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

                                   FORM 10-QSB


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

               For the quarterly period ended: September 30, 2003

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

        For the transition period from ______________ to _______________

                        Commission File Number: 001-12671


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

                                      Utah
         (State or other jurisdiction of incorporation or organization)

                                   87-0400541
                        (IRS Employer Identification No.)

              911 E. Colorado Blvd. Third Floor Pasadena, CA 91106
                    (Address of principal executive offices)

                                 (626) 844 2437
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 92 days:
                                            Yes [ X ]                 No [   ].

As of September 30, 2003, The Hartcourt  Companies,  Inc. had 161,404,449 shares
of Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                                            Yes [   ]                 No [ X ]










                                      F-1
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

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

Item 1.  Financial Statements

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

         Consolidated Statements of Operations for the Three
         Months and Nine Months ended September 30, 2003 and
         2002 (Unaudited)                                            F-5 - F-6

         Consolidated Statements of Shareholders' Equity for the
         Nine Months ended September 30, 2003 (Unaudited)            F-7 - F-8

         Consolidated Statements of Cash Flows for the Nine Months
         ended September 30, 2003 and 2002 (Unaudited)                  F-9

         Notes to the Consolidated Financial Statements                F-10

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           F-33

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                             F-38

Item 2.  Changes in Securities                                         F-38

Item 3.  Defaults upon Senior Securities                               F-38

Item 4.  Submission of Matters to Vote of Security Holders             F-38

Item 5.  Other Information                                             F-38

Item 6.  Exhibits and Reports on Form 8-K                              F-39

Signatures                                                             F-40

302 certification                                                      F-41










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

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

Current assets:
 Cash and cash equivalents                  $  7,384,200        $     79,845
 Accounts receivable, net                      4,548,860             260,306
 Advances to suppliers                         8,632,480                   -
 Inventory                                     2,872,485              16,464
 Notes receivable, current portion               759,759             709,759
 Deposits, prepaid expenses and other debts    1,185,213              49,449
                                            ------------        ------------
Total current assets                          25,382,997           1,115,823
                                            ------------        ------------
Property and equipment, net                      231,245             474,521

Investments, net                               5,937,017             430,000

Other assets
 Goodwill, net                                 9,450,689             624,689
 Intangibles, net                                      -             340,767
 Notes receivable, net of current portion      1,606,012           1,756,012
                                            ------------        ------------
Total other assets                            11,056,701           2,721,468
                                            ------------        ------------
Total assets                                $ 42,607,960        $  4,741,812
                                            ============        ============



          See accompanying notes to consolidated financial statements.




















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

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

Current liabilities:
 Bank loans                                 $  4,118,287        $          -
 Accounts payable                              4,310,409           1,342,284
 Advances from customers                       4,372,113                   -
 Deferred revenue                                 41,852             209,333
 Notes payable, current portion                6,817,506              18,988
 Due to related parties                        1,361,710           1,343,011
 Accrued expenses and other current
   liabilities                                 1,099,840             357,265
                                            ------------        ------------
Total current liabilities                     22,121,717           3,270,881

Total liabilities                             22,121,717           3,270,881
                                            ------------        ------------
Contingencies

Minority interests                             3,015,752             561,720

Shareholders' Equity
 Preferred stock:
 Original preferred stock, $0.01 par value,
   1,000 authorized, issued and outstanding           10                  10
 Common stock, $0.001 par value, 250,000,000
   shares authorized; 161,404,449 shares and
    88,518,023 shares issued and outstanding
    at September 30, 2003 and December 31,
    2002                                         161,404              88,518
 Treasury stock, at cost, 4,804,786 and
   5,610,588 shares at September 30, 2003
    and December 31, 2002                     (3,223,928)         (3,723,928)
 Additional paid-in capital                   70,866,820          55,669,100
 Other comprehensive loss                        (71,094)            (71,094)
 Accumulated deficit                         (50,262,721)        (51,053,395)
                                            ------------        ------------
Total shareholders' equity                    17,470,491             909,211
                                            ------------        ------------
Total liabilities and shareholders' equity  $ 42,607,960        $  4,741,812
                                            ============        ============









          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S>                                         <C>           <C>            <C>           <C>
                                            For the Three Months            For the Nine Months
                                             Ended September 30              Ended September 30
                                            ---------------------------  ---------------------------
                                                 2003         2002           2003          2002
                                            ------------- -------------  ------------- -------------
Net sales                                   $ 33,665,719  $  1,044,252   $ 67,500,177  $  6,387,816
                                                                                                  -
Cost of sales                                 31,812,454       954,311     64,155,964     5,410,967
                                            ------------  ------------   ------------  ------------
Gross profit                                   1,853,265        89,941      3,344,213       976,849
                                            ------------  ------------   ------------  ------------
Operating expenses:
 Selling, general and administrative           1,012,841       622,333      2,203,842     2,509,261
 Depreciation and amortization                    12,169       469,230         59,419     1,999,593
 Impairments                                           -             -         14,816
                                            ------------  ------------   ------------  ------------
Total operating expenses                       1,025,010     1,091,563      2,278,077     4,508,854
                                            ------------  ------------   ------------  ------------
Gain/(loss) from continuing operations
  before other income                            828,255    (1,001,622)     1,066,136    (3,532,005)

Other income (expense):
 Prior year adjustments                          122,478             -        122,478             -
 Equity in earnings (loss) of affiliate                -             -              -         7,554
 Loss on abandonment of property and
   equipment                                           -             -        (72,371)     (164,973)
 Interest expense                                (43,502)       (8,567)      (136,393)      (55,980)
 Interest income                                       -             -            508       119,299
 Other                                            33,417             -         75,880        58,887
                                            ------------  ------------   ------------  ------------
Total other income (expense)                     112,393        (8,567)        (9,898)      (35,213)
                                            ------------  ------------   ------------  ------------
Gain/(loss) from continuing operations           940,648    (1,010,189)     1,056,238    (3,567,218)
                                                                                                  -
Less:  gain/(loss) in subsidiary attributed
  to minority interest                          (305,081)      273,235       (552,585)    1,009,961
                                            ------------  ------------   ------------  ------------
Gain/(loss) before discontinued operations       635,567      (736,954)       503,653    (2,557,257)

Discontinued operations:
 Loss from discontinued operations                     -             -              -             -
 Gain on disposal of discontinued operations           -       659,653        466,655       659,653
                                            ------------  ------------   ------------  ------------
Gain/(loss) before income tax                    635,567       (77,301)       970,308    (1,897,604)

 Income tax                                     (121,363)            -       (179,633)            -
                                            ------------  ------------   ------------  ------------
Net Gain/(loss)                             $    514,204  $    (77,301)  $    790,675  $ (1,897,604)

</TABLE>








          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                  (Continued)
<TABLE>
<S>                                         <C>           <C>            <C>           <C>
                                            For the Three Months            For the Nine Months
                                             Ended September 30              Ended September 30
                                            ---------------------------  ---------------------------
                                                 2003         2002           2003          2002
                                            ------------- -------------  ------------- -------------
Other comprehensive gain (loss):
 Foreign currency translation gain (loss)              -             -              -        (9,407)
                                            ------------  ------------   ------------  ------------
Comprehensive gain/(loss)                   $    514,204  $    (77,301)  $    790,675  $ (1,907,011)
                                            ============  ============   ============  ============
Basic and fully diluted gain/(loss) per
common share:
 Gain/(loss) from continuing operations     $      0.003  $     (0.009)  $      0.003  $     (0.032)
 Gain/(loss) from discontinued operations          0.000        0.0008          0.003         0.008
                                            ------------  ------------   ------------  ------------
 Gain/(loss) per share                      $      0.003  $     (0.001)  $      0.006  $     (0.024)
                                            ------------  ------------   ------------  ------------
Weighted average number of shares
   outstanding - Basic and fully diluted     152,872,180    82,148,360    126,342,449    78,806,648
                                            ============  ============   ============  ============
</TABLE>
































          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<S>                          <C>          <C>       <C>     <C>     <C>           <C>
                                                                                    Common
                                   Common Stock     Preferred Stock  Additional      Stock
                             ---------------------- ---------------   Paid-In     Subscriptions
        Description             Shares      Amount  Shares  Amount    Capital      Receivable
---------------------------  ------------ --------- ------- ------- ------------- -------------
Balance - December 31, 2002   88,518,023  $  88,518  1,000  $   10  $ 55,669,100  $          -

Shares issued for
   consulting services         2,107,480      2,108      -       -       145,758             -
Shares issued in connection
  with acquisition of
  HuaQing Group               15,960,474     15,960      -       -     2,186,585             -
Shares issued in connection
  with acquisition of
  GuoWei Group                10,863,788     10,864                    4,334,652
Shares issued in connection
  with acquisition of
  NewHuaSun                   13,769,156     13,769                    3,290,828
Shares issued in connection
  with acquisition of
  ZhongNan                     8,415,370      8,415                    5,002,937
Shares issued in lieu of
  compensation                 1,615,204      1,615                      111,635
Sale of treasury stock                                   -       -      (451,187)            -
Cashless exercise of
  warrants                       714,794        715      -       -          (715)            -
Shares issued for
  subscriptions               19,440,160     19,440      -       -       577,227             -
Net loss                                                 -       -                           -
                             -----------  --------- ------  ------  ------------  ------------
Balance -September 30, 2003  161,404,449  $ 161,404  1,000  $   10  $ 70,866,820
                             ===========  ========= ======  ======  ============  ============
</TABLE>






















          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
                                  (Continued)
<TABLE>
<S>                           <C>        <C>           <C>           <C>            <C>
                                   Treasury Stock         Other                        Total
                              ------------------------ Comprehensive  Accumulated   Shareholders'
        Description             Shares      Amount         Loss      Gain/(Deficit)    Equity
---------------------------   ---------- ------------- ------------- -------------- -------------
Balance - December 31, 2002    5,610,588 $ (3,723,928) $    (71,094) $ (51,053,395) $    909,211

