
                ValueShares
                  under options at Dec 31, 2004
              
              
              7,300,000
              
              
              $
              0.28
              
              
              $
              270,000Granted
              
              
              20,300,000
              
              
              $
              0.09Exercised
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -Cancelled
              
              
              -
              
              
              
              -Shares
                  under options at May 31, 2005
              
              
              27,600,000
              
              
              $
              0.14
              
              
              $
              323,000Granted
              
              
              1,000,000
              
              
              $
              0.09Exercised
              
              
              -
              
              
              
              -Expired
              
              
              4,000,000
              
              
              $
              0.207Cancelled
              
              
              -
              
              
              
              -Shares
                  under options at May 31, 2006
              
              
              24,600,000
              
              
              $
              0.127
              
              
              $
              0-Granted
              
              
              29,000,000
              
              
              $
              0.05Exercised
              
              
              -
              
              
              
              -Expired
              
              
              3,000,000
              
              
              $
              0.30Cancelled
              
              
              16,000,000
              
              
              $
              0.09Shares
                  under options at May 31, 2007
              
              
              34,600,000
              
              
              $
              0.06
              
              
              $
              690,000Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -Cancelled
              
              
              -
              
              
              
              -Shares
                  under options at November 30, 2007
              
              
              34,600,000
              
              
              $
              0.06
              
              
              
              346,000




19


Additional
      information relating to stock options outstanding and exercisable at November
      30, 2007 summarized by the exercise price is as follows:





WeightedNumber
                of
            
            Average
            
            Weighted
            
            Number
            
            WeightedRange
                of
            
            Outstanding
                at
            
            Remaining
            
            Average
            
            Exercisable
                at
            
            AverageExercise
            
            November
                30,
            
            Contractual
            
            Exercise
            
            November
                30,
            
            ExercisePrice
            
            2007
            
            Life
            
            Price
            
            2007
            
            Price$0.04
                - $0.05
            
            29,000,000
            
            5.0
                Year
            
            $0.05
            
            14,500,000
            
            $0.05$0.09
            
            5,300,000
            
            3.48
                Year
            
            $0.09
            
            5,300,000
            
            $0.09$1.00
            
            300,000
            
            0.71
                Year
            
            $1.00
            
            300,000
            
            $1.00





During
      the three months period ended November 30, 2007, a total of 6,875,000 options
      vested and the Company recorded US$39,846 amortization in stock based
      compensation expense. For the six month period ended November 30, 2007 the
      Company recorded $114,884 in stock based compensation expense.





b) Warrants




There
      are
      no warrants outstanding for the six months period ended November 30, 2007 and
      the six months period ended November 30, 2006.





As
      of May
      31, 2005, there were 29,010,239 outstanding warrants to purchase 29,010,239
      shares of common stock at US$0.001 par value at US$0.058 per share.





In
      connection with the private placement of Hartcourt shares with Enlight
      Corporation Ltd., on October 23, 2002, Hartcourt granted Enlight warrants to
      purchase 29,010,239 shares at an exercise price of US$0.0586 per share. These
      warrants expired as of November 30, 2007.







20




NOTE
      5  GOING
      CONCERN





As
      shown
      in the accompanying consolidated financial statements, the Company has suffered
      recurring losses from operations and has an accumulated deficit of US$72,673,103
      as of November 30, 2007. These factors, among others, raise substantial doubt
      about the Company’s ability to continue as a going concern. The Company’s need
      for working capital is a key issue for management and necessary for the Company
      to meet its goals and objectives. The Company continues to pursue additional
      capitalization opportunities. There is no assurance, however, that the Company
      will be successful in meeting its goals and objectives in the
      future.





In
      view
      of the matters described in the preceding paragraph, recoverability of a major
      portion of the recorded asset amounts shown in the accompanying balance sheet
      is
      dependent upon continued operations of the Company, which in turn is dependent
      upon the Company’s ability to raise additional capital, and to succeed in its
      future operations. The financial statements do not include any adjustments
      relating to the recoverability and classification of recorded asset amounts
      or
      amounts and classification of liabilities that might be necessary should the
      Company be unable to continue as a going concern.





The
      Company has taken certain restructuring steps to provide the necessary capital
      to continue its operations. These steps included: 1) acquire profitable
      operations through issuance of equity instruments, 2) disposal of unprofitable
      or unfavorable return-on-investment operations, and 3) continue actively seeking
      additional funding through offshore private placement to satisfy working capital
      requirements.





NOTE
      6 PREPAID EXPENSES AND
      OTHER ASSETS





Deposit,
      other debtors and prepaid expenses as of November 30, 2007 and May 31, 2007
      are
      summarized as follows:





November
                30, 2007
              Unaudited
            
            
            May
                31, 2007
              AuditedPrepaid
                expenses
            
            $
            16,164
            
            
            $
            496Deposits
            
            
            28,818
            
            
            
            41,053Total
            
            $
            44,982
            
            
            $
            41,549





NOTE
      7 OTHER
      RECEIVABLE




Other
      receivable as of November 30, 2007 and May 31, 2007 are summarized as
      follows:





November
                30, 2007
              Unaudited
            
            
            May
                31, 2007
              AuditedProceeds
                receivable from disposal of Huaqing
            
            $
            264,697
            
            
            $
            651,082Proceeds
                  receivable from disposal of Control Tech
            
