**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form 10-Q**





[X]
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.**
              **For
                the quarterly period ended February 28,
                2007**




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





**Commission
      file number: 001-12671**




**The
      Hartcourt Companies, Inc.**


*(Exact
      name of registrant as specified in its charter)*




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





**306
                Yong Teng Plaza, 1065 Wuzhong Road****Shanghai,
                China**
            
            **201103***(Address
                of principal executive offices)*
            
            *(Zip
                Code)*




**(011)
      (86 21) 5152 1577**


*(Registrant’s
      telephone number including area code)*




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days. Yes x No o




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




Large
                accelerated filer [  
                ]
            Accelerated
                filer [  
]
            Non-accelerated
                filer x





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




The
      number of outstanding shares of the registrant’s Common Stock, as of April 17,
      2007: was 201,579,473, $0.001 par value.










**TABLE
      OF CONTENTS**





**PART
                I: FINANCIAL INFORMATION**Item 1.
            Financial
                Statements
            3Unaudited
                Consolidated Balance SheetsAs
                of February 28, 2007 and May 31, 2006
            3Unaudited
                Consolidated Statements of OperationsFor
                the three-month and nine-month periods ended February 28, 2007 and
                2006
            4Unaudited
                Consolidated Statements of Cash FlowsFor
                the nine-month periods ended February 28, 2007 and 2006
            5Notes
                to Unaudited Consolidated Financial Statements
            7Item 2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
            20Item 3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            24Item 4.
            Controls
                and Procedures
            24**PART
                II: OTHER INFORMATION**Item 1
            Legal
                Proceedings.
            25Item 2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            25Item 3
            Defaults
                Upon Senior Securities
            26Item 4
            Submission
                of Matters to a Vote of Security Holders
            26Item 5
            Other
                Information
            26Item 6.
            Exhibits
            26Signatures
            27EXHIBIT
                3.5EXHIBIT
                10.4EXHIBIT
                31.1EXHIBIT
                31.2EXHIBIT
                32.1EXHIBIT
                32.2




2




**PART
      I: FINANCIAL INFORMAITON**




**Item
      1.**  **Financial
      Statements**




**THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEETS (Unaudited)**







**As
                of**
              **February
                28, 2007**
            
            **As
                of**
              **May****31,
                2006****ASSET****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            15,458
            
            $
            123,117Deposit
                and prepaid expenses
            
            
            55,879
            
            
            193,820Assets
                pending for sales
            
            
            1,828,593
            
            
            3,315,773**TOTAL
                CURRENT ASSETS**
            
            
            **1,899,930**
            
            
            **3,632,710****PROPERTY
                & EQUIPMENT - NET**
            
            
            30,802
            
            
            34,564**TOTAL
                ASSETS**
            
            $
            1,930,732
            
            $
            **3,667,274****LIABILITIES
                AND SHAREHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            547,322
            
            $
            558,141Due
                to directors
            
            
            61,922
            
            
            49,869Other
                payables
            
            
            374,093
            
            
            292,325**TOTAL
                CURRENT LIABILITIES**
            
            
            **983,337**
            
            
            **900,335****SHAREHOLDERS'
                EQUITY****Preferred
                Stock:**Class
                A preferred stock, 10,000,000 shares authorized, none issued and
                outstanding
            
            
            -
            
            
            -**Common
                stock**:$0.001
                par value, 424,999,000 authorized,199,579,473
                issued, 199,530,745 outstanding
            
            
            199,531
            
            
            194,845Additional
                paid in capital
            
            
            71,090,059
            
            
            70,402,436Treasury
                stock
            
            
            (48,728
            )
            
            (48,728
            )Other
                comprehensive loss
            
            
            (45,651
            )
            
            (72,240
            )Accumulated
                deficit
            
            
            (70,247,816
            )
            
            (67,709,374
            )**TOTAL
                SHAREHOLDERS' EQUITY**
            
            
            **947,395**
            
            
            **2,766,939****TOTAL
                LIABILITIES AND SHAREHOLDERS' EQUITY**
            
            $
            1,930,732
            
            $
            **3,667,274**




The
      accompanying notes form an integral part of these consolidated financial
      statements.




3




**THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS (Unaudited)**






**For
                  the Three Month Periods**
                **Ended
                  February 28,**
              
              **For
                  the Nine Month Periods**
                **Ended
                  February 28,****2007**
              
              **2006**
              
              **2007**
              
              **2006**Revenue
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Operating
                  expenses:Selling,
                  general and administrative expenses
              
              
              327,237
              
              
              119,348
              
              
              1,032,602
              
              
              412,814Depreciation
                  and amortization
              
              
              7,957
              
              
              2,066
              
              
              19,912
              
              
              7,957Total
                  operating expenses
              
              
              335,194
              
              
              121,414
              
              
              1,052,514
              
              
              420,771Loss
                  from continuing operations before other income (expenses) and discontinued
                  operations
              
              
              (335,194
              )
              
              (121,414
              )
              
              (1,052,514
              )
              
              (420,771
              )Other
                  income/(expense):Interest
                  expense
              
              
              -
              
              
              -
              
              
              (168
              )
              
              -Interest
                  income
              
              
              98
              
              
              2,151
              
              
              1,421
              
              
              5,706Others
              
              
              -
              
              
              104,640
              
              
              -
              
              
              129,536Total
                  other income
              
              
              98
              
              
              106,791
              
              
              1,253
              
              
              135,242Loss
                  from continuing operations
              
              
              (335,096
              )
              
              (14,623
              )
              
              (1,051,261
              )
              
              (285,529
              )Discontinued
                  operationsLoss
                  from operations of discontiunued entities
              
              
              (1,048,625
              )
              
              (1,485,831
              )
              
              (1,487,180
              )
              
              (1,078,701
              )NET
                  LOSS
              
              
              (1,383,721
              )
              
              (1,500,454
              )
              
              (2,538,441
              )
              
              (1,364,230
              )Other
                  comprehensive income/ (loss)
              
              
              325
              
              
              37,607
              
              
              26,589
              
              
              172,257Comprehensive
                  loss
              
              
              (1,383,396
              )
              
              (1,462,847
              )
              
              (2,511,852
              )
              
              (1,191,973
              )BASIC
                AND DILUTED LOSS PER COMMON SHARELoss
                per share
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.01
              )Weighted
                average basic & diluted shares
                outstanding
              
              
              199,262,100
              
              
              194,044,012
              
              
              196,601,703
              
              
              175,064,306




Weighted
      average number of shares for dilutive securities has not been calculated because
      the effect of dilutive securities is anti-dilutive.