Shares issued for
   consulting services                                            -                      147,866
Shares issued in connection
  with acquisition of
  HuaQing Group                                                   -                    2,202,545
Shares issued in connection
  with acquisition of
  GuoWei Group                                                                         4,345,516
Shares issued in connection
  with acquisition of
  NewHuaSun                                                                            3,304,597
Shares issued in connection
  with acquisition of
  ZhongNan                                                                             5,011,352
Shares issued in lieu of
  compensation                                                                           113,250
Sale of treasury stock          (805,802)     500,000             -                       48,813
Cashless exercise of
  warrants                                                        -                           -
Shares issued for
  subscriptions                                                   -                      596,667
Net loss                                                                   790,674       790,674
                              ---------- ------------  ------------  -------------  ------------
Balance - September 30, 2003   4,804,786   (3,223,928)      (71,094)   (50,262,721)   17,470,491
                              ========== ============  ============  =============  ============
</TABLE>























          See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<S>                                                     <C>           <C>           <C>           <C>
                                                        For the Three Months Ended  For the Nine Months Ended
                                                               September 30                September 30
                                                             2003          2002         2003          2002
                                                        ------------- ------------- ------------- -------------
Cash flows from operating activities:
 Net gain/(loss)                                        $    514,204      (77,300)       790,675    (1,897,604)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
   Loss on abandonment of property and equipment                   -            -         72,371       164,973
   Depreciation and amortization                              12,169      319,272         74,235     1,999,593
   Gain on sale of affiliate                                       -     (659,653)      (466,655)     (659,653)
   Minority interest in loss/(gain) of subsidiaries          305,081     (295,133)       552,585    (1,009,961)
   Equity in loss of affiliate                                     -      (14,924)             -        (7,554)
   Shares issued in lieu of compensation and services         76,562            -        261,116       622,420
     Prior year adjustments                                 (122,478)           -       (122,478)            -
   Changes in operating assets and liabilities:
     (Increase) decrease in:
     Accounts receivable                                    (894,847)    (764,948)      (987,881)     (415,430)
        Advances to suppliers                             (1,758,647)           -     (1,758,647)            -
     Inventory                                              (306,291)     (88,035)     3,560,748       (89,089)
     Prepaid expenses and other                            1,143,664       17,322      1,003,737        63,738
     (Decrease) Increase in:
     Cash overdraft                                                -      222,487              -       341,071
     Accounts payable                                        940,151      426,546     (3,974,738)     (688,253)
     Accrued expenses and other current liabilities          704,194      256,347        285,245       573,052
     Deferred revenue                                          3,834      (40,320)        21,361      (402,635)
                                                        ------------  -----------   ------------  ------------
Net cash used in operating activities                        617,596     (698,339)      (688,326)   (1,405,332)
                                                        ------------  -----------   ------------  ------------
Cash flows from investing activities:
 Proceeds on notes receivable                                      -       37,565        100,000       324,678
 Proceeds on return of investment                             10,000            -        253,755             -
 Cash decreased due to merge                                       -            -        (32,006)            -
 Cash paid for investments                                         -            -              -       (10,835)
 Cash acquired in acquisitions                                     -            -      2,940,507             -
 Purchase of property and equipment                          (23,110)           -        (54,074)      (97,877)
                                                        ------------  -----------   ------------  ------------
Net cash provided by investing activities                    (13,110)      37,565      3,208,182       215,966
                                                        ------------  -----------   ------------  ------------
Cash flows from financing activities:
 Proceeds on sale of common stock                             30,000            -         30,000             -
 Proceeds on sale of treasury stock                                -            -         48,813             -
 Proceeds on stock subscriptions                                   -       23,422              -       349,909
 Proceeds on loans and lines of credit                      (151,686)           -      2,304,063             -
 Proceeds from (payments to) related parties                (381,603)     565,387       (150,047)      866,870
 Proceeds (payments) on notes payable                      1,197,321       33,843      2,551,670      (208,040)
 Payments on capital leases                                        -      (17,432)             -       (50,856)
                                                        ------------  -----------   ------------  ------------

Net cash provided by financing activities                    694,032      605,220      4,784,499       957,883
                                                        ------------  -----------   ------------  ------------
Foreign currency translation                                       -       (9,597)             -        (9,407)

Net increase (decrease) in cash                            1,298,518      (65,151)     7,304,355      (240,890)

Cash and cash equivalents, beginning of period             6,085,682      105,824         79,845       281,563
                                                        ------------  -----------   ------------  ------------
Cash and cash equivalents, end of period                $  7,384,200       40,673      7,384,200        40,673
                                                        ============  ===========   ============  ============

</TABLE>






          See accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Item 1

Note 1:  Organization and Nature of Operations:


The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is an  investment  holding  company,  focusing  on the  acquisition  of  private
companies in the growth industries of China.  Hartcourt's strategy is to acquire
a group of complimentary  companies, add substantial value in terms of financial
restructuring,  strategic planning and corporate governance to fully realize the
value of  their  assets  and  enhance  Hartcourt's  overall  performance.  As of
September 30, 2003, Hartcourt made strategic investments in IT Product Marketing
area. This IT Product Marketing sector contributes approximately 99% of sales of
Hartcourt.   Hartcourt  also  involves  in  three  (3)  other  areas  (Financial
Information Provider,  Online Education and Investment Consultation Services) in
China, which contribute approximately 1% of Hartcourt's sales.

Due to limited  resources,  the Company  plans to focus solely on the IT product
distribution  and marketing  business.  Hartcourt will divest other companies in
its  existing  portfolio  and  distribute  dividends,  if  any,  to  Hartcourt's
shareholders.  Hartcourt's  operative business strategy is to acquire profitable
companies with strong market  position in the IT sector,  using proxy  technique
(See Note # 2 Basis of  Presentation,  Note # 3 Key  Factors  for the  Company's
Financial  Presentation  and  Note  #  11  Irreversible  Proxy  Statement).  The
consolidation  strategy  will help these  acquired  companies  to improve  their
margins by increase efficiency. The current four business sectors are IT Product
Marketing sector (including HuaQing Corporate Development Co., Ltd. ("HuaQing"),
Guangdong  NewHuaSun Computer Co., Ltd.  ("NewHuaSun"),  Shanghai GuoWei Science
and  Technology  Co.,  Ltd.  ("GuoWei")  and  Wenzhou  ZhongNan  Computer  Group
("ZhongNan")),  Financial  Information  sector,  Online  Education and Hartcourt
Capital Inc. It is management's  plan to dispose of all these operating  sectors
except for the IT Product Marketing sector.

In November of 2002,  Hartcourt  obtained  irreversible  voting rights via proxy
statements  (See Note # 2 Basis of  Presentation,  Note # 3 Key  Factors for the
Company's Financial Presentation and Note 11, Irreversible Proxy Statements) for
a 10% of the  equity  voting  rights of HuaQing  (a China  incorporated  company
located in Shanghai,  China).  The proxy  rights are  obtained  from two HuaQing
shareholders,  who are non-US citizens,  during a Shareholders meeting. Such 10%
voting  rights  proxy  covers from  February 1, 2003 to March 31,  2006,  over a
period of three years.  In addition to the purchase of 45% of the HuaQing equity
interests,  Hartcourt's  management  believes  that  with the 10%  proxy  right,
Hartcourt  effectively  controls  a 55% of the total  voting  rights of  HuaQing
starting  February of 2003. In accordance  with SFAS # 94  Consolidation  of All
Majority Owned Subsidiaries,  HuaQing's  financial  statements were consolidated
under the operations of Hartcourt in March of 2003. On June 30, 2003,  Hartcourt
signed  a  purchase  agreement  to  purchase  an  additional  6  percent  of all
outstanding  shares of HuaQing for a total  consideration of $857,891,  of which
the purchase price was solely paid by issuance of 1,340,455 common shares of the





                                      F-10
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Hartcourt,  restricted under Rule 144 of securities law, at value of $0.64 each.
Together with the 45 percent  equity  interests  purchased on February 14, 2003,
Hartcourt  owns a 51 percent of equity  interests of HuaQing as of September 30,
2003.

In December of 2002,  similar to the  practice  of HuaQing,  Hartcourt  obtained
irreversible  voting  rights  via  proxy  statements  (See  Note  # 2  Basis  of
Presentation,  Note # 3 Key Factors for the Company's Financial Presentation and
Note 11, Irreversible Proxy Statements) for a 10% of the equity voting rights of
GuoWei (a China incorporated  company located in Shanghai,  China) and NewHuaSun
(a China incorporated company located in Guangzhou, China) from their respective
shareholders,  who are non-US citizens, in two separate  Shareholders  meetings.
Such 10% voting rights proxy covers from April 1 2003, to June 30, 2006,  over a
period  of  three  years.  In  addition  to the  purchase  of 45% of the  equity
interests of GuoWei and NewHuaSun in early 2003, Hartcourt's management believes
that with the 10% proxy right, Hartcourt effectively controls a 55% of the total
voting rights of GuoWei and NewHuaSun starting April of 2003. In accordance with
SFAS # 94, GuoWei and NewHuaSun's  financial  statements are consolidated  under
the operations of Hartcourt as of September 30, 2003.

The  accompanied  consolidated  financial  statements  of Hartcourt for the nine
months ended  September 30, 2003 contains  $66,773,879  of sales and $597,325 of
operating  profit of  Huaqing,  GuoWei  and  NewHuaSun  (See Note # 2,  Basis of
Presentation, Note # 3 Key Factor For the Company's Financial Presentation, Note
# 4 Foreign Operating Risks and Note # 11 Irreversible Proxy Statement).

Hartcourt,  through a strategic acquisitions focused on the IT Product Marketing
business in China,  provides a sustainable,  fast growing and profitable revenue
base.  The Company  aggressively  identifies  targets in the industry as well as
helping its  subsidiaries  to explore and share the best business  opportunities
available.   Through  a  continued  refinement  of  its  acquisition   programs,
operational efficiencies,  and setting higher standards of corporate governance,
the Company is demonstrating to the market an unique growth strategy, consistent
execution of its  business  plan,  and growth of its  businesses  mirroring  the
tremendous growth presented by the emergence of the world's largest consumer and
business markets.

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




                                      F-11
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

retail  outlets,  and ZhongNan,  the largest PC retailer (by sales) covering the
Zhejiang  province.  This sector is currently  the core  business of the Company
(See Note # 3, Key  Factors for the  Company's  Financial  Presentation),  which
represents approximately 99% of sales of the Company as of September 30, 2003.