            
            69,997
            
            
            
            100,600Total
            
            $
            334,693
            
            
            $
            675,969









21




NOTE
      8 ACCRUED EXPENSES AND
      OTHER CURRENT LIABILITIES





Accrued
      expenses and other current liabilities as of November 30, 2007 and May 31,
      2007
      are summarized as follows:





Amount
            
            
            AmountNovember
                30, 2007
              Unaudited
            
            
            May
                31, 2007
              AuditedAccrued
                directors’ compensations
            
            $
            84,000
            
            
            $
            196,500Accrued
                professional fees
            
            
            87,500
            
            
            
            83,235Payroll
                payable
            
            
            275,739
            
            
            
            21,690Welfare
            
            
            12,190
            
            
            
            9,588Accrued
                other expenses
            
            
            4,405
            
            
            
            38,947Other
                payable
            
            
            241,380
            
            
            
            222,832Total
            
            $
            705,214
            
            
            $
            572,792





NOTE
      9 PROPERTIES AND
      EQUIPMENT





The
      Company’s property and equipment as of November 30, 2007 and May 31, 2007 are
      summarized as follows:





November
                30, 2007
              Unaudited
            
            
            May
                31, 2007
              AuditedOffice
                equipment and computers
            
            $
            68,887
            
            
            $
            61,172Less:
                accumulated depreciation
            
            
            (40,595
            )
            
            
            (34,749
            )Property
                and equipment, net
            
            $
            28,292
            
            
            $
            26,423








NOTE
      10RELATED
      PARTY TRANSACTION





During
      the quarter ended August 31, 2007, the Company issued 310,000 unregistered
      shares of common stock to its directors, including 182,330 shares of common
      stock valued at US$13,000 for services rendered and 127,670 shares valued at
      US$9,103 were over issued to them. The stock was valued at the average market
      price for the period for which services were provided. The over issued common
      shares are recorded as Advance compensation to Directors.





During
      the quarter ended August 31, 2007, the company received 997,550 shares of the
      Company’s common stock from Shanghai Huaqing pursuant to the Sales and Purchaser
      agreement. These shares were valued at US$69,829 which was approximately equal
      to the fair market value of the stock at the return date.





During
      the quarter ended November 30, 2007, the Company issued 73,120 unregistered
      shares of common stock to its directors for their service on Board after
      adjusting the over-issued stock. The stock was valued at US$2,824 after
      adjusting the over-issued stock which was approximately equal to the fair market
      value of the stock at the return date.







22




NOTE
      11IMPAIRMENT
      OF
      GOODWILL





The
      Company evaluates intangible assets and other long-lived assets for impairment,
      at a minimum, on an annual basis and whenever events or changes in circumstances
      indicate that the carrying value may not be recoverable from its estimated
      future cash flows. Recoverability of intangible assets, other long-lived assets
      and goodwill is measured by comparing their net book value to the related
      projected undiscounted cash flows from these assets, considering a number of
      factors including past operating results, budgets, economic projections, market
      trends and product development cycles. If the net book value of the asset
      exceeds the related undiscounted cash flows, the asset is considered impaired,
      and a second test is performed to measure the amount of impairment loss. The
      Company assessed the carrying value of goodwill in accordance with the
      requirements of SFAS #142 "Goodwill and Other Intangible Assets".  Based on
      its assessment, the Company determined that goodwill resulting from the
      acquisition of China Princely amounted to US$673,727 is impaired as of November
      30, 2007.





NOTE
      12  DISCONTINUED
      OPERATIONS





Control
      Tech Electronics (Shanghai) Co., Ltd.





During
      the transition period ended May 31, 2005, the Company, via its BVI subsidiary,
      Hartcourt Capital, Inc., acquired Control Tech, located and operated in China.
      Control Tech is the distributor of video and audio conference products in
      mainland China. On November 1, 2004, the Company signed a definitive agreement
      to purchase a 90% equity interest in Control Tech for a total consideration
      of
      US$1.96 million. Pursuant to the definitive purchase agreement, the purchase
      price was to be paid by the issuance of 8,516,902 shares of the Company’s common
      stock at a value of US$0.23 per share. On February 25, 2005, the Company
      completed all legal procedures to acquire 90% of the capital stock of Control
      Tech. Due to Company’s share price decline, the purchase price was revised as
      US$1.96 million payable in 19,588,875 shares of Company’s common
      stock.





Since
      January 1, 2006, the Company decided to cease the operation of Control Tech
      due
      to the unsatisfied operating results.





The
      Company has made a provision for the future disposal of Control Tech of
      US$1,827,990 during the fiscal year ended May 31, 2006.





Loss
      from
      the discontinued operation of Control Tech during the fiscal year ended May
      31,
      2006 was US$596,352.





The
      investment in Control Tech US$300,000 has been classified as assets pending
      for
      sale on the consolidated balance sheet as of May 31, 2006.





In
      September 2006, the Company entered into a definitive sales & purchase
      agreement to sell its interest in Control Tech. During the fiscal year ended
      May
      31, 2007, US$199,400 was collected, and the remaining balance of $100,600 has
      been reclassified to other receivable.






23





During
      the six-month period ended November 30, 2007, US$30,235 was collected and the
      remaining balance of US$69,997 is part of other receivable.