The
      accompanying notes form an integral part of these consolidated financial
      statements.




4




**THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Unaudited)**






**For
                the Nine Month Periods Ended February 28,****2007**
            ****
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss from continuing operations
            $
            (1,051,261
            )
            $
            (285,529
            )Adjustments
                to reconcile net loss from continuing operations to net cash used
                in
                operating activities:Loss
                on disposal of assets
            
            -
            
            
            6,030Depreciation
            
            19,912
            
            
            7,957Stock
                options granted for services
            
            383,403
            
            
            -Stock
                issued for services and compensations
            
            56,535
            
            
            30,934Changes
                in operating assets and liabilities:Prepaid
                expenses and other receivables
            
            (295
            )
            
            (279,426
            )Accounts
                payable
            
            (10,813
            )
            
            (272,048
            )Accrued
                expenses and other current liabilities
            
            63,851
            
            
            (107,096
            )Other
                Current assets
            
            137,385
            
            
            -NET
                CASH USED IN OPERATING ACTIVITIES
            
            (401,283
            )
            
            (899,178
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property and equipment
            
            (16,383
            )
            
            (21,574
            )Cash
                included in assets pending for sale
            
            (277,555
            )
            
            -Proceeds
                on notes receivable, net
            
            -
            
            
            483,793NET
                CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
            $
            (293,938
            )
            $
            462,219




The
      accompanying notes form an integral part of these consolidated financial
      statements.




5




**THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Unaudited)(Continued)**






CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                on sale of common stock
            
            
            252,372
            
            
            -Proceeds
                from related parties
            
            
            12,457
            
            
            284,039NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            $
            264,829
            
            $
            284,039EFFECT
                OF EXCHANGE RATE ON CASH
            
            
            45,178
            
            
            41,732NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (385,214
            )
            
            (111,188
            )CASH
                AND CASH EQUIVALENTS - BEGINNING OF PERIOD
            
            
            400,672
            
            
            598,841CASH
                AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            15,458
            
            $
            487,653SUPPLEMENTAL
                DISCLOSURE OF CASH FLOWSCash
                paid for interest
            
            $
            -
            
            $
            88,438Cash
                paid for income taxes, net of refund received
            
            $
            -
            
            $
            85,395




The
      accompanying notes form an integral part of these consolidated financial
      statements.




6


**THE
      HARTCOURT COMPANIES, INC. AND SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FEBRUARY
      28, 2007 AND 2006**





**NOTE
      1** **GENERAL**





The
      Hartcourt Companies, Inc. ("Hartcourt" or the "Company"), was incorporated
      in
      Utah in 1983.  Previously, the
      Company was a distributor of internationally well known brand named IT hardware
      products and related services in the People’s Republic of China. In August 2006,
      the Company announced the intention to expand the business to include providing
      vocational/training and education service in the People’s Republic of China.





On
      February 26, 2007, the Company entered into a definitive agreement to dispose
      all of its prior IT hardware distribution business. That transaction must be
      approved by the Company’s stockholders. The Company is in the process of filing
      the proxy statement to secure such approval with the United States Securities
      and Exchange Commission and will distribute the proxy statement and seek to
      obtain the necessary stockholders approval following the effectiveness of such
      proxy statement.





On
      December 28, 2006, the Company entered into a definitive agreement to acquire
      a
      51% equity interest in Taishun Yucai Senior School in Zhejiang Province China
      (“Yucai”), a high school education and vocational training service provider in
      Wenzhou, Zheijiang, the People’s Republic of China. The remaining 49% of the
      equity interests in Yucai will be held by its current shareholders led by Mr.
      Shunsheng Dong. Under the terms of the purchase agreement, the purchase price
      that the Company agreed to pay for the acquisition is $2,000,000 cash and
      5,500,000 shares of the Company’s restricted common stock. Pursuant to the
      purchase agreement, the $2,000,000 cash will be payable in three installments
      within one year time after closing of the acquisition and the 5,500,000 shares
      will be payable upon closing of the acquisition. Mr. Dong and his fellow
      shareholders together with Yucai have jointly guaranteed that the Company will
      receive a minimum of $554,487 (RMB 4,325,000) in terms of profit and management
      fee each year for the three years following closing (2007-2009), in the event
      that the net profit is less than the guaranteed amount to the Company, Mr.
      Dong
      and his fellow shareholders s shall make up the discrepancy before December
      31
      of each year in respect thereof. The Company has guaranteed that the average
      3-day closing price of its shares on the days immediately prior to the one
      year
      anniversary of the closing date will be not less than $0.50 per share, in the
      event that the share price is less than $0.50, the Company shall credit
      additional cash or issue new restricted shares. The transaction is subject
      to
      government approval. We cannot predict whether or when such approval will be
      obtained.





On
      December 28, 2006, the Company entered into a definitive agreement to acquire
      a
      51% equity interest in Taishun Yucai Senior School in Zhejiang Province China
      (“Yucai”), a high school education and vocational training service provider in
      Wenzhou, Zheijiang, the People’s Republic of China. The remaining 49% of the
      equity interests in Yucai will be held by its current shareholders led by Mr.
      Shunsheng Dong. Under the terms of the purchase agreement, the purchase price
      that the Company agreed to pay for the acquisition is $2,000,000 cash and
      5,500,000 shares of the Company’s restricted common stock. Pursuant to the
      purchase agreement, the $2,000,000 cash will be payable in three installments
      within one year time after closing of the acquisition and the 5,500,000 shares
      will be payable upon closing of the acquisition. Mr. Dong and his fellow
      shareholders together with Yucai have jointly guaranteed that the Company will
      receive a minimum of $554,487 (RMB 4,325,000) in terms of profit and management
      fee each year for the three years following closing (2007-2009), in the event
      that the net profit is less than the guaranteed amount to the Company, Mr.
      Dong
      and his fellow shareholders s shall make up the discrepancy before December
      31
      of each year in respect thereof. The Company has guaranteed that the average
      3-day closing price of its shares on the days immediately prior to the one
      year
      anniversary of the closing date will be not less than $0.50 per share, in the
      event that the share price is less than $0.50, the Company shall credit
      additional cash or issue new restricted shares. The transaction is subject
      to
      government approval. We cannot predict whether or when such approval will be
      obtained.




7


As
      of
      February 28, 2007, the Company owns 100% of three (3) British Virgin Island
      (“BVI”) incorporated companies: (1) Hartcourt China Inc., (2) Hartcourt Capital
      Inc., and (3) AI-Asia Inc. All three of these BVI subsidiaries are holding
      companies for assets located in China.