The following  three (3) sectors are  relatively  small in operations and sales,
which  represents  approximately 1% of sales of the Company as of  September 30,
2003:

2) Financial  Information  sector:  This sector  consists of three (3) entities.
They are Financial  Telecom Limited,  a Hong Kong incorporated  company,  Genius
Technology  International  Ltd., a China incorporated  company (acquired 100% of
Sinobull  Information  Co.  Ltd  which is  formerly  Shanghai  GuoMao  Science &
Technology Co. Ltd.), and Sinobull Network  Technology  Company Limited, a China
incorporated  company (formerly  Beijing Net Technologies  Center Company Ltd.).
The sector is engaged in the construction of financial  information database and
provision of securities and commodities  information to brokerages and financial
institutions  to enable  their  customers'  access to a  comprehensive  suite of
quality  financial  news,   real-time  market  data,   financial   analysis  and
professional  market  commentary.  The sector's main scope of business  includes
financial  information  service terminal,  financial  publications  indexing and
search,  internet-based  information services.  The group is at the forefront of
the  financial   information   industry  in  China,  please  refer  to  website:
www.genius.com.cn,  its financial services and information portal, is one of the
China's financial portals.  The sector's e-Finance platform is an integration of
the advanced Internet,  telecommunication  and wireless access systems available
on the market today. The service platform and collateral  content is offered via
subscription to leading  securities  brokerages,  investment  firms,  banks, and
media companies throughout Greater China.


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

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





                                      F-12
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)


History of the Company:

Stardust, Inc. ("Stardust"), a corporation organized under the laws of the State
of Utah in September 1983,  acquired all of the outstanding  shares of Hartcourt
Investments, a Nevada corporation, for 6,110,337 shares of Stardust common stock
(after taking into account a reverse stock split and stock dividend) pursuant to
an Agreement and Plan of  Reorganization  dated November 5, 1994. At the time of
this  acquisition,  Stardust  was a "shell"  entity with no assets,  business or
operations.  Subsequent to the  acquisition of Hartcourt  Investments,  Stardust
changed its name to The Hartcourt Companies,  Inc. Over the years of operations,
the total  outstanding  and issued common  shares have  increased to 161 million
shares as of September 30, 2003.

OPERATIONS BY BUSINESS DIVISIONS

IT PRODUCTS MARKETING AND DISTRIBUTION GROUP:

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

On February 14, 2003,  Hartcourt and HuaQing's  shareholders signed a definitive
agreement  ("The  Agreement")  to  purchase  of 45% of the  equity  interest  of
HuaQing,  for a total  consideration of $2,202,545,  of which the purchase price
was solely  paid by  issuance  of  15,960,474  common  shares of the  Hartcourt,
restricted  under Rule 144 of the securities  laws, at value of $0.138 each. Due
to the  restrictions  of the Chinese  government  against foreign entity holding
direct  interest in  marketing  and  distribution  services  companies in China,
Hartcourt nominated Mr. Richard Yan, the Financial Controller of Hartcourt and a
Chinese citizen, and Mr. Li ZhengZheng, the President and a major shareholder of
HuaQing to hold 30% and 15% of the equity interest of HuaQing  respectively,  on
behalf of  Hartcourt,  according to advice  received  from  Hartcourt's  Chinese
attorneys.  Subject to the Chinese law, the two nominees  have pledged all their
shares to  Hartcourt;  as well as all its voting  power to enable  Hartcourt  to
appoint the controlling  slate of Directors of HuaQing.  The nomination could be
terminated  by  Hartcourt  at  its  sole  discretion  and  Hartcourt  holds  the
irrevocable  right to receive  back the  ownership  of the shares upon  request,
whenever the Chinese law is revised to allow  foreign  ownership in HuaQing,  as
stipulated  in the World  Trade  Organization  (WTO)  agreement  entered  by the
Chinese  government.  On March 6,  2003,  the  shareholders  meeting  of HuaQing
approved  the Share  Transferring  Agreement  and  accepted  the two nominees of
Hartcourt  to be the new  shareholders  of  HuaQing.  The  shareholders  meeting



                                      F-13
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

updated the Article of  Association  and  elected new  directors  to satisfy The
Agreement.  In November of 2002,  Hartcourt obtained  irreversible voting rights
via  proxy  statements  (See  Note 3 Key  Factors  for the  Company's  Financial
Presentation and Note 11,  Irreversible  Proxy Statements) for additional 10% of
the equity voting rights from two HuaQing  shareholders,  Mr. Li Zhengzheng  and
Mr. Zhang Hui in a HuaQing's Shareholders' meeting. Such 10% voting rights proxy
covers from February 1, 2003 to March 31, 2006, over a period of three years. In
addition to the  purchase of 45% of the HuqQing  equity  interests,  Hartcourt's
management  believes  that  with  the 10%  proxy  right,  Hartcourt  effectively
controls a 55% of the total voting rights of HuaQing starting  February of 2003.
Consequently,   Hartcourt's   management   believes  that  it  has   controlling
relationship  in  HuaQing's  operation  and treats  HuaQing  as its  controlling
subsidiary.  HuaQing financial statement is consolidated under the operations of
Hartcourt starting March of 2003. On June 30, 2003,  Hartcourt has signed a Sale
and  Purchase  Agreement  to purchase  an  additional  6% of equity  interest of
HuqQing for a total  consideration of $857,891,  of which the purchase price was
solely paid by issuance of 1,340,455 common shares of the Hartcourt,  restricted
under Rule 144 of securities  law, at value of $0.64 each.  HuaQing's  financial
statements  is  consolidated  on 51% basis  under  the  operation  of  Hartcourt
starting from July 1, 2003.

Guangdong  NewHuaSun  Computer  Co.  Ltd.  ("NewHuaSun"):   Guangdong  NewHuaSun
Computer Co. Ltd, founded in 1998, headquartered in Guangzhou Province of China,
is  a  established   distribution   and  marketing   company  for  PC  monitors.
(www.newhuasun.com.cn)  With approximately 80  employees,  the company  owns and
operates  5  flagship  stores,  and  has approximately 60  independently   owned
franchised stores. The company is voted by www.pconline.com.cn as one of the top

marketer  in  Southern  China with the one of the  largest  market  share in the
computer monitor marketing sector with close to 30% of the market shares.

On April 24, 2003,  Hartcourt and NewHuaSun's  shareholders  signed a definitive
agreement  ("The  Agreement")  to  purchase  of 45% of the  equity  interest  of
NewHuaSun, for a total consideration of $3,304,597,  of which the purchase price
was paid by issuance of 13,769,156  common shares of the  Hartcourt,  restricted
under  Rule  144  of  securities  laws,  at  value  of  $0.24  each.  Due to the
restriction  of the Chinese  government  against  foreign  entity holding direct
interest in marketing and distribution  services  companies in China,  Hartcourt
adopted the same deal structure as HuaQing.  On April 24, 2003, the shareholders
meeting of NewHuaSun approved the Share Transferring  Agreement and accepted the
two  nominees  of  Hartcourt  to be  the  new  shareholders  of  NewHuaSun.  The
shareholders  meeting  updated  the  Article  of  Association  and  elected  new
directors  to satisfy The  Agreement.  In December of 2002,  Hartcourt  obtained
voting  rights via proxy  statements  (See Note 3 Key Factors for the  Company's
Presentation and Note 11,  Irreversible  Proxy Statements) for additional 10% of
the equity voting rights from one of NewHuaSun's  shareholder,  Mr. Kan XiaoMin,
in NewHuaSun's  all  shareholders'  meeting.  Hartcourt also obtained the voting
rights proxy from one of the NewHuaSun's Board of Directors, Mr. Xiao YongLi, in
NewHuaSun's  Board of  Directors'  meeting.  Such 10% voting rights proxy covers
from March 1, 2003 to April 30, 2006,  over a period of three years. In addition




                                      F-14
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

to the  purchase  of 45% of the  NewHuaSun  equity  interests,  the  Hartcourt's
management  believes  that  with  the 10%  proxy  right,  Hartcourt  effectively
controls a 55% of the total voting rights of NewHuaSun  through the  complicated
mechanism  mentioned  above,  starting  May of 2003.  Consequently,  Hartcourt's
management  believes  that  it  has  controlling   relationship  in  NewHuaSun's
operation  and  treats  NewHuaSun  as its  controlling  subsidiary.  NewHuaSun's
financial  statement is consolidated  under the operation of Hartcourt  starting
May of 2003.

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

On April 30,  2003,  Hartcourt  and  GuoWei's  shareholders  signed a definitive
agreement ("The Agreement") to purchase of 45% of the equity interest of GuoWei,
for a total consideration of $4,345,517, of which the purchase price was paid by
issuance of 10,863,792 common shares of the Hartcourt, restricted under Rule 144
of the  securities  laws, at value of $0.4 each.  Due to the  restriction of the
Chinese  government  against foreign entity holding direct interest in marketing
and distribution  services  companies in China,  Hartcourt adopted the same deal
structure as HuaQing.  On April 30,  2003,  the  shareholders  meeting of GuoWei
approved  the Share  Transferring  Agreement  and  accepted  the two nominees of
Hartcourt to be the new shareholders of GuoWei. The shareholders meeting updated
the Article of  Association  and elected new directors to satisfy The Agreement.
In January of 2003,  Hartcourt  obtained voting rights via proxy statements (See
Note 3 Key  Factors for the  Company's  Presentation  and Note 11,  Irreversible
Proxy  Statements)  for  additional  10% of equity voting rights from one GuoWei
shareholder,  Mr. ZhouJian in GuoWei's  Shareholders'  meeting.  Such 10% voting
rights proxy, covers from April 1, 2003 to June 30, 2006, over a period of three
years.  In addition to the purchase of 45% of the GuoWei equity  interests,  the
Hartcourt's  management  believes  that  with  the 10%  proxy  right,  Hartcourt
effectively  controls a 55% of total  voting  rights of GuoWei,  starting May of
2003.  Consequently,  Hartcourt's  management  believes that it has  controlling
relationship  in  GuoWei's  operation  and  treats  GuoWei  as  its  controlling
subsidiary.  GuoWei's financial statement is consolidated under the operation of
Hartcourt starting May of 2003.