Shanghai
      Huaqing Corporation Development Co., Ltd.





On
      February 26, 2007, the Board of Directors agreed to dispose off the operations
      of Shanghai Jiumeng and entered into a definitive agreement with Shanghai
      Shiheng Architecture Consulting Co., Ltd (the “Purchaser”) to sell its 100%
      equity interests in Shanghai Jiumeng, which holds 51% equity interest in
      Shanghai Huaqing.





On
      June
      11, 2007, the Purchaser terminated the Sales & Purchase Agreement described
      above it had entered into with the Company.  The Purchaser refused to
      consummate the transaction for the agreed upon purchase
      price.





On
      June
      13, 2007, the Board of Directors of the Company authorized the disposal of
      its
      51% interest in Shanghai Huaqing to its minority shareholders. As per the terms
      of sale and purchase agreement the Company will receive RMB 4,000,000. In
      addition, a shareholder of Shanghai Huaqing will return 997,550 shares of our
      common stock to an individual or entity as per the discretion of the
      Company.





During
      the three months ended November 30, 2007, RMB 1,000,000 (US$132,348) was
      received. As of November 30, 2007, total RMB 2,000,000 (US$263,721) and 997,550
      shares of the Company’s common stock were received and the remaining balance of
      US$264,697 is part of other receivable.








NOTE
      13 COMMITMENTS AND
      CONTINGENCIES





a) Employment
      Agreements




On
        May
        31, 2006, the Board of Directors of the Company appointed Mr. Victor Zhou
        to be
        the acting Chief Executive Officer, effective June 1, 2006. Mr. Victor Zhou’s
        employment agreement was signed on June 1, 2006. The compensation included
        a
        monthly salary of US$8,333. In addition, Mr. Victor Zhou was granted 10,000,000
        stock options with exercise price of US$0.04. The stock option vesting schedule
        was as follows:


-
            Option
                to purchase 6,000,000 shares of our common stock to be vested with
                three
                installments of 2,000,000 each upon each successful new business
                acquisition of the Company; and


-
            Option
                to purchase 2,000,000 shares of our common stock to be vested upon
                each
                full profitable year.






24





On
      September 1, 2006, the Board of Directors of the Company promoted Mr. Victor
      Zhou to be the Company’s permanent Chief Executive Officer. The Company signed
      the new employment contract with Mr. Zhou on September 1, 2006. The compensation
      includes an annual base salary of US$100,000, payable by equal monthly
      installment of US$8,333 cash. In addition, Mr. Victor Zhou was granted
      11,000,000 stock options with exercise price of US$0.05. The stock option
      vesting schedule is as following. These options replace the options that were
      granted on June 1, 2006:


-
            7,500,000
                stock options vested pro rata over 2 years of the employment contract
                period.


-
            2,000,000
                stock options vested upon each successful new business acquisition
                of the
                Company.


-
            1,500,000
                stock options vested upon each full profitable
                year.





On
      December 5, 2006, the Compensation Committee increased Mr. Zhou’s annual base
      salary to US$150,000 effective September 1, 2006. The options remain
      unchanged.





On
      May
      31, 2006, the Board of Directors of the Company appointed Mr. Yungeng Hu to
      be
      the President & Chief Financial Officer, effective on June 1, 2006. Mr.
      Yungeng Hu’s employment agreement was signed on June 1, 2006. The compensation
      includes an annual base salary of US$150,000, payable by equal monthly
      installments of US$12,500 cash. In addition, Mr. Yungeng Hu was granted
      11,000,000 stock options with exercise price of US$0.04. The stock option
      vesting schedule is as follows:


-
            7,500,000
                stock options vested pro rata over 2 years of the employment contract
                period.


-
            2,000,000
                stock options vested upon each successful new business acquisition
                of the
                Company.


-
            1,500,000
                stock options vested upon each full profitable
                year





b) Operating
      Leases




The
      Company leases its offices and facilities under long-term, non-cancelable lease
      agreements expiring at various dates through July 5, 2009. The non-cancelable
      operating lease agreements provide that the Company pays certain operating
      expenses applicable to the leased premises according to the Chinese Law. Rental
      expense for the three months ended November 30, 2007 and 2006 were US$23,236and
      US$28,212, respectively.





The
      future minimum annual lease payments required under this operating lease are
      as
      follows:


Year
                ended May 31
            
            Payments2008
            
            $
            58,2822009
            
            $
            108,690








c) Legal
      Proceedings




Hartcourt
      Hi-Tech Investment (Shanghai) Inc. filed a compliant against Beijing Yi Zhi
      He
      Lian Information Technology Co., Ltd for returning RMB 1,000,000 which it owed
      the Company. On December 19, 2006, Beijing Shi Jing Shan District Court entered
      the judgment in this case. The court found that Hartcourt Hi-Tech Investment
      (Shanghai) Inc. has no rights to file the compliant against Beijing Yi Zhi
      He
      Lian Information Technology Co., Ltd. unless designated by Hartcourt Capital,
      Inc., which signed and was bound by the acquisition agreement. The court issued
      an order overruling the complaint from Hartcourt Hi-Tech Investment (Shanghai).,
      Inc. as the plaintiff. The plaintiff can appeal to Beijing No. 1 Intermediate
      People’s Court if objecting to the rule. The Company has prepared additional
      lawsuit material and lodged the petition to appeal to Beijing No. 1 Intermediate
      People’s Court.