In
      September 2006, the Company has entered into a definitive sales and purchase
      agreement to sell its interest in Control Tech, which is expected to close
      not
      later than May 31, 2007. Due to the delay of the Buyer in paying the
      consideration, the closing date was postponed from the end of February 2007
      to
      May 31, 2007. Upon closing, the Company expect to receive the consideration
      of
      US$400,000 in full amount.





As
      of
      February 28, 2007, Hartcourt Capital Inc. owns 100% of Hartcourt Hi-Tech
      Investment (Shanghai) Inc. located in Shanghai, China.





As
      of
      February 28, 2007 AI-Asia, Inc., the third holding company, owns 100% equity
      of
      AI-Asia (Shanghai) Information Technology, Inc of China (“AI”), located in
      Shanghai, China.




On
      February 26, 2007, the Company entered into a definitive agreement to sell
      IT
      distribution business by June 2007. As of February 28, 2007, the Company has
      classified the IT distribution business as discontinued operation.





**NOTE
      2** **BASIS
      OF PRESENTATION**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with the rules and regulations of the Securities and Exchange
      Commission for the presentation of financial information, but do not include
      all
      the information and footnotes required by accounting principles generally
      accepted in the United States for complete financial statements. The audited
      consolidated financial statements for the fiscal year ended May 31, 2006 were
      filed on September 15, 2006 with the Securities and Exchange Commission and
      are
      hereby referenced. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included. Operating results for
      the
      nine-month period ended February 28, 2007 are not necessarily indicative of
      the
      results that may be expected for the year ended May 31, 2007.





The
      accounting policies followed by us are set forth in Notes to the Company’s
      consolidated financial statements as stated in the Company’s report on Form
      10-KSB for the fiscal year ended May 31, 2006, as filed on September 15, 2006
      and incorporated into this Form 10-Q by reference.





**Principles
      of Consolidation**





The
      Company’s financial statements for the three months ended February 28, 2007 are
      consolidated to include the accounts of The Hartcourt Companies Inc., the wholly
      owned subsidiaries Hartcourt China Inc., Hartcourt Capital Inc., Hartcourt
      Hi-Tech Investment (Shanghai) Inc., Ai-Asia Inc. and Ai-Asia Information
      Technology Inc. All significant inter-company accounts and transactions have
      been eliminated in consolidation.




8


**NOTE
      3** **LOSS PER
      SHARE**





Three
                Months
              Ended
              February
                28, 2007
            
            Three
                Months
              Ended
              February
                28, 2006Net
                loss
            
            $
            (1,364,286
            )
            $
            (1,500,454
            )Effects
                of dilutive securities
            
            
            -
            
            
            -Weighted
                average shares outstanding
            
            
            199,262,100
            
            
            194,044,012Basic
                and dilutive loss per share
            
            $
            (0.01
            )
            $
            (0.01
            )





As
      of
      February 28, 2007, the Company had 34,600,000 options outstanding, each
      exercisable for one share of the Company’s common stock. These instruments were
      not included in the computation of diluted earnings per share for any of the
      periods presented, due to their anti-dilutive effects.





**NOTE
      4** **EQUITY
      TRANSACTIONS DURING THE PERIOD**





On
      December 4, 2006, the Company issued 3,709,118 shares of the Company’s common
      stock for cash in an offshore transaction under Regulation S at $0.068 per
      share
      for gross proceeds of $252,372. Proceeds will be used for working
      capital.





On
      January 1, 2007, the Company issued 196,450 shares of the Company’s common stock
      valued at $20,168 for director service compensation, the stock were valued
      at
      the average market price for the period for which service were
      provided.





On
      January 1, 2007, the Company issued 95,474 shares of the Company’s common stock
      valued at $6,492 for employee service compensation, the stock were valued at
      the
      average market price for the period for which service were
      provided.





**Stock
      Option Plan**





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




9


Primarily
      as a result of adopting SFAS No. 123R, the Company recognized $126,937 and
      $383,403 in share-based compensation expense for the three months and nine
      months period ended February 28, 2007 respectively. The impact of this
      share-based compensation expense on the Company’s basic and diluted earnings per
      share was ($0.001) per share. The fair value of the Company’s stock options was
      estimated using the Black-Scholes option pricing model.





For
      periods presented prior to the adoption of SFAS No. 123R, pro forma
      information regarding net income and earnings per share as required by SFAS
      No. 123R has been determined as if the Company had accounted for the
      Company’s employee stock options under the original provisions of SFAS
      No. 123. The fair value of these options was estimated using the
      Black-Scholes option pricing model. For purposes of pro forma disclosure, the
      estimated fair value of the options is amortized to expense over the option’s
      vesting period.




In
      April
      1995, the Company adopted a stock option plan (the “April 1995 Plan”) to attract
      and retain qualified persons for positions of substantial responsibility as
      officers, directors, employees, consultants, legal counsel, and other positions
      of significance to the Company. The April 1995 Plan provided for the issuance
      of
      both Incentive Stock Options and Non-Qualified Stock Options. The April 1995
      Plan was administered by the Board of Directors and provided for the issuance
      of
      a maximum of 2,000,000 options to purchase shares of common stock at the market
      price thereof on the date of grant. Such options were generally exercisable
      over
      a 10-year period from the date of grant. Each option lapsed 90 days after the
      optionee terminated his continuous activity with the Company, except that if
      such continuous activity with the Company terminated by reason of death, such
      option of the deceased optionee was exercisable within one year after the death
      of such optionee. Options granted under the April 1995 Plan were restricted
      as
      to sale or transfer. All options were granted at not less than fair value at
      the
      date of grant and had terms of 10 years. The April 1995 Plan expired in March
      2005 pursuant to its terms. As of February 28, 2007, 300,000 options remained
      outstanding under the April 1995 Plan.