WenZhou ZhongNan Group. ("ZhongNan"):  It is a company incorporated in China. On
June 28, 2003, Hartcourt Capital Inc., incorporated in British Virgin Islands, a
wholly owned  subsidiary of The Hartcourt  Companies,  Inc., a Utah  Corporation



                                      F-15
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

(Registrant),  signed a  definitive  agreement  to  purchase  51% of the  equity
interest  of  ZhangNan  Group   ("ZhongNan"),   for  a  total  consideration  of
$4,176,807.  The  purchase  price will be paid by issuance of  7,013,950  common
shares of the Hartcourt,  restricted  under Rule 144 of the securities  laws, at
value of $0.5955 each. In the  agreement,  the Company also committed to acquire
51% of all of the interest of WenZhou  Huaqing  Monitor Company Ltd. for a total
consideration  of  $834,545  by  issuance  of  1,401,420  common  shares  of the
Hartcourt,  restricted under Rule 144 of the securities laws. ZhongNan,  founded
in 1996, owns and operates 21 stores in Wenzhou area and its surrounding  areas,
completed with service  centers and warehouse  distribution.  The stores provide
customers with latest computer hardware,  software, technical services and other
digital  products.  As of September 30, 2003, the execution of the agreement has
been  completed.  However,  Hartcourt did not  consolidate it in the accompanied
financial  statements,  as the profit and loss effect to the financial statement
is  immaterial.  Included  in  the  investments  of  the  accompanied  financial
statements, $5,011,352 represented the investment to ZhongNan.

The  accompanied  consolidated  financial  statements  of Hartcourt for the nine
months ended on September 30, 2003 contains $32,887,507 of sales and $247,010 of
operating  profit of NewHuaSun  and GuoWei  combined.  These  amounts  represent
five-month's  operation  result of GuoWei and NewHuaSun.  These companies' sales
and operating profits are being consolidated as Hartcourt's  income,  because of
the recent acquisitions of certain  shareholders' proxy rights (See Note # 3 Key
Factors  For the  Company's  Financial  Presentation  and Note # 10 Segment  and
Related Information).  In addition,  the total assets of Hartcourt in the amount
of $42,607,960  include total assets of $6,626,466  contributed  from GuoWei and
NewHuaSun   combined.   These  companies'  assets  are  being   consolidated  as
Hartcourt's assets,  because of the recent acquisitions of certain shareholders'
proxy right (See Note # 3 Key Factors For the Company's  Financial  Presentation
and Note # 10 Segment and Related Information).

Management  believes  that  Hartcourt's  current  ownership  structure  of these
Chinese  incorporated  entities  complies with all existing PRC laws,  rules and
regulations,  according  to the legal  opinion of our Chinese  attorney.  As the
Chinese  legal  system  and rules are just  start to  formulate  and  continuing
upgrading,  there are uncertainties  regarding the interpretation of current PRC
laws and regulations that it is possible that the PRC government will ultimately
take a view contrary to ours.

FINANCIAL INFORMATION SECTOR:

This group ("Sinobull  Group") was formed in November 1999 with the intention to
consolidate  various related  businesses  acquired or expected to be acquired by
Hartcourt or Sinobull.com Inc. ("Sinobull"), the holding company of the Sinobull
Group incorporated in British Virgin Islands. On May 16, 2002, Sinobull.com Inc.
changed  its  name  to  Hartcourt  Companies  Limited.  In the  text  hereafter,
Hartcourt  Companies  Limited is  referred to as  "Sinobull".  On April 2, 2001,
Sinobull's  one share  issued  and  outstanding  held by Mr.  Tang Wing On,  was
formally transferred to Hartcourt, and Sinobull became a wholly owned subsidiary
of Hartcourt.



                                      F-16
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

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

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

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

On September 10, 2003, Hartcourt sold all its shares in FTL to Financial Telecom
limited  (USA),  Inc (FTL NV"),  a  wholly-owned  subsidiaries  of  Hartcourt in
exchange for the 15 million FTL NV shares. On October 9, 2003, Hartcourt filed a
Schedule14C  with SEC to  distribute  all of its shares in  Fininancial  Telecom
Limited (USA) Inc to all Hartcourt's  shareholders on record date of October 17,
2003.

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


                                      F-17
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

activities include research, development and sales of data broadcasting hardware
and software. Shangdi is a major shareholder of Hua Xia Info, the financial data
provider of Hua Xia  Securities,  one of the largest  stock  brokerage  firms in
China.  Hua Xia Info has its own financial  reporters for its  data-broadcasting
network via cable TVs and  magazines.  Through this  relationship,  Sinobull can
have access to account holders through Hua Xia Securities Brokerages nationwide.
Shangdi has completed a software  program for cable set top boxes,  which enable
users to trade stock  online from their home  television  sets.  On December 28,
2000,  Sinobull  through  Tiandi  Hulian  Technologies   Limited  (Tiandi),   an
investment  holding  company  incorporated  in the British Virgin Islands (BVI),
holding the 51% of interest of Sinobull  Network.  Tiandi and  Sinobull  Network
ceased its operations as of May 16, 2001 (See Note # 12 Litigation).

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





                                      F-18
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)
Limited  was sold to a  non-related  company,  Genius  Technology  International
Limited  ("GTI"),  a  leader  in  this  field,  on  May  7,  2003,  for a  total
consideration  of  $410,163,  of  which  the  amount  was  paid by  issuance  of
57,826,793 common stock of GTI at value of $0.0071 each.

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

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

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

On July 16,  2001,  Hartcourt  and UAC  Trading,  by mutual  consent,  agreed to
rescind the contractual joint venture  agreement named UAC Exchange.  As part of
the rescission,  Hartcourt  agreed to accept a promissory note for the amount of
its net  investment  in UAC Exchange as of the date of  rescission  amounting to
$2,858,286,  bearing  interest  at six per cent  (6%) per anum,  payable  over a
thirty-nine  months  period.  The  parties  mutually  agreed to forego all other
rights  and  benefits   provided   under  the   contractual   joint  venture  as
consideration  for the rescission of the contract.  On September 10, 2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  purchased all
existing  tangible  and  intangible  assets of UAC  Exchange  for the  amount of
Hartcourt's net investment in UAC Exchange,  and signed a promissory note in the



                                      F-19
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

amount of $2,858,286  bearing interest at six per cent (6%) per anum, payable in
quarterly  installments  of $50,000  commencing  November 1, 2001 with a balloon
payment of $2,715,772 due on December 1, 2006. The promissory note is secured by
a security agreement granting to Hartcourt all tangible and intangible  property
of Edda  Limited.  As of September  30,  2003,  Edda paid seven  quarterly  note
payments of $50,000 each. As of December 31, 2002, Hartcourt corrected the share
subscription  price of the shares  issued to Edda in the Stock  Sales  Agreement
signed with Edda to raise  capital,  which lead to reducing of $652,274  towards
the promissory  note due to Hartcourt.  As of September 30, 2003,  Edda has paid
$60,459 towards interest due on the promissory note due to Hartcourt.


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

On September 18, 2000,  Hartcourt and WindInfo signed a Term Sheet Agreement and
agreed to form a  Joint-Venture  Company  (JVC) to  expand  the  financial  data
service business in China. On the same day,  Sinobull  advanced  $500,000 to Guo
Mao who loaned the same amount to WindInfo on behalf of  Hartcourt.  Pursuant to
the addendum to the Term Sheet  Agreement,  on January 10, 2001,  Hartcourt  and
WindInfo  signed a direct  investment  agreement  whereby  Hartcourt  agreed  to
convert the loan from Guo Mao of $500,000 to a 5% equity ownership in the JVC to
be formed.  Upon further  negotiations  between the two parties,  Hartcourt  and
WindInfo have mutually agreed to terminate the Term Sheet Agreement of formation
of JVC and  WindInfo  agreed  to return  Hartcourt's  contribution  of  $500,000
towards its investment in the JVC. As of September 30, 2003,  WindInfo  returned
$60,241 to Hartcourt via Sinobull Information.  Both parties are negotiating, to
an  acceptable  payment plan for  Hartcourt to receive the remainder of its loan
during the year 2004.

Equis International  Inc.((R)), is incorporated in US, a wholly owned subsidiary
of a Nasdaq  listed  company of Reuters  Group PLC,  signed on June 1, 2001,  an
International  Distribution Agreement with Hartcourt including Sinobull Group in

Shanghai,  Beijing  and Hong  Kong,  a  non-exclusive  distributor  of  licensed
products  within the  People's  Republic of China (PRC)  except in Hong Kong and
Taiwan,  and grants to Hartcourt a non-exclusive  right to market and distribute
the licensed  products in the PRC to  sub-distributors.  The initial term of the
agreement  is  for  three  years.   Under  the  terms  of  the  agreement  Equis
International also granted Sinobull Group conditional  territory exclusivity for
a period of twelve months for the Chinese versions of MetaStock  products within
the Greater  China  market.  Hartcourt's  remuneration  for the sale of licensed
products will be the  difference  between the selling price to its customers and
Hartcourt's  discounted purchase price as agreed between Hartcourt and Equis. As
of September 30, 2003,  Hartcourt is planned to transfer the agreement to Genius
Technology so it can focus on the IT Products Marketing Group







                                      F-20
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

MEDIA TECHNOLOGY SERVICES SECTOR:

The Media  Technology  Services Group  originally  consists of six (6) entities,
they are  Ai-Asia  Inc.,  ,  StreamingAsia  Limited,  LogicSpace  Asia  Limited,
SyndicateAsia Limited., Empact Solutions Inc., and Beijing Total Solution System
Ltd. The Media  Technology  Services  Group provides a  comprehensive  real-time
audio  and  video  delivery  (Streaming  Media)  solution  along  with  Internet
consulting  and  web  application  development  to  businesses,   professionals,
organizations,  web sites and content  publishers.  As of  September  30,  2003,
Hartcourt  has sold off  StreamingAsia  Limited,  LogicSpace  Asia  Limited  and
SyndicateAsia  Limited to Yee Fu Laser Company Limited,  an un-related  company.
Hartcourt is no longer  involved in this  business.  Hartcourt  might still have
potential liabilities regarding the past businesses of these sold-off companies;
however, management believes that they are very minimal.