25




On
      August
      10, 2007, Hartcourt Capital Inc filed a lawsuit in the Beijing No. 1
      Intermediate People’s Court against Beijing Yi Zhi He Lian Information
      Technology Co., Ltd to return the RMB 1,000,000 which it owes the Company.
      The
      lawsuit is in the initial stage and the outcome cannot be estimated as of
      November 30, 2007.





NOTE
      14 CURRENT VULNERABILITY
      DUE TO CERTAIN CONCENTRATIONS





The
      Company's operations are carried out in the PRC. Accordingly, the Company's
      business, financial condition and results of operations may be influenced by
      the
      political, economic and legal environments in the PRC, by the general state
      of
      the PRC's economy. The Company's business may be influenced by changes in
      governmental policies with respect to laws and regulations, anti-inflationary
      measures, currency conversion and remittance abroad, and rates and methods
      of
      taxation, among other things.







Item
      2.  Management’s Discussion and Analysis of Financial Condition and
      Results of Operations




Forward-looking
      Statements





This
      report contains forward-looking statements within the meaning of
      Section 27A of the Securities Act of 1933, as amended, and Section 21E
      of the Securities Exchange Act of 1934, as amended. Such statements are based
      upon current expectations that involve risks and uncertainties. Any statements
      contained herein that are not statements of historical fact may be deemed to
      be
      forward-looking statements. For example, the words
“believes,” "anticipates,” “plans,” “expects,” “intends” and similar
      expressions are intended to identify forward-looking statements. Our actual
      results and the timing of certain events may differ significantly from the
      results discussed in the forward-looking statements. Factors that might cause
      such a discrepancy include, but are not limited to, those discussed in “Risk
      Factors Affecting Future Results” and “Liquidity and Capital Resources” below.
      All forward-looking statements in this document are based on information
      available to us as of the date hereof and we assume no obligation to update
      any
      such forward-looking statements. The following discussion should be read in
      conjunction with our unaudited condensed consolidated financial statements
      and
      the accompanying notes contained in this quarterly report. Unless expressly
      stated or the context otherwise requires, the terms “we,” “our,” “us” and
“Hartcourt” refer to The Hartcourt Companies, Inc. and its subsidiaries





Overview




Vocational
      and Technical Education Business




In
      2006
      we conducted a feasibility study before deciding to enter into the Chinese
      vocational and training marketplace.  As a result of the feasibility
      study, we believe that vocational schools in China, which have over US$10
      billion in annual revenues, provide a good investment opportunity.




In
      China,
      when students graduate from secondary schools (grade 9), they have two
      educational options: (a) high schools or (b) middle vocational
      schools.  In 2005, there were 21 million secondary school graduates,
      of which 8.8 million chose to go to high schools and 6.6 million chose to go
      to
      middle vocational schools. In 2005, the total number of middle vocational school
      students was about 16 million.






26




High
      school graduates also have two educational options: (a) bachelor degree colleges
      and (b) higher vocational schools. Middle vocational school students are allowed
      to be admitted to higher vocational schools if they pass the required
      tests.  Higher vocational school students are allowed to be admitted
      to bachelor degree colleges if they pass the required tests. In 2005, there
      were
      6.7 million high school graduates and 7 million high vocational school
      students.




The
      Chinese government believes that in order for the healthy growth of China’s
      economy to be sustained there will need to be more vocational schools and
      vocational school graduates than degree colleges and degree college graduates.
      All levels of government are required to speed up the development of vocational
      education.  The goal of the Chinese government is to recruit 8 million
      middle vocational students by 2010 in order to achieve the projected number
      of
      middle vocational students and high school students. In addition, the goal
      of
      the Chinese government is to have more high vocational students than college
      students by that same year.




In
      August
      2006, after reviewing our business condition, competitive position, and
      opportunities in China, we decided to change our business by focusing on the
      post-secondary education market in China to take advantage of the ongoing demand
      for skilled workers and growing post-secondary age population. We plan to not
      only acquire certain schools we have targeted, but also to run these schools
      actively by putting together strong faculty teams, incentive plans and strategic
      expansion programs.




Following
      our change in strategic direction, we entered into memorandums of understanding
      with several  vocational education providers in 2006, and we have
      signed definitive agreements with Yucai (as defined below) and China Princely
      (as defined below). On May 15, 2007, the acquisition of China Princely
      closed.




In
      June
      2007, the Company entered into a Memorandum of Understanding with Chongqing
      Zhengda Software Group Co., Ltd relating to the acquisition of 100% of its
      equity interests in its two subsidiaries: Chongqing Zhengda Education Group
      and
      Chongqing Zhengda Hengling Co., Ltd. We have conducted due diligence for the
      proposed acquisition. A proxy statement for this transaction will be filed
      with
      the SEC and sent to our shareholders in connection with the special shareholders
      meeting to be held in future.