In
      2005,
      The Board of directors adopted a new stock option plan (the “2005 Plan”) to
      replace the April 1995 Plan in order to attract and retain qualified persons
      for
      positions of substantial responsibility as officers, directors, employees,
      consultants, legal counsel, and other positions of significance to the Company.
      The 2005 Plan provides for the grant of stock options and stock appreciation
      rights, and the issuance of restricted stock, stock units, bonus stock, dividend
      equivalents, other stock-related awards and performance awards that may be
      settled in cash, stock, or other property. The total number of shares of the
      Company’s common stock that may be subject to awards under the 2005 Plan is
      equal to 35,000,000 shares, plus (i) the number of shares with respect to which
      awards previously granted under the 2005 Plan terminate without the issuance
      of
      the shares or where the shares are forfeited or repurchased; (ii) with respect
      to awards granted under the 2005 Plan, the number of shares which are not issued
      as a result of the award being settled for cash or otherwise not issued in
      connection with the exercise or payment of the award and (iii) the number of
      shares that are surrendered or withheld in payment of the exercise price of
      any
      award or any tax withholding requirements in connection with any award granted
      under the 2005 Plan. Unless earlier terminated by the Company’s Board of
      Directors, the 2005 Plan will terminate on the earlier of (1) ten years after
      the later of (x) its adoption by the Company’s Board of Directors, and (y) the
      approval of an increase in the number of shares reserved under the 2005 plan
      by
      the Company’s Board of Directors (contingent upon such increase being approved
      by the Company’s shareholders) and (2) such time as no shares of the Company’s
      common stock remain available for issuance under the 2005 Plan and the Company
      have no further rights or obligations with respect to outstanding awards under
      the 2005 plan. Options granted under the 2005 Plan are restricted as to sale
      or
      transfer.




10




The
      2005
      stock option plan was approved on November 23, 2005 during the annual
      shareholders meeting.




On
      February 24, 2007, the Company hold it shareholders’ meeting at which the
      shareholders approved an amendment to the 2005 Stock Option Plan to increase
      the
      number of shares of common stock reserved and available for the Plan from
      35,000,000 to 70,000,000 shares.




On
      July
      4, 2006, the Company granted Billy Wang, Chairman of the Board, an option to
      purchase 5,000,000 shares of the Company’s common stock at excise price of
      $0.04. The option will vest on September 28, 2007 and is exercisable within
      five
      years time after vesting. On December 6, 2006, the Board of Directors realized
      that the exercise price of $0.04 was incorrect and, based on the fair market
      value of the Company’s stock on the date of grant, the exercise price should
      have been $0.05. The option agreement has been amended to reflect the new
      exercise price and the option expenses are calculated based on the new exercise
      price.




Following
      assumption are used to calculate the fair value of the options
      granted.




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




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




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




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


-
              7,500,000
                  stock options vest pro rata over the two years of the employment
                  contract
                  period in equal installments of every six months.-
              2,000,000
                  stock options vest upon each successful new business acquisition
                  of the
                  Company.-
              1,500,000
                stock
                options vest upon each full profitable
                year
  11


Following
      assumption is used to calculate the fair value of the options
      granted.




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




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




Following
      assumption are used to calculate the fair value of the options
      granted.




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




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




-
              7,500,000
                  stock options vested pro rata over 2 years of the employment contract
                  period.-
              2,000,000
                  stock options vested upon each successful new business acquisition
                  of the
                  Company.-
              1,500,000
                stock
                options vested upon each full profitable
                year.
  Following
        assumption are used to calculate the fair value of the options
        granted.




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




12




The
        stock
        option granted to ex-CEO Carrie Hartwick to purchase total 15,000,000 shares
        of
        the Company’s common stock was terminated 90 days after her departure on June 1,
        2006 from the Company. The stock option granted to ex-Vice President Zhou
        Jing
        Jing to purchase 1,000,000 shares of the Company’s common stock was terminated
        90 days after his departure on June 9, 2006 from the Company.
  The
        following table summarizes the activity of stock options:
 
 Number
                  of
                Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Aggregate
                Intrinsic
                ValueShares
                  under option at May 31, 2006
              
              
              24,600,000
              
              $
              0.127
              
              $
              0Granted
              
              
              18,000,000
              
              
              0.041ExercisedExpired
              
              
              3,000,000
              
              
              0.300Canceled
              
              
              16,000,000
              
              
              0.091Shares
                  under option at August 31, 2006
              
              
              23,600,000
              
              $
              0.064
              
              $
              340,000Granted
              
              
              11,000,000
              
              
              0.05Exercised
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Canceled
              
              
              -
              
              
              -Shares
                  under option at November 30, 2006
              
              
              34,600,000
              
              $
              0.060
              
              $
              690,000Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Canceled
              
              
              -
              
              
              -Shares
                  under option at February 28, 2007
              
              
              34,600,000
              
              $
              0.060
              
              $
              734,980
 
 Following
        is a summary of the status of options outstanding at February 28, 2007:
 Weighted
              TotalTotal
              Average
              Weighted
              
              WeightedRange
                  of
              Options
              Remaining
              Average
              Options
              AverageExercisePrices
              Outstanding
              Life
              Exercise
              Exercisable
              ExercisePrice(Years)
              Price$0.04
                  - $0.05
              