AI-Asia Inc. ("AI-Asia"): On August 20, 2001, Hartcourt established a new wholly
owned subsidiary AI-Asia Inc. to hold and develop assets of the Media Technology
Services  Group.  AI-Asia's  objective  is to  identify,  develop,  and maintain
first-mover advantages in technologies,  products and services for corporate and
consumer Internet deployment.

Empact  Solutions,  Inc.  ("Empact"):  Empact is a US company,  aims to help its
customers improve business management through smart, efficient, and effective IT
management. It is founded by IT outsourcing and management  professionals,  data
mining pioneers, and experts in the fields of systems and application management
technologies.  On April 30, 2000, Harcourt executed a Subscription Agreement and
Investment  Representation  and agreed to subscribe  and purchase  three hundred

(300)  shares of Class B  Convertible  Preferred  Stock of Empact,  at par value
$0.001 per share for  $300,000.  Hartcourt has  determined  that at this time to
increase its  investment in Empact would not be  advantageous  to the company or
its shareholders.  On January 7, 2002, Empact received  $7,500,000 as the second
round of funding from the venture capital partners for further  expansion of its
business.  In  March  2002,  Empact  launched  the  EyeQTM  service  to  provide
independent  service quality audit and analysis  across IT utilities  (networks,
servers, infrastructures),  applications and business processes.The accompanying
financial  statements  at September 30, 2003 reflect  Hartcourt's  investment of
$300,000.

Beijing Total Solution System,  Ltd.  ("TSS"):  It is a company  incorporated in
China. On September 15, 2000, Hartcourt and TSS signed a Term Sheet Agreement to
form a  Joint  Venture  Company  (JVC)  to  develop  web-casting  solutions  and
broadband  enabling  technology in China.  Hartcourt  agreed to contribute  $2.4
million for 60%  ownership  interest in the JVC. On December 1, 2000,  Hartcourt
and TSS  signed  a loan  agreement  and  Hartcourt  advanced  $70,000  as a loan
(interest  free) to support TSS's 2000 marketing  plan, the loans is convertible
into 5%  ownership  of  TSS.  Upon  contribution  of the  remaining  $2,330,000,
Hartcourt  could own the  additional  55% shares of the JVC. As of September 30,
2003,  Hartcourt  has not  converted  its loan into an  investment of 5% in TSS.




                                      F-21
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Hartcourt has not exercised its right to subscribe for the additional 55% of the
ownership  interest in the JVC and such right has subsequently been lapsed.  The
accompanying  financial statements reflect Hartcourt's loan of $70,000 to TSS as
of  September  30,  2003.  Hartcourt  does not  intend to  acquire  any  further
ownership interest in TSS. Both parties are negotiating to an acceptable payment
plan for Hartcourt to receive its loan, during the year 2003.


HARTCOURT CAPITAL GROUP:

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

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


ONLINE EDUCATION SECTOR:

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



                                      F-22
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

statements as of September 30, 2003 reflect  Hartcourt's  investment of $100,000
in the education project. The total financial commitments of Hartcourt and terms
of payment on this project are currently  being  negotiated  between the parties
and expect to be finalized by end of 2003.


OTHER DIVESTED VENTURES:

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

Pursuant to an Agreement of Merger and Plan of Reorganization,  effective August
27, 2001, and through the subsequent transaction that closed on January 4, 2002,
Staruni Corporation, a California corporation merged with Elephant Talk Limited.
Staruni was the surviving  corporation  and  continued  its corporate  existence
under the laws of California. On January 9, 2002, Staruni filed a Certificate of
Amendment of Articles of  Incorporation  to amend its corporate name to Elephant
Talk Communications,  Inc. (ETCI). This name change was done in conjunction with
the merger, and to emphasize that the new focus of the ETCI will be the business
of Elephant  Talk Limited.  Pursuant to the terms of the merger,  each holder of
ordinary shares of ElephantTalk  common stock,  par value of HK$1 (One Hong Kong
Dollar) immediately prior to the effective time of the merger date, by virtue of
the merger and without any action on the part of such holder, received as of the
merger date, such number of shares of common stock of ETCI, no par value, as the
number of shares of  ElephantTalk  common  stock  owned by such holder as of the
merger  date.  Collectively,   following  the  merger,  the  former  holders  of
ElephantTalk common stock held an aggregate of 90% of the issued and outstanding
shares of ETCI's common stock.  The merger caused no change in any of the shares
of the  ETCI's  common  stock  outstanding  on the  merger  date,  and no  other
securities were converted as a result of the merger.  Prior to the completion of
the merger  with  Staruni,  on January 2, 2002,  Hartcourt  purchased  7,500,000
shares of  Elephant  Talk  Limited  from a  shareholder  for a note  payable  of
$140,595  bearing an annual interest rate of 8%. At the conclusion of the merger
on January 4, 2002, Hartcourt retained a 51.7% ownership in ETCI.

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






                                      F-23
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Acquisitions and Partnerships Disclaimer:

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

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

FUNDING:

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

Swartz Private  Equity,  LLC ("Swartz") - Swartz is an  institutional  financing
company, incorporated in Delaware,  specializing in private placement and equity
credit  line for public  companies.  On November  3, 1999,  Hartcourt  signed an
Investment Agreement with Swartz. Swartz agreed to purchase from Hartcourt, from
time to time,  shares of  Hartcourt's  common  stock,  as part of an offering of
common stock by Hartcourt to Swartz,  for a maximum aggregate offering amount of
$25,000,000.  These funds will be used to satisfy  Hartcourt's  working  capital
requirements  and  complete  acquisitions  of Internet  related  operations.  On
January 5, 2000, Hartcourt and Swartz agreed to increase the equity line funding
to $35,000,000 to provide working capital and planned  acquisitions of Hartcourt
subsidiaries.  As of September 30, 2003,  Hartcourt has not utilized this equity
credit line. On July 1, 2003, Swartz exercised its 800,000 units of warrant on a
cashless basis  (original  400,000 units of warrant split into 800,000 units) by
converting those warrant into 714,794 common shares of Hartcourt.

PYR  Management  LLC  ("PYR") - It is a company  incorporated  in  Delaware.  On
January 26, 2000,  Hartcourt  completed a private  placement of 227,445 Units of
equity,  each unit of equity consisting of a Class I and a Class II Warrant,  to
PYR for $3,000,000 pursuant to a Regulation D Subscription Agreement. On January
27, 2000,  Hartcourt received $2,743,000 from PYR to be used for working capital
requirements  of Hartcourt.  On February 4, 2000 Hartcourt filed a Form 8-K with





                                      F-24
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

the SEC. On February  21,  2001,  Hartcourt  and PYR  Management  entered into a
Letter  Agreement  whereby the parties agreed on the maximum number of Units PYR
can receive under the reset provisions of the Subscription  Agreement.  Pursuant
to the terms of the  agreement,  the quantity of Units and the exercise price of
the warrants will no longer reset.  The final amount of Units that can be issued
shall be 4,000,000  shares of common stock and 4,000,000  Class I Warrants.  The
cap amount shall be 8,000,000  shares of common stock (on a "post-split"  basis)
including Class I warrants. As a result of reset calculations,  Hartcourt issued
on March 6, 2001 an additional  930,784 shares and on May 18, 2001 an additional
1,035,308 shares of common stock for a total of 4,000,000 shares as of September
30, 2003 and  4,000,000  warrants  exercisable  at $0.69375  per share of common
stock.  No warrants  have been  exercised  to convert  into common  shares as of
September 30, 2003.

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

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


Enlight Corporation ("Enlight"):  On May 9, 2002, Hartcourt and Enlight signed a
Stock Purchase  Agreement whereby Hartcourt agreed to sell 5,000,000  restricted
shares of its common  stock as a block to  Enlight  at the price of eight  cents
($0.08) per share.  However,  as Hartcourt share price kept decreasing,  the two
sides have agreed to revise the  agreement on 10 October  2002.  Pursuant to the
terms of the new  agreement,  Enlight will purchase  $1,000,000  worth of common
shares of Hartcourt,  restricted  under Rule 144 and/or Reg S  regulation,  at a
discount to current  market  price.  As of  September  30, 2003,  Hartcourt  has
received $1,000,000 from Enlight and agreed to issue 2,417,520 restricted shares
to Enlight  each  month  starting  December  2002.  As of  September  30,  2003,
Hartcourt has issued nine  installments  (21,757,680  shares) of the  restricted
shares to Enlight as in accordance with the agreement.




                                      F-25
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Currently,  Hartcourt's  primary objective is to acquire  established  operating
companies with histories of growth and profitability,  in order to diversify and
create a leading IT Product Marketing company in China.


Note 2.  Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and the instructions of Form 10-QSB. Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  audited  financial  statements  and  related  notes
included in the Company's 2002 Form 10-KSB filed under SEC..

During  the  second  quarter  ended on June 30,  2003,  the  Company  acquired a
controlling  interest  in  both  of  NewHuaSun  and  GuoWei.  Through  the  same
complicated  mechanism as used by Hartcourt in the acquisition of Huaqing in the
first quarter ended on March 31 2003, this  acquisition  also  consummated via a
proxy  exercise.  Hartcourt  obtained  voting  rights proxy for 10% of the total
equity interests of each recently acquired  companies from few shareholders in a
Shareholders and Board of Directors meeting,  in addition to the purchase of 45%
of the total equity  interests of each companies.  Management  believes with the
10% proxy right and 45% equity  interest  purchased,  Hartcourt can  demonstrate
control  over  those  recently  acquired  companies  and treats  these  acquired
companies  as its  controlling  subsidiaries  (See Note # 3 Key  Factors for the
Company's Presentation and Note # 4, Operating Risks). In accordance with SFAS #
94, these recently  acquired  companies'  financial  statements are consolidated
under the  operations  of Hartcourt  (see Note # 1,  Organization  and Nature of
Operations).   The  acquisition  has  a  significant  financial  implication  to
Hartcourt's  operations as to Hartcourt's  sales operating  results,  and assets
(See Note # 3, Key Factors for the Company's Presentation).  As the Company is a
public  traded  entity in the United  States,  it is required to disclose such a
major acquisition event on Form 8-K with the Securities and Exchange  Commission
under the federal  securities laws of the United States.  The disclosure  should
include  audited  financial  statements  of NewHuaSun  and GuoWei,  the recently
acquired  entity,  for the two most recent fiscal years and any interim  periods
prior to the date of such an acquisition.  Such a disclosure should also include
in pro forma financial information showing the effect of the acquisition.  As of
September 30, 2003, such required audited financial statements and the pro forma
financial information have not been filed with the SEC.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments  (which  include  only  normal  recurring
adjustments)  necessary to present  fairly the Balance  Sheets of The  Hartcourt
Companies,  Inc. and its  subsidiaries as of September 30, 2003 and December 31,
2002,  and the  results of their  operations  and their cash flows for the three
months and nine months  ended  September  30, 2003 and 2002,  respectively.  The
financial  statements for the three and nine months ended September 30, 2003 are
consolidated to include the accounts of The Hartcourt Companies Inc., its wholly




                                      F-26
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

owned  subsidiary  Financial  Telecom  Limited  (USA),  Inc,  its  wholly  owned
subsidiary  Hartcourt Companies Ltd. (formerly known as Sinobull.com Inc.) which
owns 85% of StreamingAsia  Limited Group (Disposed off in June of 2003), its 51%
owned subsidiary  HuaQing Corporate  Development Co., Ltd., 45% owned subsidiary
GuangDong  NewHuaSun  Computer Co., Ltd., 45% owned  subsidiary  Shanghai GuoWei
Science and  Technology  Co.,  Ltd.  and its wholly owned  subsidiary  Hartcourt
Capital Inc.