On
      December 28, 2006, we entered into a definitive agreement to acquire a 51%
      equity interest in Taishun Yucai Senior School (“Yucai”), a high school
      education and vocational training service provider located in Wenzhou, Zheijiang
      PRC. The remaining 49% of the equity interests in Yucai will be held by Yucai’s
      current shareholders. Under the terms of the purchase agreement, we agreed
      to
      pay US$2,000,000 and 5,500,000 shares of our restricted common stock in order
      to
      acquire a 51% equity interest in Yucai. Pursuant to the purchase agreement,
      the
      US$2,000,000 will be payable in three installments within one year after closing
      of the acquisition and the 5,500,000 shares will be payable upon closing of
      the
      acquisition. The lead selling shareholder and his fellow selling shareholders
      together with Yucai have jointly guaranteed that we will receive a minimum
      of
      US$554,487 (RMB 4,325,000) in profit and management fees for each of the three
      years following the closing. In the event that the net profit is less than
      the
      guaranteed amount to the Company for a given year, the lead selling shareholder
      and his fellow selling shareholders shall make up the discrepancy before
      December 31 of each year in respect thereof. We have guaranteed that the average
      three-day closing price of our shares on the days immediately prior to the
      one-year anniversary of the closing date will be not less than US$0.50 per
      share.  In the event that the share price is less than US$0.50, we
      shall credit additional cash or issue new restricted shares. The transaction
      is
      subject to government approval. We cannot predict whether or when such approval
      will be obtained.






27




On
      May 15, 2007, we completed the purchase of 100% of the equity interests in
      China Princely Education Technology Development Company Limited (“China
      Princely”), an authorized accrediting organization for China vocational
      education located in Beijing, PRC. Under the terms of the purchase agreement,
      we
      paid to the shareholders of China Princely 5,400,000 shares of our restricted
      common stock at closing.  Cash consideration of US$39,180 (RMB300,000)
      and a capital infusion of US$274,258 (RMB2,100,000) in China Princely were
      also
      due at closing.  As of the date of this report, by mutual agreement of
      the parties, we have not paid these amounts.  The primary current
      shareholder of China Princely has personally guaranteed that the net profit
      of
      China Princely will be not less than US$256,000 (RMB2,000,000) for the calendar
      year 2007, while we have guaranteed that the average three-day closing price
      of
      our shares on the days immediately prior to the one-year anniversary of the
      closing date will be not less than US$0.50 per share. In the event that the
      share price is less than US$0.50, we shall, at our option, pay additional cash
      or issue new restricted shares. After closing, we changed the name of China
      Princely to Hartcourt Princely Education Technology Development (Beijing) Co.,
      Ltd.




IT
      Distribution Business




Historically,
      through our subsidiaries, Shanghai Huaqing Enterprise Development Co., Ltd
      (“Huaqing Shanghai”) and Shanghai Control Tech, we have been a distributor of
      internationally well-known IT hardware products and related software and
      services. The main products distributed were Samsung-branded notebooks and
      monitors. We also provided audio and video conference products and related
      services. Almost all of our revenue for the last two fiscal years was attributed
      to distribution revenues from sales of IT products in China.




As
      a
      result of our business decision to move away from the IT distribution business,
      in September 2006, we entered into a definitive sales and purchase agreement
      to
      sell our interest in Besteffort Investments Ltd (“Besteffort”). In October 2006,
      the Company completed the transfer of legal ownership of Besteffort to the
      purchaser. As of the close of our fiscal quarter ended November 30, 2007, we
      have already received US$229,635 in connection with the sale of our IT
      distribution business and the remaining balance of US$70,365 is held for assets
      receivable. Prior to this sale, Besteffort Investments Ltd indirectly held
      a 90%
      equity interest in Shanghai Control Tech, which was a distributor of Radvision
      video conference products in China. Shanghai Control Tech had ceased its
      operations on January 1, 2006 primarily as a result of Radvision’s
      termination of its distribution agreement with Shanghai Control
      Tech.  The revenue of Shanghai Control Tech had been derived almost
      exclusively from the Radvision business.




We
        have
        entered into a definitive sale and purchase agreement to sell our 51% interest
        in Shanghai Huaqing Corporation Development Co., Ltd to its minority
        shareholders.  The agreement is subject to the receipt of required
        third party consents and approvals if required by applicable law.  The
        contemplated purchase price is US$528,419. In addition, a shareholder of
        Huaqing
        Shanghai will return 997,550 shares of our common stock to the individual
        or
        entity designated by us. During the three months ended November 30, 2007,
        RMB
        1,000,000 (US$132,348) was received. As of November 30, 2007, total RMB
        2,000,000 (US$263,721) and 997,550 shares of the Company’s common stock were
        received and the remaining balance of US$264,697 is part of other
        receivable.


28




Results
      of
      Operations




The
      following table sets forth the consolidated statements of operations for the
      three months ended November 30, 2007, with the comparable reporting period
      in
      the preceding year. We used the pro forma numbers for the three months ended
      November 30, 2006.