              7,000,000
              
              5
              
              $0.05
              
              -
              
              $0.05$0.04
                  - $0.05
              
              22,000,000
              
              5.61
              
              $0.05
              
              1,875,000
              
              $0.05$0.09
              
              5,300,000
              
              4.08
              
              $0.09
              
              5,300,000
              
              $0.09$1.00
              
              300,000
              
              1.30
              
              $1.00
              
              300,000
              
              $1.30
  13
  During
        the three months ended February 28, 2007, a total of 1,875,000 options vested.
  **Warrants**
  There
        are
        no warrants outstanding as of February 28, 2007.
  **NOTE
        5** **RECENT
        PRONOUNCEMENTS**
  In
        February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
        Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
        Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
        financial instrument that contains an embedded derivative that otherwise
        would
        require bifurcation, clarifies which interest-only strips and principal-only
        strips are not subject to the requirements of SFAS No. 133, establishes a
        requirement to evaluate interest in securitized financial assets to identify
        interests that are freestanding derivatives or that are hybrid financial
        instruments that contain an embedded derivative requiring bifurcation, clarifies
        that concentrations of credit risk in the form of subordination are not embedded
        derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
        qualifying special-purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than another derivative financial
        instrument. This statement is effective for all financial instruments acquired
        or issued after the beginning of the Company's first fiscal year that begins
        after September 15, 2006. Management is currently evaluating the effect of
        this
        pronouncement on financial statements.
  In
        March
        2006, FASB issued SFAS 156 "Accounting for Servicing of Financial Assets"
        this
        Statement amends FASB Statement No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING
        OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, with respect to the
        accounting for separately recognized servicing assets and servicing
        liabilities.
  This
        Statement:
  1.
        Requires an entity to recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        servicing contract.
  2.
        Requires all separately recognized servicing assets and servicing liabilities
        to
        be initially measured at fair value, if practicable.
  3.
        Permits an entity to choose "Amortization method" or "Fair value measurement
        method" for each class of separately recognized servicing assets and servicing
        liabilities.
  4.
        At its
        initial adoption, permits a one-time reclassification of available-for-sale
        securities to trading securities by entities with recognized servicing rights,
        without calling into question the treatment of other available-for-sale
        securities under Statement 115, provided that the available-for-sale securities
        are identified in some manner as offsetting the entity's exposure to changes
        in
        fair value of servicing assets or servicing liabilities that a servicer elects
        to subsequently measure at fair value.
  14
  5.
        Requires separate presentation of servicing assets and servicing liabilities
        subsequently measured at fair value in the statement of financial position
        and
        additional disclosures for all separately recognized servicing assets and
        servicing liabilities.
  This
        Statement is effective as of the beginning of the Company's first fiscal
        year
        that begins after September 15, 2006. Management believes that this statement
        will not have a significant impact on the financial statements.
  In
        September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, this Statement does not require
        any
        new fair value measurements. However, for some entities, the application
        of this
        Statement will change current practice. This Statement is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. Management is currently
        evaluating the effect of this pronouncement on financial
        statements.
  In
        September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
        Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
        88, 106, and 132(R). This Statement improves financial reporting by requiring
        an
        employer to recognize the overfunded or underfunded status of a defined benefit
        postretirement plan (other than a multiemployer plan) as an asset or liability
        in its statement of financial position and to recognize changes in that funded
        status in the year in which the changes occur through comprehensive income
        of a
        business entity or changes in unrestricted net assets of a not-for-profit
        organization. This Statement also improves financial reporting by requiring
        an
        employer to measure the funded status of a plan as of the date of its year-end
        statement of financial position, with limited exceptions. An employer with
        publicly traded equity securities is required to initially recognize the
        funded
        status of a defined benefit postretirement plan and to provide the required
        disclosures as of the end of the fiscal year ending after December 15, 2006.
        An
        employer without publicly traded equity securities is required to recognize
        the
        funded status of a defined benefit postretirement plan and to provide the
        required disclosures as of the end of the fiscal year ending after June 15,
        2007. However, an employer without publicly traded equity securities is required
        to disclose the following information in the notes to financial statements
        for a
        fiscal year ending after December 15, 2006, but before June 16, 2007, unless
        it
        has applied the recognition provisions of this Statement in preparing those
        financial statements:
  a.
              A
                  brief description of the provisions of this Statement
 b.
              The
                  date that adoption is required
 c.
              The
                  date the employer plans to adopt the recognition provisions of
                  this
                  Statement, if earlier.
  The
        requirement to measure plan assets and benefit obligations as of the date
        of the
        employer’s fiscal year-end statement of financial position is effective for
        fiscal years ending after December 15, 2008. The management is currently
        evaluating the effect of this pronouncement on financial
        statements.
  15
  In
        February 2007, FASB issued FASB Statement No. 159, The Fair Value Option
        for
        Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
        years beginning after November 15, 2007. Early adoption is permitted subject
        to
        specific requirements outlined in the new Statement. Therefore, calendar-year
        companies may be able to adopt FAS 159 for their first quarter 2007 financial
        statements.
  The
        new
        Statement allows entities to choose, at specified election dates, to measure
        eligible financial assets and liabilities at fair value that are not otherwise
        required to be measured at fair value. If a company elects the fair value
        option
        for an eligible item, changes in that item's fair value in subsequent reporting
        periods must be recognized in current earnings. FAS 159 also establishes
        presentation and disclosure requirements designed to draw comparison between
        entities that elect different measurement attributes for similar assets and
        liabilities. The management is currently evaluating the effect of this
        pronouncement on financial statements.
  In
        July
        2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty
        in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN
        48
        clarifies the accounting and reporting for uncertainties in income tax law.
        This
        interpretation prescribes a comprehensive model for the financial statement
        recognition, measurement, presentation and disclosure of uncertain tax positions
        taken or expected to be taken in income tax returns. This statement is effective
        for fiscal years beginning after December 15, 2006. The Company is currently
        in
        the process of evaluating the expected effect of FIN 48 on the Company’s results
        of operations and financial position.
 
 **NOTE
        6** **GOING
        CONCERN**
 
 As
        shown
        in the accompanying consolidated financial statements, the Company has suffered
        recurring losses from operations and has an accumulated deficit of  $70,247,816  as
        of
        February 28, 2007. These factors, among others, raise substantial doubt about
        the Company’s ability to continue as a going concern. The Company’s need for
        working capital is a key issue for management and necessary for the Company
        to
        meet its goals and objectives. The Company continues to pursue additional
        capitalization opportunities. There is no assurance, however, that the Company
        will be successful in meeting its goals and objectives in the
        future.
 
 In
        view
        of the matters described in the preceding paragraph, recoverability of a
        major
        portion of the recorded asset amounts shown in the accompanying balance sheet
        is
        dependent upon continued operations of the Company, which in turn is dependent
        upon the Company’s ability to raise additional capital, and to succeed in its
        future operations. The financial statements do not include any adjustments
        relating to the recoverability and classification of recorded asset amounts
        or
        amounts and classification of liabilities that might be necessary should
        the
        Company be unable to continue as a going concern.
 
 The
        Company has taken certain restructuring steps to provide the necessary capital
        to continue its operations. These steps included: 1) Plan to acquire profitable
        operations through issuance of equity instruments, 2) Plan to dispose off
        unprofitable or unfavorable return-on-investment operations, and 3) continue
        actively seeking additional funding and to acquire subsidiaries or satisfy
        working capital requirements.
  **NOTE
        7** **ASSETS
        PENDING FOR SALE**
  Assets
        pending for sale comprised of assets related to following entities:
 
 16
 Assets
        of
        Control Tech as of February 28, 2007, amounting to $300,000. In September
        2006,
        the Company entered into a definitive sales & purchase agreement to sell its
        interest in Control Tech, which is expected to close not later than May 31,
        2007.
 
 Assets
        pending for sale also includes assets of Jiumeng as of February 28, 2007,
        amounting to $1,528,593. In February 26, 2007, the Company entered into a
        definitive sales & purchase agreement to sell its interest in Jiumeng, which
        is expected to close not later than June 15, 2007.
 