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

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

Certain  figures from 2002 have been  reclassified  to conform to current period
presentation.  These reclassifications have no effect on previously reported net
income.

The accounting  policies  followed by the Company are set forth in Note A to the
Company's  financial  statements  as stated in its report on Form 10-KSB for the
fiscal year ended December 31, 2002.

Note 3.   Key Factors for the Company's Financial Presentation

The accompanying  consolidated  financial statements,  via proxy statements have
significant  and  material  favourable  financial   implication  to  Hartcourt's
operational results, profits and assets presentation.

Management believes that through a series of three proxy statements exercises in
the past nine  months  during  the year of 2003 (See Note # 1  Organization  and
Nature of Operations and Note 11, Irreversible Proxy Statements) the Company can
demonstrate  control over these three newly acquired companies.  Therefore,  the
management  consolidated the assets,  sales,  operational  profits and income of
these three (3) entities in the accompanied  financial  statements of Hartcourt.
Had the Company excluded the operational  results of these three companies,  its
sales will be  significantly  reduced  and its  operational  results  will incur
losses as of September 30, 2003.

Through the proxy statements,  the management prepared the accompanied financial
statements  for the three  months  ended  September  30,  2003 which  contain an
additional sales of $18,273,008 (or equivalent to 54% of the consolidated sales)
from the newly  acquired  companies and an additional net income of $205,596 (or
equivalent  to 40% of the  consolidated  net  income)  from the  newly  acquired
companies . The  accompanied  financial  statements  for the nine  months  ended
September 30, 2003 contain an additional  sales of $32,887,507 (or equivalent to
49% of the  consolidated  sales) and an  additional  net income of $247,010  (or
equivalent  to 31% of the  consolidated  net income).  In addition,  through the


                                      F-27
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

proxy statements, the management prepared the accompanied consolidated financial
statements  which contain an additional  assets of $6,626,466  (or equivalent to
16% of the consolidated assets) as of September 30, 2003.

Note 4.   Operating risks

The  Company's  operations  are solely  conducted in China (See Note # 5 Foreign
Exchange Risks, Note # 7 Foreign Corrupt Practices Act), its business, financial
conditions  and  results  of  operations  may be  influenced  by the  political,
economic and legal environment in China. Consequently,  the Company's operations
are  subject  to  special  considerations  and  risks  which  are not  typically
associated with companies in North America.

As the Chinese legal system and rules are just start to formulate and continuing
upgrading,  there are uncertainties  regarding the interpretation of current PRC
laws and regulations that it is possible that the PRC government will ultimately
take a view contrary to ours.

Although the Severe Acute  Respiratory  Syndrome ("SARS") has been controlled in
China,  there are still  certain  potential  risks of the adverse  effect on our
business during the next quarter.

Note 5.  Foreign Exchange Risks

The Company  prepares its  consolidated  financial  statements  using the United
States Dollars as the reporting currency. However, its operations are located in
China using Reminbi (RMB) - the functional  currency of China.  All transactions
in RMB are  translated  into United  States  dollars - the  reporting  currency.
Management does not expect any major fluctuation in the currency rate that would
affect the  stockholders'  equity.  However,  if a major  fluctuation of foreign
exchange occurs, the Company's operations may have positive implication.

As of September  30,  2003,China  is under  pressures  from the United States to
increase  RMB value.  If the RMB is  appreciated,  it is  expected  that the RMB
appreciation may have favorable implication to the Company's operations.

Note 6.  Inflation

It is believed that inflation did not have any material  impact on the Company's
business in recent years. If severe inflation occurred,  it may have unfavorable
impact to the Company's  operations.  It is management's belief that significant
inflation will not occur in the near future.

Note 7.  Foreign Corrupt Practices Act

The Company is a US entity  incorporated  in the State of Utah. As the Company's
operations are mainly in China, is subject to the Foreign Corrupt  Practices Act
1977.  The  management  believes  that there has been no  violation  of Foreighn
Corrupt Practices Act as of September 30, 2003.




                                      F-28
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Note 8.  Supplemental Disclosure of Non-Cash Financing Activities

                             Nine Months Ended  Nine Months Ended
                               September 30,      September 30,
                                   2003                2002
                             -----------------  -----------------
Cash paid for:
  Interest                   $        136,393   $         55,980
  Taxes                                     -                  -
                             ================   ================

Non-cash operating and financing activities:
  Shares issued to directors or officers for
  compensation and services                     $     113,250    $    439,601
  Shares issued for consulting services               147,866         182,820
  Shares issued for subscription                      596,667               -
  Shares issued in connection with acquisitions
  (See Note # 1)                                   14,864,010               -



Note 9.  Loss per Share
<TABLE>
<S>                                    <C>            <C>            <C>            <C>
                                       Three Months   Three Months    Nine Months    Nine Months
                                           Ended         Ended           Ended          Ended
                                       September 30,  September 30,  September 30,  September 30,
                                           2003           2002           2003           2002
                                       -------------  -------------  -------------  -------------
Net gain/(loss)                        $    514,204   $    (77,301)  $    790,675   $ (1,897,604)
Effects of dilutive securities                0.000          0.000          0.000          0.000
                                       ------------   ------------   ------------   ------------
Weighted average shares outstanding     152,872,180     82,148,360    126,342,449     78,806,648
                                       ============   ============   ============   ============
Basic and dilutive earnings per share         0.003   $     (0.001)  $      0.006   $     (0.024)
                                       ============   ============   ============   ============
</TABLE>

As of  September  30, 2003 and 2002,  the Company had  9,333,530  and  4,733,530
warrants  and options  outstanding,  each  exercisable  into one share of common
stock, respectively.


Note 10.  Segment and Related Information:

The  Company's  operations  are all  located in China.  The Company has four (4)
reportable  segments with revenues  generated in China (See Note # 4,  Operating
Risks and Note # 5 Foreign Exchange Risks). Each segment is a strategic business
that the Company  manages  separately  because each business  develops and sells
products to a specific  market.  The reportable  segments are as follows:  a) IT





                                      F-29
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2003 (UNAUDITED)

Products Marketing Group,  provides services to customers to build their own PCs
with components,  technology and after sales support;  b) Financial  Information
Services Group,  provides  financial  content through various sources  including
television,   internet  and  wireless  access  systems;  c)  Telecommunications,
provides comprehensive  telecommunications services, which was divested in 2002;
d) Media  Technology  Group,  provides  internet  related  software  development
services with an expertise in audio and video streaming to businesses. Hartcourt
is no  longer  involved  in this  business  as of  September  30,  2003.  e) The
Consulting,  Online  Education  Group and  Hartcourt  Capital  Groups  operating
segments do not meet the quantitative threshold for a reportable segment and are
therefore  included in the "Other" category.  The principal market and operation
for the  Company's  products  and services is located in China.  Foreign  sales,
primarily  in  China  amounted  to  $66,773,879  during  the nine  months  ended
September 30, 2003 (see Note # 1, HuaQing,  NewHuaSun and GuoWei's  acquisition,
and Note # 2. Basis of  Presentation,  Note # 3 Key  Factors  for the  Company's
Presentation).  The Chinese  operations  account for $22,425,929 of consolidated
total  assets as of  September  30,  2003 (See Note # 1 HuaQing,  NewHuaSun  and
GuoWei's acquisition). As Hartcourt divested its relationship with Elephant Talk
Communications Inc. (ETCI), a former controlling subsidiary on October 23, 2002,
the segment  information of the first nine months ended  September 30, 2003 does
not include any financial  information of ETCI.  The accounting  policies of the
segments  are the same as  described  in the summary of  significant  accounting
policies.