THE
                HARTCOURT COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF OPERATIONSThree
                Months ended
            
            
            Three
                Months endedNovember
                30
            
            
            November
                302007
            
            
            2006Operating
                expenses:General
                and administrative
            
            $
            230,582
            
            
            $
            388,371Depreciation
                and amortization
            
            
            3,413
            
            
            
            713Impairment
                of goodwill
            
            
            666,471Total
                operating expenses
            
            
            900,466
            
            
            
            389,084Loss
                from continuing operations before other income/(expenses)
            
            
            (900,466
            )
            
            
            (389,084
            )Other
                income/(expense):Interest
                income
            
            
            (191
            )
            
            
            161Loss
                from continuing operations
            
            
            (900,657
            )
            
            
            (388,923
            )Discontinued
                operations:Loss
                from discontinued operations
            
            
            -
            
            
            
            (639,057
            )NET
                LOSS
            
            $
            (900,657
            )
            
            $
            (1,027,980
            )OTHER
                COMPREHENSIVE ITEM:Foreign
                currency translation gain
            
            
            3,594
            
            
            
            28,831NET
                COMPREHENSIVE LOSS
            
            $
            (897,063
            )
            
            
            (999,149
            )







29





Three
      months
      ended November 30, 2007 compared to three months ended November 30,
      2006.


Net
      Revenue:





There
      was
      no revenue during the three months ended November 30, 2007 and 2006, because
      the
      Company entered into a definitive agreement to sell the IT distribution business
      and therefore the sales from the IT distribution business have been classified
      into discontinued operations for the three months ended November 30, 2007 and
      the comparable period in the preceding year.




General
      and
      administrative expenses:




General
      and administrative expenses were US$230,582 for the three months ended November
      30, 2007 compared to US$388,371 for the same period in 2006, a decrease of
      US$157,789 or 40% compared to the three months ended November 30, 2006. The
      decrease of expenses for the three months ended November 30, 2007 was due to
      the
      decrease in professional expenses compared to the same period in
      2006.




Depreciation
      and amortization expenses:




Depreciation
      and amortization expenses were US$3,413 for the three months ended November
      30,
      2007 compared to US$713 for the same period in 2006 or a US$2700 increase.
      The
      increase was primarily due to the purchase of fixed assets during the three
      months ended November 30, 2007 than the three months ended November 30,
      2006.




Interest
      income:




Interest
      expense was US$191 for the three months ended November 30, 2007 compared to
      interest income of US$161 for the same period in 2006. The US$352 decrease
      was
      mainly due to lower average cash balances in our accounts.




Loss
      from
      Continuing Operations:




Loss
      from
      continuing operations for the three months ended November 30, 2007 was
      US$900,657, compared to US$388,923 for the same period in 2006. The increase
      was
      mainly due to goodwill impairment charges in the three months ended November
      30,
      2007.




Discontinued
      operations:




During
      the three months ended November 30, 2007 and November 30, 2006, the discontinued
      operations represent the operating results of Shanghai Huaqing in these
      three-month periods and a loss on disposal of Shanghai Huaqing.








30




THE
                HARTCOURT COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF OPERATIONS




Six
                Months ended
            
            
            Six
                Months endedNovember
                30
            
            
            November
                302007
            
            
            2006Net
                revenue
            
            $
            -
            
            
            $
            -Operating
                expenses:General
                and administrative expenses
            
            
            537,069
            
            
            
            713,081Depreciation
                and amortization
            
            
            5,833
            
            
            
            4,240Impairment
                of goodwill
            
            
            666,471Total
                operating expenses
            
            
            1,209,373
            
            
            
            717,321Loss
                from continuing operationsbefore
                other income
            
            
            (1,209,373
            )
            
            
            (717,321
            )Other
                incomeInterest
                income
            
            
            5,189
            
            
            
            1,155Others
            
            
            34,433Total
                other income
            
            
            39,622
            
            
            
            1,155Loss
                from continuing operations
            
            
            (1,169,751
            )
            
            
            (716,166
            )Discontinued
                operations:Income/(loss)
                from discontinued operations
            
            
            22,878
            
            
            
            (438,555
            )NET
                LOSS
            
            
            (1,146,873
            )
            
            
            (1,154,721
            )OTHER
                COMPREHENSIVE ITEM:Foreign
                currency translation gain
            
            
            8,920
            
            
            
            48,787NET
                COMPREHENSIVE LOSS
            
            $
            (1,137,953
            )
            
            $
            (1,105,934
            )





Six
      months ended
      November 30, 2007 compared to six months ended November 30,
      2006.


Net
      Revenue:





There
      was
      no revenue during the six months ended November 30, 2007 and 2006, because
      the
      Company entered into a definitive agreement to sell the IT distribution business
      and therefore the sales from the IT distribution business have been classified
      into discontinued operations for the six months ended November 30, 2007 and
      the
      comparable period in the preceding year.




General
      and
      administrative expenses:




General
      and administrative expenses were US$537,069 for the six months ended November
      30, 2007 compared to US$713,081 for the same period in 2006, a decrease of
      US$176,012 or 24% compared to the six months ended November 30, 2006. The
      decrease of expenses for the six months ended November 30, 2007 was due to
      the
      decrease in professional expenses compared to the same period in
      2006.






31






Depreciation
      and amortization expenses:




Depreciation
      and amortization expenses were US$5,833 for the six months ended November 30,
      2007 compared to US$4,240 for the same period in 2006 or a 37%
      increase.  The increase was primarily due to the purchase of fixed
      assets during the six months ended November 30, 2007.




Interest
      income:




Interest
      income was US$5,189 for the six months ended November 30, 2007 compared to
      US$1,155 for the same period in 2006. The US$4,034 increase was mainly due
      to a
      higher average cash balances in our accounts.




Loss
      from
      Continuing Operations:




Loss
      from
      continuing operations for the six months ended November 30, 2007 was
      US$1,169,751, compared to US$716,166 for the same period in 2006. The increase
      was mainly due to goodwill impairment charges in the six months ended November
      30, 2007.