 **NOTE
        8** **DEPOSIT
        AND PREPAID EXPENSES**
  Deposit,
        other debtors and prepaid expenses as of February 28, 2007 are summarized
        as
        follows:
  AmountPrepaid
                  expenses
              
              
              697Others
              
              
              55,182Total
              
              $
              55,879
 
  **NOTE
        9** **PROPERTIES
        AND EQUIPMENT**
  The
        Company’s property and equipment as of February 28, 2007 are summarized as
        follows:
  AmountOffice
                  equipment and computers
              
              $
              85,625Less:
                  accumulated depreciation
              
              
              (54,823
              )Property
                  and equipment, net
              
              $
              30,802
  **NOTE
        10** **DUE
        TO DIRECTORS**
  The
        amount due to directors as of February 28, 2007 was $61,922 and represented
        director fee due to the Company’s director. The amount is unsecured, interest
        free and due on demand.
  **NOTE
        11** **OTHER
        PAYABLES**
  Other
        payables as of February 28, 2007 are summarized as follows:
  AmountTax
                  payable
              
              $
              333Accrued
                  expenses
              
              
              244,202Other
                  payable
              
              
              129,558Total
              
              $
              374,093
  17
  **NOTE
        12** **RELATED
        PARTY TRANSACTION**
  During
        the quarter ended February 28, 2007, Hartcourt issued 196,450 shares of common
        stock valued at $20,168 to its directors for services rendered, the stock
        were
        valued at the average market price for the period for which service were
        provided.
 
 During
        the quarter ended February 28, 2007, Hartcourt issued 95,474 shares of the
        Company’s common stock valued at $6,492 for employee service compensation, the
        stock were valued at the average market price for the period for which service
        were provided.
 
 **NOTE
        13** **DISCONTINUED
        OPERATIONS**
 
 On
        February 26, 2007, the Company entered into a definitive agreement with Shanghai
        Shiheng Architecture Consulting Co., Ltd to sell its 100% equity interests
        in
        Shanghai Jiumeng Information Technology Co., Ltd. (“Jiumeng”), which holds 51%
        equity interest in Shanghai Huaqing Corporation Development Ltd. (“Huaqing”).
 
 The
        net
        investment on Jiumeng as of February 28, 2007 is $1,528,593 a`nd is classified
        as assets pending for sale in the financial statements. Total loss for the
        nine
        month period ended February 28, 2007 is classified as operation loss from
        assets
        to be discontinued and amounted $1,487,180. Loss from the operation of Jiumeng
        during the three month ended February 28, 2007 was $1,048,625.
 
 **NOTE
        14** **COMMITMENTS
        AND CONTINGENCIES**
  A)
                Employment
                    Agreements
  The
        current senior management consists of a Chief Executive Officer (“CEO”) and
        Chief Financial Officer & President (“CFO & President”). Each of the
        Company’s executive employment agreements stipulate that senior executives, CEO
        and CFO & President of the Company, can be terminated without causes upon
        written notice of 90 days or less.
  On
        May
        31, 2006, the Board of Directors of the Company appointed Mr. Victor Zhou
        to be
        the acting Chief Executive Officer, effective on June 1, 2006. The compensation
        includes a monthly salary of $8,333 ($100,000 annually). In addition, Mr.
        Victor
        Zhou was granted an option to purchase 10,000,000 shares of the Company’s common
        stock with excise price of $0.04. The stock option vesting schedule was as
        following:
  –
              Option
                  to purchase 6,000,000 shares of the Company’s common stock to be vested in
                  three installments of 2,000,000 each upon each successful new business
                  acquisition of the Company; and–
              Option
                  to purchase 2,000,000 shares of the Company’s common stock to be vested
                  upon each full profitable year.
  During
        the three months period ended August 31, 2006 when Mr. Victor Zhou serving
        as
        the acting Chief Executive Officer, none of the above options
        vested.
  18
  On
        September 1, 2006, the Board of Directors of the Company promoted Mr. Victor
        Zhou to be the Chief Executive Officer. The compensation includes an annual
        base
        salary of $100,000, payable in equal monthly installment of US$8,333 cash.
        In
        addition, Mr. Victor Zhou was granted an option to purchase 11,000,000 shares
        of
        the Company’s common stock with excise price of $0.05 according to the following
        vesting schedule and subject to the number of shares conserved by the option
        being subsequently approved by shareholders. These options replace the options
        that were granted on June 1, 2006.
  –
              Option
                  to purchase 7,500,000 shares of the Company’s common stock to be vested
                  pro rata over two years of the employment contract period in equal
                  installments of every six months; and–
              Option
                  to purchase 2,000,000 shares of the Company’s common stock to be vested
                  upon each successful new business acquisition of the Company;
                  and–
              Option
                  to purchase 1,500,000 shares of the Company’s common stock to be vested
                  upon each full profitable year.
  On
        December 5, 2006, the Compensation Committee increased Mr. Zhou’s annual base
        salary to $150,000 effective September 1, 2006. The options remain
        unchanged.
  On
        May
        31, 2006, the Board of Directors of the Company appointed Mr. Yungeng Hu
        to be
        the President and the Chief Financial Officer, effective on June 1, 2006.
        The
        compensation includes an annual base salary of $150,000, payable by equal
        monthly installments of US$12,500 cash. In addition, Mr. Yungeng Hu was granted
        an option to purchase 11,000,000 shares of the Company’s common stock with
        excise price of $0.04 according to the following vesting schedule and subject
        to
        number of shares conserved by the option being subsequently approved by
        shareholders.
  –
              Option
                  to purchase 7,500,000 shares of the Company’s common stock to be vested
                  pro rata over 2 years of the employment contract period in equal
                  installments of every six months; and–
              Option
                  to purchase 2,000,000 shares of the Company’s common stock to be vested
                  upon each successful new business acquisition of the Company; and–
              Option
                  to purchase 1,500,000 shares of the Company’s common stock to be vested
                  upon each full profitable year
  B)
              Operating
                  Leases
  The
        Company leases its offices and facilities under long-term, non-cancelable
        lease
        agreements expiring at various dates through July 5, 2009. The non-cancelable
        operating lease agreements provide that the Company pays certain operating
        expenses applicable to the leased premises according to the Chinese Law.
        Rental
        expense for the quarter ended February 28, 2007 and 2006 were $9,313 and
        $25,852, respectively.
  19
 The
        future minimum annual lease payments required under the operating leases
        are as
        follows:
  Year
                  Ending May 31
              
              Payments2007
              
              $
              9,3132008
              
              
              90,7372008
                  after
              
              
              96,228Total
                  future lease payments
              
              $
              196,278
 
 **NOTE
        15** **CURRENT
        VULNERABILITY DUE TO CERTAIN CONCENTRATIONS**
 
 The
        Company's operations are carried out in the PRC. Accordingly, the Company's
        business, financial condition and results of operations may be influenced
        by the
        political, economic and legal environments in the PRC, by the general state
        of
        the PRC's economy. The Company's business may be influenced by changes in
        governmental policies with respect to laws and regulations, anti-inflationary
        measures, currency conversion and remittance abroad, and rates and methods
        of
        taxation, among other things.
 