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
























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

Segment  results for the nine months  ended  September  30, 2003 and 2002 are as
follows:
<TABLE>
<S>                             <C>           <C>           <C>          <C>         <C>          <C>
                                 IT-Products      Tele-      Financial   Streaming
                                  Marketing   Communication   Services     Media         Other        Total
                                ------------- ------------- ------------ ----------- ------------ ------------
2003
----
Net sales                       $ 66,773,879  $          -  $   349,796  $         - $    376,502 $67,500,177

Gain/(loss) from operations          597,325             -      (62,910)     (27,906)     284,166     790,695

Depreciation and amortization         13,100             -       41,417            -        4,902      59,419

Assets                            22,425,929             -    1,058,693       72,415   19,050,923  42,607,960

Capital expenditures                       -             -            -            -            -           -
                                ------------  ------------  -----------  ----------- ------------ -----------
2002
----
Net sales                                  -  $  5,041,793  $   917,983  $    97,301 $   330,739  $ 6,387,816

Loss from operations                       -      (927,639)      85,819     (405,786)   (649,998)  (1,897,604)

Depreciation and amortization              -       544,795    1,191,876      251,463      11,459    1,999,593

Assets                                     -     5,299,145    4,807,844      142,649   3,241,360   13,490,998

Capital expenditures                       -       (72,576)     (25,301)           -           -      (97,877)
                                ------------  ------------  -----------  -----------  ----------  -----------
</TABLE>
Note 11.  Irreversible Proxy Statement

Hartcourt has entered into the irreversible proxy statements  ("Statements) with
three (3) non-US citizens. They are Mr. Li ZhengZheng, Mr. Zhou Jian and Mr. Kan
XiaoMing,  who are  Chinese  citizens  and are  shareholders  and  directors  of
HuaQing,  GuoWei and  NewHuaSun  respectively.  In the  Statements,  these three
individuals  assign the 10% proxy  rights of their  owned  equity  shares to the
Company  on a  irreversible  basis.  A  legal  opinion  on the  legality  of the
irreversible  proxy  statements from Zhong Lun Law Firm, a Chinese law firm, was
obtained. The legal opinion from the non-US legal advisor stated that in general
practice of contract  law under the Laws of  People's  Republic of China  (PRC),
despite the proxy  statements  are  indicated as  irreversible,  the above named
persons are still legally  entitled to withdraw the  assignments  made under the
Statements.  No US legal  opinion is obtained by the  management of Hartcourt to
further disclose the legal status or position of these proxy  statements.  It is
management believes that if the three individuals rescind the proxy assignments,
Hartcourt  has the rights to sue for the breach of contract  and seek to recover
economic damages from these individuals  accordingly.  (See Note # 3 Key Factors
for the Company's Financial Presentation).









                                      F-31
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Note 12.  Litigations

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

Securities  and Exchange  Commission v. The Hartcourt  Companies,  Inc., et al.,
United States  District  Court for the Central  District of California  Case No.
CV03-3698LGB(PLAx),

The  Securities  and  Exchange  Commission  has filed a  complaint  for  alleged
securities violations.  The complaint alleges that the company illegally used an
S-8 registration  statement in 1999 to improperly raise capital,  and that false
and misleading  press releases were issued by the company from September 9, 1999
through November 18, 1999, and the SEC is seeking  disgorgement from the company
of  approximately  $800,000.00,  civil  penalties  and  interest,  as well as an
injunction against future securities law violations.  The Company filed a Motion
to  Dismiss  on  August  5,  2003 and the  Court  has  taken  the  matter  under
submission. The company's maximum exposure is approximately  $1,300,000.00.  The
company plans on vigorously contesting these allegations.

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

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

Note 13.  Subsequent Events

On October 9, 2003, Hartcourt filed a Schedule 14C with SEC to distribute all of
its  shares  in  Financial   Telecom   Limited  (USA)  Inc  to  all  Hartcourt's
shareholders on record date of October 17, 2003.

                                      F-32
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                         SEPTEMBER 30, 2003 (UNAUDITED)


Part I

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

General

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

Plan of Operation

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

Hartcourt, through a combination of synergistic internal expansion and strategic
acquisitions focused on the IT Product Marketing business in China, is executing
plans to provide a sustainable,  fast growing,  and profitable revenue base. The
company is continuing aggressively  identifying and pursuing acquisition targets
within the industry as well as helping its subsidiaries to explore and share the
best business  opportunities  available.  Through a continued  refinement of its
acquisition programs,  operational efficiencies,  and setting higher standard of
corporate governance, the Company is demonstrating to the market a unique growth
strategy,  consistent  execution  of  its  business  plan,  and  growth  of  its
businesses  mirroring the  tremendous  growth  presented by the emergence of the
world's largest consumer and business markets.

Results of Operations

Since  mid-1999,  Hartcourt  had been  focused on  assembling  a  collection  of
companies  and services  that  provided  citizens of China with next  generation



                                      F-33
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                         SEPTEMBER 30, 2003 (UNAUDITED)

communication  services.  Due to limited  resources,  the Company has decided to
focus solely on the IT product  distribution and marketing  business in the next
few years. Other portfolio companies will be divested and dividends,  if any, is
to be distributed back to  shareholders.  During 2003,  Hartcourt  continued its
plan to acquire profitable companies that were in established  industries with a
history of growth. In February 2003, Hartcourt  successfully acquired HuaQing, a
profitable and growing IT service related company, leverage on proxy rights from
few shareholders. In April 2003, Hartcourt signed definite agreements to acquire
NewHuaSun and GuoWei, PC distributors and retailers,  to further consolidate the
marketing position and improve the operating result of the whole Company.  These
acquisitions  are based on 3 years'  "irreversible"  proxy  rights (See Note # 1
Organization and Nature of Operations and Note # 3 Key Factors for the Company's
Financial Presentation).  On June 30, 2003, Hartcourt signed a sale and purchase
agreement  to  purchase an  additional  6% equity  interest  of  HuaQing,  which
increase its total  interest in HuaQing to 51  percentage.  Management  believes
that the  uncertainties  have been  monitored,  when the three (3) years'  proxy
right expires. When appropriate, Hartcourt will seek ways to make these entities
become public companies to give shareholders optimal returns.

The operations of Hartcourt for the three months and nine months ended September
30,  2003  consisted  of the  operations  of FTL NV (100%  ownership  interest),
Hartcourt   Companies  Limited  (formerly  known  as  Sinobull.com  Inc.)  (100%
ownership interest),  Ai-Asia Inc. (100% ownership interest),  HuaQing Corporate
Development  Co., Ltd. (51% ownership  interest for three months ended September
30, 2003,  and 45%  ownership  interest  for four months  ended June 30,  2003),
GuangDong NewHuaSun Computer Co., Ltd. (45% ownership interest), Shanghai GuoWei
Science and Technology  Co., Ltd. (45% ownership  interest),  Hartcourt  Capital
Inc. (100% ownership interest), and Hartcourt's investment and advances to other
entities in US, China and Hong Kong.  The operations of  StreamingAsia  Limited,
SyndicateAsia Limited and LogicSapce Asia Limited were discontinued and disposed
off and therefore,  are shown  separately under  discontinued  operations in the
accompanying  financial  statements as of September 30, 2003.  The operations of
Hartcourt  for the  three  months  and nine  months  ended  September  30,  2002
consisted  of the  operations  of FTL  (58.53%  ownership  interest),  Hartcourt
Companies  Limited  (formerly  known  as  Sinobull.com   Inc.)  (100%  ownership
interest)  which  holds 85%  ownership  interest  in  StreamingAsia  Limited and
Syndicate Asia Limited, Ai-Asia Limited (100% ownership interest), Elephant Talk
Communications,  Inc. (51.7% ownership  interest),  Hartcourt Capital Inc. (100%
ownership interest),  and Hartcourt's  investment and advances to other entities
in US, China and Hong Kong.

Net sales and cost of sales:  The Company  recorded net sales of $33,665,719 and
$67,500,177  for the three  months and nine months  ended  September  30,  2003,
compared to $1,044,252  and  $6,387,816  for the same periods in 2002. Net sales
during the three  months and nine months  ended  September  30,  2003  primarily
consisted of revenues derived from sales of IT products to customers,  providing
services to help customers build their own PCs with  components,  technology and
after sales support. Net sales also include sale of rental of equipment, and the
related  Internet  and  telephone  services  provided by FTL;  and  consultation
services  rendered by Hartcourt  Capital Inc.. Net sales during the three months



                                      F-34
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                         SEPTEMBER 30, 2003 (UNAUDITED)

and nine months ended September 30, 2002 primarily consisted of revenues derived
from providing  telecommunication  services relating to voice, data transmission
like IDD,  pre-paid  calling cards and ISP services to a wide range of customers
including major telecommunication  companies in US and Hong Kong. Net sales also
include sale of wireless pagers,  rental of equipment,  and the related Internet
and  telephone  services  provided by FTL;  real-time  financial  data  services
provided by Sinobull  Information  using a  satellite  network to transmit  data
specializes in stock quotes,  futures,  indexes and commodities to its customers
in China;  and  StreamingAsia  providing  web hosting and  software  development
services in audio and video  delivery or  streaming  solutions.  The increase of
sales was mainly  attributed  due to the sales of HuaQing,  NewHuaSun and GuoWei
acquired in February and April 2003.

Cost of sales amounted to $31,812,454  and  $64,155,964 for the three months and
nine months ended September 30, 2003 compared to $954,311 and $5,410,967 for the
same period in 2002.  Cost of sales for the three  months and nine months  ended
September 30, 2003 primarily included the costs of IT products sold to customers
provided by HuaQing, NewHuaSun and GuoWei; and cost of transmission and Internet
services provided to FTL customers.  Cost of sales for the three months and nine
months ended September 30, 2002 primarily included the costs in providing resale
arrangements  with  long  distance  providers,   cost  of  leasing  transmission
facilities,  international  gateway  switches voice,  data  transmission and ISP
services offered by ElephantTalk;  cost of wireless pagers, cost of transmission
and  Internet  services  provided to FTL and FWL  customers;  costs  incurred in
providing  financial data services in stock quotes,  futures and  commodities by
Hartcourt  Companies  Limited;  and costs incurred in providing  audio and video
delivery and  streaming  solutions  by  StreamingAsia.  The drop in  operational
margin was mainly  contributed to the lower margin in  distribution  sector when
compared to the margin of telecommunication sector.

Selling,  general and administrative  expenses (SG&A):  SG&A were $1,012,841 and
$2,203,842  for the three  months  and nine  months  ended  September  30,  2003
compared to $622,333 and  $2,509,261  for the same period in 2002. As GuoWei,  a
retailer whose selling and administrative expenses are comparatively higher than
wholesaler's,   was  fully  consolidated  in  this  quarter,   the  selling  and
administrative expenses in this quarter was higher than the same period of 2002.
Furthermore,  due to the  recession of the  telecommunication  market during the
same period of 2002, Elephant Talk adopted drastic cost cutting measures,  which
resulted in a lower expenses level during the same period of 2002

Depreciation and  amortization:  The depreciation and amortization  were $12,169
and  $59,419  for the three  months and nine  months  ended  September  30, 2003
compared to $469,230 and $1,999,593 for the same period in 2002. The significant
decrease resulted mainly due to the lower equipment requirements in distribution
sector  in  2003   compared   with  the   higher   equipment   requirements   in
telecommunication sector in 2002.