Discontinued
      operations:




During
      the six months ended November 30, 2007 and November 30, 2006, the discontinued
      operations represent the operating results of Shanghai Huaqing in these
      six-month periods and a loss on disposal of Shanghai Huaqing.




Liquidity
      and Capital Resources:





As
      shown
      in our accompanying financial statements, we had a net loss of US$1,146,873
      for
      the six months ended November 30, 2007, as compared to a net loss of
      US$1,154,721 for the same period in 2006.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. This basis of accounting
      contemplates the recovery of the Company’s assets and the satisfaction of
      liabilities in the normal course of business.





The
      Company has taken certain restructuring steps to provide the necessary capital
      to continue its operations. These steps included:


·
              Look
                  for growth opportunities through acquisitions and mergers with
                  profitable
                  education businesses;
 ·
              Raise
                  additional capital through public offering or private placement;
                  and
 ·
              Take
                  measures to control costs and operating
                  expenses





Operating
        activities: During the six months ended November 30, 2007, net cash used
        in operating activities was US$334,202, compared to US$656,863 during the
        same
        period in 2006. The cash used in operating activities in the six months ended
        November 30, 2007 resulted mainly from loss of US$1,146,873 and an increase
        of
        accrued expenses and other current liabilities of US$34,320 and goodwill
        impairment of US$666,471 and increase of stock option expense of US$114,884.
        The
        cash used in operating activities in the six months ended November 30, 2006
        resulted mainly from loss of US$1,154,721, a decrease of prepaid expenses
        and
        other receivables of US$182,884 and an increase of stock option expense of
        US$256,466. The increase of accrued expenses for the quarter ended November
        30,
        2007 is related to the payroll payable to the management team.





32




Investing
      activities: Net cash provided by investing activities during the six
      months ended November 30, 2007 was US$286,242, compared to cash used in
      investing activities of US$0 during the same period in 2006. The cash provided
      by investing activities in the six months period ended November 30, 2007 was
      due
      to the cash received upon disposal of assets of US$293,956 and cash decrease
      due
      to purchase of property and equipment of US$7,714.





Financing
      activities: Net cash provided by financing activities during the six
      months ended November 30, 2007 was US$35,636 compared to US$202,225 provided
      by
      the same period in 2006. Net cash used in financing activities in the six months
      ended November 30, 2007 was due to payments of US$11,683 to related parties.
      Net
      cash provided by financing activities in the six months ended November 30,
      2007
      was due to sales of treasury stock of US$47,319. The cash provided by financing
      activities in the same period in 2006 was due to proceeds of US$12,353 from
      related parties and US$189,872 of sales of treasury stock.





Contractual
      Obligations





During
      the three months ended November 30, 2007, we did not have any contractual
      obligation other than the facility leases described in Note 13(b) of financial
      statements.





Off-Balance
      Sheet
      Arrangements





During
      the three months ended November 30, 2007, the Company did not engage in any
      off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC's
      Regulation S-K.





Critical
      Accounting Policies and
      Estimates





For
      a
      description of what we believe to be the critical accounting policies that
      affect our more significant judgments and estimates used in the preparation
      of
      our condensed consolidated financial statements, please refer to our Annual
      Report on Form 10-K for the year ended May 31, 2007. There have been no
      changes in our critical accounting policies since May 31,
      2007.





Item 3.Quantitative
      and Qualitative
      Disclosures About Market Risk





Short-Term
      Investment Portfolio




We
      do not
      hold derivative financial instruments in our portfolio of short-term
      investments. Our short-term investments consist of instruments that meet quality
      standards consistent with our investment policy. This policy specifies that,
      except for direct obligations of the United States government, securities issued
      by agencies of the United States government, and money market or cash management
      funds, we diversify our holdings by limiting our short-term investments and
      funds held for payroll customers with any individual issuer. As of November
      30,
      2007, all our cash equivalents represent cash on hand and cash deposit in PRC
      banks, the interest rate earned on our money market accounts ranged from 0.81%
      to 1.71% per annum.






33




Interest
      Rate Risk




Our
      cash
      equivalents are subject to market risk due to changes in interest rates.
      Interest rate movements affect the interest income we earn on cash equivalents,
      and funds held for payroll customers and the value of those
      investments.




Impact
      of Foreign Currency Rate Changes




Since
      we
      translate foreign currencies (primarily Chinese Yuans and Hong Kong Dollars)
      into US dollars for financial reporting purposes, currency fluctuations can
      have
      an impact on our financial results. The historical impact of currency
      fluctuations has generally been immaterial. We believe that our exposure to
      currency exchange fluctuation risk is not significant. Although the impact
      of
      currency fluctuations on our financial results has generally been immaterial
      in
      the past and we believe that for the reasons cited above currency fluctuations
      will not be significant in the future, there can be no guarantee that the impact
      of currency fluctuations will not be material in the future. As of November
      30,
      2007, we did not engage in foreign currency hedging activities.