 **NOTE
        16** **RECLASSIFICATION**
  Certain
        prior period amounts have been reclassified to conform to the quarter ended
        February 28, 2007 presentation.
  ***Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations***
  **Forward-looking
        Statements**
 
 *This
        report contains forward-looking statements within the meaning of
        Section 27A of the Securities Act of 1933, as amended, and Section 21E
        of the Securities Exchange Act of 1934, as amended. Such statements are based
        upon current expectations that involve risks and uncertainties. Any statements
        contained herein that are not statements of historical fact may be deemed
        to be
        forward-looking statements. For example, the words
“believes,” "anticipates,” “plans,” “expects,” “intends” and similar
        expressions are intended to identify forward-looking statements. Our actual
        results and the timing of certain events may differ significantly from the
        results discussed in the forward-looking statements. Factors that might cause
        such a discrepancy include, but are not limited to, those discussed in “Risk
        Factors Affecting Future Results” and “Liquidity and Capital Resources” below.
        All forward-looking statements in this document are based on information
        available to us as of the date hereof and we assume no obligation to update
        any
        such forward-looking statements. The following discussion should be read
        in
        conjunction with our unaudited condensed consolidated financial statements
        and
        the accompanying notes contained in this quarterly report. Unless expressly
        stated or the context otherwise requires, the terms “we,” “our,” “us” and
“Hartcourt” refer to The Hartcourt Companies, Inc. and its
        subsidiaries*
 
 **Overview**
 
 Historically,
        we were a distributor of internationally well-known brand named IT hardware
        products and related software and services. The main products were Samsung
        branded notebooks and monitors. Almost all of our revenue for prior fiscal
        years
        was attributed to distribution revenues from sales of Samsung products in
        China.
 
 Our
        Samsung distribution business began in March 2003, through the acquisition
        of a
        Chinese company named Huaqin Shanghai, which was the distributor of Samsung
        monitors in the Eastern part of China. In August 2004, Huaqin Shanghai obtained
        additional distribution rights from Samsung for its notebook product line
        in the
        same geographic area.
 
 20
 After
        reviewing Hartcourt's current business condition, its competitive edge, and
        opportunities in China in May 2006, the management team of the Company submitted
        to the Board of Directors a two-year business plan. Going forward, the Company
        plans diversify its business by focusing on the post-secondary education
        market
        in China to take advantage of the on-going demand of skilled workers and
        growing
        post-secondary age population. The Company has not made any investment in
        this
        new business for the quarter ended February 28, 2007. Although the Company
        has
        entered into a number of definitive agreements to acquire companies in this
        new
        market, these acquisitions have not yet closed and it is uncertain when,
        if
        ever, these acquisitions will have an impact on our financial results.
 
 On
        February 26, 2007, the Company entered into a definitive agreement with Shanghai
        Shiheng Architecture Consulting Co., Ltd to sell its 100% equity interests
        in
        Shanghai Jiumeng Information Technology Co., Ltd. (“Shanghai Jiumeng”), which
        holds a 51% equity interest in Shanghai Huaqing Corporation Development Ltd.
        (“Shanghai Huaqing”). Under the terms of the sales agreement, the net proceeds
        from the sale are expected to be US$1,548,028 (RMB12,000,000) payable in
        cash by
        June 15, 2007. Closing is subject to approval by the Company’s stockholders. The
        Company is preparing the necessary proxy statement to secure such approval
        and
        expects to file the preliminary proxy statement with the U.S. Securities
        and
        Exchange Commission shortly. Once becoming effective, the proxy statement
        will
        be mailed to the Company’s stockholders and a special meeting of the
        stockholders will be held thereafter. Assuming we obtain the necessary approval,
        the transaction will thereafter close. The Company expects to use the proceeds
        from the sale for general working capital and acquisitions.
  The
        following discussion and analysis are based on the historical figures and
        information and reflect only our IT business. As noted above, the Company
        plans
        to enter the growing Chinese vocational training marketplace. The business
        transformation from relying solely on the IT industry to the education industry
        likely will materially change the Company’s business operations and the
        accompanying financial results in the future. As a result, any predictions
        of
        the future financial trends based on the discussion and analysis below are
        subject to substantial risks and uncertainties. The Company did not have
        engaged
        in any active business activities for the quarter ended February 28,
        2007.
  **Results
        of Operations**
  The
        following table sets forth the consolidated statements of operations for
        the
        three and nine months ended February 28, 2007, with the comparable reporting
        period in the preceding year. And we used the pro forma numbers for the three
        and nine months ended February 28, 2006.


21




Three
                  Months Ended February 28
              
              Nine
                  Months Ended February 282007
              
              Percentage
                Change
              
              2006
                  Pro
                    Forma
              
              2007
              
              Percentage
                    Change
              
              2006
                  Pro
                    FormaNet
                  revenue
              
              $
              -
              
              
              -
              %
              $
              -
              
              $
              -
              
              
              -
              %
              $
              -Cost
                  of revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Gross
                  profit
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  expensesSales
                  and marketing
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -General
                  and administrative
              
              
              335,194
              
              
              -176
              
              
              121,414
              
              
              1,052,514
              
              
              -31
              
              
              420,771Total
                  operating expenses
              
              
              335,194
              
              
              -176
              
              
              121,414
              
              
              -
              
              
              -100
              
              
              420,771Interest
                  (expenses) / income-net
              
              
              98
              
              
              -95
              
              
              2,151
              
              
              1,253
              
              
              -78
              
              
              5,706Other
                  (expenses) / income -net
              
              
              -
              
              
              -100
              
              
              104,640
              
              
              -
              
              
              -100
              
              
              129,536Minority
                  Interest expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Loss
                  on discontinued operations expenses, net
              
              
              (1,048,625
              )
              
              -29
              
              
              (1,485,831
              )
              
              (1,487,180
              )
              
              38
              
              
              (1,078,701
              )Loss
                  before income taxes
              
              
              (1,383,721
              )
              
              -8
              
              
              (1,500,454
              )
              
              (2,538,441
              )
              
              86
              
              
              (1,364,230
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              $
              (1,383,721
              )
              
              -8
              %
              $
              (1,500,454
              )
              $
              (2,538,441
              )
              