Discontinued  operation:  Hartcourt  sold all of its interests in  StreamingAsia
Limited,  SyndicateAsia  Limited  and  LogicSpace  Asia  limited to Yee Fu Laser
Company Limited,  a Hong Kong company,  on June 26, 2003 and recorded a net gain



                                      F-35
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                         SEPTEMBER 30, 2003 (UNAUDITED)

of $466,655 for the three and nine months ended  September 30 2003.  The gain on
disposal of subsidiaries  during the same period of 2002 represented the gain of
$659,653 on disposal of Topomedia and HCTV

Liquidity and Capital Resources:

Hartcourt's  principal capital requirements during the year 2003 are to fund (by
issuing additional stock) the acquisitions of growth and profitable,  IT related
operating companies in China (See Note # , Organization and Nature of Operations
and Note # 3, Key Factors for the Company's Financial Presentation).  During the
nine months ended September 30, 2003,  Hartcourt raised necessary funds to carry
out its plans of  acquisitions  by  selling  its own common  shares to  selected
investors and bringing in business  partners  whose  contributions  included the
necessary cash.

As shown in the accompanying financial statements, Hartcourt incurred a net gain
of $512,204 and  $790,675  for the three months and nine months ended  September
30, 2003 as compared to a net loss of $77,301 and  1,897,604 for the same period
in  2002,  in  addition,   Hartcourt's   current  assets  exceeded  its  current
liabilities  by $3,261,280  at September  30, 2003.  All above factors show that
Hartcourt has improved substantially on its cash flow position.

However,  to support  the  expansion  plan of  existing  subsidiaries  in the IT
Product  Marketing  business  and  to  meet  Hartcourt's   requirements  in  its
acquisition plan, the Company has continued to raise funds from capital markets.

Operating activities:  During the nine months ended September 30, 2003, net cash
used by operating activities increased to $688,326 compared to $1,405,332 during
the same  period in 2002.  The cash  outflow in  operating  activities  resulted
primarily  due to the decrease of accounts  payable of  $3,974,738,  increase of
accounts  receivable  of $987,881  and  increase of  advances  to  suppliers  of
$1,758,647,  netting of the decrease of inventory of $3,560,748  and decrease of
prepaid  expenses of $1,003,737,  after  acquisition  of HuaQing,  NewHuaSun and
GuoWei.  There were also gain on sale of  affiliate  of $466,655  and prior year
adjustments  of  $122,478  by  netting  of a  net  gain  of  $790,674,  loss  on
abandonment  of property  and  equipment  of $72,371,  depreciation  of $74,235,
minority  interest  of  $552,585,  shares  issued  in  lieu of  compensation  of
$261,116, increase of accrued expenses and other current liabilities of $285,246
and increase of deferred revenue of $21,361.

Investing activities.  Net cash provided by investing activities during the nine
months ended  September 30, 2003,  was  $3,208,182  compared to $215,966 for the
same period in 2002.  Cash provided  during the nine months ended  September 30,
2003 was primarily due to the cash  acquired  from the  acquisition  of HuaQing,
NewHuaSun and GuoWei of $2,940,507, proceeds on notes receivable of $100,000 and
proceeds received on return of investment from investment of $253,755.  The cash
used during the nine months ended  September  30, 2003 is due to the purchase of
property  and  equipment  of  $54,074  and the cash  decreased  due to  Sinobull
Information Co., Limited merged with GTI of $32,006.




                                      F-36
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                         SEPTEMBER 30, 2003 (UNAUDITED)

Financing activities.  Net cash provided by financing activities during the nine
months ended  September 30, 2003 was $4,784,499  compared to $957,883 during the
same  period in 2002.  Net cash was  provided  primarily  due to  proceeds  from
increase of bank loans and notes payable  amounted to $2,304,063  and $2,551,670
respectively.

As a result of the above activities,  the company  experienced a net increase in
cash of $7,304,355 for the nine months ended September 30, 2003. In spite of the
positive  cashflow  results,  the ability of  Hartcourt  to achieve its on-going
acquisition  strategy is still dependent on its success in obtaining  additional
financing  and  completion of its  re-structuring  plan,  and its  demonstrating
operational  controls over these newly acquired  entities,  via the proxy rights
exercises (See Note # 1  Organization  and Nature of Operations and Note # 3 Key
Factors for the Company's Financial Presentation).







































                                      F-37
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)


Part II

Item 1.  LEGAL PROCEEDINGS

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

Securities  and Exchange  Commission v. The Hartcourt  Companies,  Inc., et al.,
United States  District  Court for the Central  District of California  Case No.
CV03-3698LGB(PLAx),

The  Securities  and  Exchange  Commission  has filed a  complaint  for  alleged
securities violations.  The complaint alleges that the company illegally used an
S-8 registration  statement in 1999 to improperly raise capital,  and that false
and misleading  press releases were issued by the company from September 9, 1999
through November 18, 1999, and the SEC is seeking  disgorgement from the company
of  approximately  $800,000.00,  civil  penalties  and  interest,  as well as an
injunction against future securities law violations.  The Company filed a Motion
to  Dismiss  on  August  5,  2003 and the  Court  has  taken  the  matter  under
submission. The company's maximum exposure is approximately  $1,300,000.00.  The
company plans on vigorously contesting these allegationse.

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

Item 2.  CHANGES IN SECURITIES

Not applicable

Item 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable

Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

None

Item 5.  OTHER INFORMATION

None






                                      F-38
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

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

    b) Reports on Form 8-K

       On  February  25,  2003,  Hartcourt's  acquisition  of 45%  of  ownership
       interest in Shanghai HuaQing  Corporation  Development Co., Ltd. SEC File
       Number 001-12671; File Number 03578843. Incorporated herein by reference.

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

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

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

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

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

       On August 13, 2003, Hartcourt's  acquisition of 51% of ownership interest
       in  WenZhou  ZhongNan  Group.  SEC File  Number  001-12671;  File  Number
       03838826. Incorporated herein by reference.

       On August  13,  2003,  Hartcourt's  disposal  of  StreamingAsia  Limited,
       SyndicateAsia  Limited  and  LogicspaceAsia   Limited.  SEC  File  Number
       001-12671; File Number 03838830. Incorporated herein by reference.














                                      F-39
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)

                                   SIGNATURES

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


                          The Hartcourt Companies, Inc.

Date:  November 14, 2003                    By: /s/ David Chen
                                                --------------------------------
                                                David Y. Chen
                                                Acting Chairman


Date:  November 14, 2003                    By: /s/ David Chen
                                                --------------------------------
                                                David Chen
                                                Chief Executive Officer and
                                                Principal Accounting Officer

































                                      F-40
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)

                                302 CERTIFICATION

I, David Y. Chen, certify that:

1.       I have  reviewed  this  transition  report on Form 10-QSB of  HARTCOURT
         COMPANIES INC;

2.       Based on my  knowledge,  this  transition  report  does not contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this transition report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included in this transition report,  fairly present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this transition report;

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.   designed such  disclosure  controls and  procedures to ensure that
              material  information  relating to the  registrant,  including its
              consolidated  subsidiaries,  is made known to us by others  within
              those  entities,  particularly  during  the  period in which  this
              transition report is being prepared;

         b.   evaluated  the   effectiveness  of  the  registrant's   disclosure
              controls and  procedures  as of a date within 90 days prior to the
              filing date of this transition report (the "Evaluation Date"); and

         c.   presented  in this  transition  report our  conclusions  about the
              effectiveness  of the disclosure  controls and procedures based on
              our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee of the  registrant's  board of  directors  (or persons
         performing the equivalent functions):

         a.   all  significant  deficiencies  in  the  design  or  operation  of
              internal  controls which could adversely  affect the  registrant's
              ability to record,  process,  summarize and report  financial data
              and have  identified  for the  registrant's  auditors any material
              weaknesses in internal controls; and

         b.   any fraud,  whether or not material,  that involves  management or
              other  employees who have a significant  role in the  registrant's
              internal controls; and

                                      F-41
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)


6.       The registrant's other certifying officers and I have indicated in this
         transition  report  whether  or not there were  significant  changes in
         internal controls or in other factors that could  significantly  affect
         internal controls subsequent to the date of our most recent evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.



Date:  November 14, 2003                    By: /s/ David Chen
                                                --------------------------------
                                                David Chen
                                                Chief Executive Officer and
                                                Principal Accounting Officer






































                                      F-42
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)

                                302 CERTIFICATION

I, Richard Yan, certify that:

1.       I have  reviewed  this  transition  report on Form 10-QSB of  HARTCOURT
         COMPANIES INC;

2.       Based on my  knowledge,  this  transition  report  does not contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this transition report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included in this transition report,  fairly present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this transition report;

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.   designed such  disclosure  controls and  procedures to ensure that
              material  information  relating to the  registrant,  including its
              consolidated  subsidiaries,  is made known to us by others  within
              those  entities,  particularly  during  the  period in which  this
              transition report is being prepared;

         b.   evaluated  the   effectiveness  of  the  registrant's   disclosure
              controls and  procedures  as of a date within 90 days prior to the
              filing date of this transition report (the "Evaluation Date"); and

         c.   presented  in this  transition  report our  conclusions  about the
              effectiveness  of the disclosure  controls and procedures based on
              our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee of the  registrant's  board of  directors  (or persons
         performing the equivalent functions):

         a.   all  significant  deficiencies  in  the  design  or  operation  of
              internal  controls which could adversely  affect the  registrant's
              ability to record,  process,  summarize and report  financial data
              and have  identified  for the  registrant's  auditors any material
              weaknesses in internal controls; and

         b.   any fraud,  whether or not material,  that involves  management or
              other  employees who have a significant  role in the  registrant's
              internal controls; and

                                      F-43
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                                OTHER INFORMATION
                         SEPTEMBER 30, 2003 (UNAUDITED)


6.       The registrant's other certifying officers and I have indicated in this
         transition  report  whether  or not there were  significant  changes in
         internal controls or in other factors that could  significantly  affect
         internal controls subsequent to the date of our most recent evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.



Date:  November 14, 2003                    By: /s/ Richard Yan
                                                --------------------------------
                                                Richard Yan
                                                Acting Chief Financial Officer
                                                and Financial Controller






































                                      F-44