Item 4.
      Controls and Procedures





Evaluation
      of disclosure controls and
      procedures.Our
      management evaluated, with the participation of our chief executive officer
      and
      our chief financial officer, the effectiveness of our disclosure controls and
      procedures as of the end of the period covered by this Quarterly Report on
      Form
      10-Q. Based on this evaluation, our chief executive officer and our chief
      financial officer have concluded that our disclosure controls and procedures
      are
      effective to ensure that information we are required to disclose in reports
      that
      we file or submit under the Securities Exchange Act of 1934 is recorded,
      processed, summarized and reported within the time periods specified in
      Securities and Exchange Commission rules and forms.





Changes
      in internal control over
      financial reporting.There was
      no change in our internal control over financial reporting that
      occurred during the period covered by this Quarterly Report on Form 10-Q that
      has materially affected, or is reasonably likely to materially affect, our
      internal control over financial reporting. We are aware that any system of
      controls, however well designed and operated, can only provide reasonable,
      and
      not absolute, assurance that the objectives of the system are met, and that
      maintenance of disclosure controls and procedures is an ongoing process that
      may
      change over time.





PART
      II: OTHER
      INFORMATION





Item
      1. Legal Proceedings.




In
      2005,
      following the termination of the acquisition of a 51% equity interest in Beijing
      Ying Zhi He Lian Information Technology Co., Ltd, (YZHL), YZHL returned to
      us
      RMB4,000,000 out of the RMB5,000,000 cash consideration we previously paid
      to
      them.  The remaining RMB1,000,000 is still unpaid as of the date of
      filing this quarterly report.  In 2006, Hartcourt Hi-Tech Investment
      (Shanghai) Inc. filed a compliant against YZHL for the return of the remaining
      RMB 1,000,000 (US$131,844)owed to us. On December
      19, 2006, Beijing Shi Jing Shan District Court entered the Judgment in this
      case. The court found that Hartcourt Hi-Tech Investment (Shanghai) Inc. had
      no
      right to file the compliant against YZHL unless such complaint was made by
      Hartcourt Capital, Inc., which signed the purchase agreement to acquire the
      51%
      equity interest in YZHL in 2004. After reviewing the case with our attorney,
      Hartcourt Capital, Inc., as the plaintiff, has appealed to Beijing People’s
      court on August 10, 2007against YZHL to return
      to us the remaining RMB1,000,000 that is owed to us.




34




Item
      1A. Risk Factors


The
      risk
      factors facing the Company have not changed in any material way from those
      Risk
      Factors discussed on the Company’s Annual Report on Form 10-K for the fiscal
      year ended May 31, 2007.





Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds




During
      the quarter ended November 30, 2007, the Company issued 73,120 unregistered
      shares of common stock to its directors for their service on Board after
      adjusting the over-issued stock. The stock was valued at US$2,824 after
      adjusting the over-issued stock which was approximately equal to the fair market
      value of the stock at the return.




Item
      3. Defaults Upon Senior Securities


None





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


None.





Item
      5. Other Information


None.





Item 6.
      Exhibits





Exhibit
            
            
            Previously
                FiledNumber
            
            Description3.1
            
            Articles
                of Incorporation of Hartcourt, dated September 6, 1983
            (1)3.2
            
            Bylaws
                of Hartcourt
            (1)3.3
            
            Amendment
                to the Bylaws of Hartcourt, dated December 2, 1996
            (2)3.4
            
            Amendment
                to the Bylaws of Hartcourt, dated October 25, 2004
            (6)3.5
            
            Amendments
                to the Articles of Incorporation of Hartcourt, dated November 21,
                1994
            (2)3.6
            
            Amendments
                to the Articles of Incorporation of Hartcourt, dated March 23,
                1995
            (1)3.7
            
            Amendment
                to the Articles of Incorporation of Hartcourt, dated October
                1997
            (3)3.8
            
            Amendment
                to the Articles of Incorporation of Hartcourt, dated March 13,
                2003
            (4)3.9
            
            Amendment
                to the Articles of Incorporation of Hartcourt, dated November 24,
                2005
            (5)31.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section 302 of the Sarbanes-Oxley Act of 200231.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section 302 of the Sarbanes-Oxley Act of 200232.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002




(1)
            Previously
                filed as an exhibit to Hartcourt’s Form 10SB12G/A, dated July 3, 1997
                and incorporated herein by
                reference.


(2)
            Previously
                filed as an exhibit to Hartcourt’s Form 10SB12B, dated January 21,
                1997 and incorporated herein by
                reference.


(3)
            Previously
                filed as an exhibit to Hartcourt’s Form 10KSB, dated April 13, 1998
                and incorporated herein by
                reference.


(4)
            Previously
                filed as an exhibit to Hartcourt’s Form 10KSB/A, dated April 25, 2003 and
                incorporated herein by reference.


(5)
            Previously
                filed as an exhibit to Hartcourt’s Form 10-Q, dated April 23, 2007, as
                amended by Hartcourt’s Form 10-Q/A, dated April 24, 2007, incorporated
                herein by reference.


(6)
            Previously
                filed as an exhibit to Hartcourt’s Form 10-K, dated September 15, 2007 and
                incorporated herein by reference.






35




SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




THE
                HARTCOURT COMPANIES, INC.Dated:
                January 11, 2008
            By:
                /s/ VICTOR
                ZHOUVictor
                ZhouChief
                Executive OfficerDated:
                January 11, 2008
            By:
                /s/ YUNGENG
                HUYungeng
                HuChief
                Financial Officer & President











36