              86
              %
              $
              (1,364,230
              )
 
 ***Three
        and nine months ended February 28, 2007 Compared to the prior year
        period.***
  ***Net
        Revenue***
 
 There
        was
        no revenue during the three months ended February 28, 2007, because the Company
        entered into a definitive agreement to sell the IT distribution business
        and
        therefore the sales from IT distribution business has been classified into
        discontinued operation category for three and nine
        months ended February 28, 2007 and comparable period in the preceding
        years. ** Although
        the company has signed several definitive agreements to purchase equity interest
        in the educational institutions, none of the acquisition has been completed
        as
        of February 28, 2007.
  ***Selling,
        general and administrative expenses*** :
        Selling, general and administrative expenses were $335,194 for the three
        months
        ended February 28, 2007 compared to $121,414 for the same period in 2006.
        Selling, general and administrative expenses were $1,052,514 for the nine
        months
        ended February 28, 2007 compared to $420,771 for the same period in 2006.
        The
        increased expenses for three and nine months ended February 28, 2007 were
        related to the intensified efforts to search for acquisition targets and
        looking
        for fund resources to finance the acquisition deals and working
        capital.
  ***Interest
        income:*** Interest
        income was $98 and $2,151 for the three months ended February 28, 2007 and
        2006
        respectively. Interest income was $1,253 and $5,076 for the nine months ended
        February 28, 2007 and 2006 respectively. The decreased interest income for
        the
        three and nine months ended February 28, 2007 compared with the same periods
        in
        the preceding year was due to the decreased bank deposits.
 
 ***Discontinued
        operation:*** Losses
        from discontinued operations for three months and nine months ended February
        28,
        2007 were US$1,048,625 and US$1,487,180 respectively. This is because of
        the
        Company entered into the definitive agreement to sell the IT distribution
        business - Jiumeng, therefore the financials of IT distribution business
        has
        been classified into discontinued operation category.
  22
 Losses
        from discontinued operations for three months and nine months ended February
        28,
        2006 were US$1,485,831 and US$1,078,701 respectively. The losses during these
        periods are mostly contributed from the losses from the operation of Control
        Tech.
 
 **Liquidity
        and Capital Resources:**
 
 As
        shown
        in our accompanying financial statements, we had a net loss of $2,538,441
        for
        the nine months ended February 28, 2007 as compared to a net loss of $1,364,230
        for the same period in 2006. These matters raise substantial doubt about
        the
        Company’s ability to continue as a going concern.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. This basis of accounting
        contemplates the recovery of the Company’s assets and the satisfaction of
        liabilities in the normal course of business.
 
 The
        Company has taken certain restructuring steps to provide the necessary capital
        to continue its operations. These steps included:
 l
            Look
                for growth opportunities through acquisitions and mergers with profitable
                education businesses; l
            Raise
                additional capital through public offering or private placement;
                and l
            Take
                measures to control cost and operating
                expenses 
 ***Operating
        activities:*** During
        the nine months ended February 28, 2007, net cash used in operating activities
        was $401,238, compared to $899,178 during the same period in 2006. The cash
        used
        in operating activities in the nine month period ended February 28, 2007
        resulted mainly from loss of $1,051,261 and increase of stock option costs
        of
        $383,403. The cash used in operating activities in the nine month period
        ended
        February 28, 2006 resulted mainly from loss of $285,529, increase of prepaid
        expenses and other receivables of $279,426 and decrease of accounts payable
        of
        $272,048.
 
 ***Investing
        activities:*** Net cash
        used by investing activities during the nine months ended February 28, 2007,
        was
        $293,938 compared to cash provided by investing activities of $462,219 for
        the
        comparable period in 2006. The cash used in investing activities in the nine
        month period ended February 28, 2007 was due to the disposal of IT business
        operation of $277,555.The cash provided by investing activities in the same
        period of last year was due to proceeds of $486,603 on notes receivable and
        netted by $21,574 of purchase of property and equipment.
 
 ***Financing
        activities:*** Net cash
        provided by financing activities during the nine months ended February 28,
        2007
        was $264,829 compared to $284,039 provided in the same period of 2006. Net
        cash
        provided by financing activities in the nine months period ended February
        28,
        2007 consisted of proceeds on sale of common stock of $252,372 and proceeds
        of
        $12,457 from related parties. The cash provided by financing activities in
        the
        same period of last year was due to proceeds of $284,039 from related
        parties.
 
 **Contractual
        Obligations**
 
 During
        the quarter ended February 28, 2007, we did not have any contractual obligation
        other than the facility leases described in Note 14(b) of financial
        statements.
  23
  **Off-Balance
        Sheet Arrangements**
 
 During
        the quarter ended February 28, 2007, the Company did not engage in any
        off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC's
        Regulation S-K.
 
 **Critical
        Accounting Policies and Estimates**
 
 For
        a
        description of what we believe to be the critical accounting policies that
        affect our more significant judgments and estimates used in the preparation
        of
        our condensed consolidated financial statements, refer to our Annual Report
        on
        Form 10-K for the year ended May 31, 2006. There have been no changes in
        our critical accounting policies since May 31, 2006.
  **Item 3.** ***Quantitative
        and Qualitative Disclosures About Market Risk***
 
 **Short-Term
        Investment Portfolio**
  We
        do not
        hold derivative financial instruments in our portfolio of short-term
        investments. Our short-term investments consist of instruments that meet
        quality
        standards consistent with our investment policy. This policy specifies that,
        except for direct obligations of the United States government, securities
        issued
        by agencies of the United States government, and money market or cash management
        funds, we diversify our holdings by limiting our short-term investments and
        funds held for payroll customers with any individual issuer. As of February
        28,
        2007, all our cash equivalents represent cash on hand and cash deposit in
        PRC
        banks, the interest rate earned on our money market accounts ranged from
        0.72%
        to 1.62% per annum. Our cash equivalents are subject to market risk due to
        changes in interest rates. Interest rate movements affect the interest income
        we
        earn on cash equivalents, and funds held for payroll customers and the value
        of
        those investments. We attempt to limit this exposure by investing primarily
        in
        short-term securities. Due to the short duration and conservative nature
        of our
        investment portfolio a movement of 10% by market interest rates would not
        have a
        material impact on our operating results and the total value of the portfolio
        over the next fiscal year.
 
 **Impact
        of Foreign Currency Rate Changes**
 
 We
        are
        exposed to risks associated with foreign exchange rate fluctuations due to
        our
        international sales activities. Since we translate foreign currencies (primarily
        Chinese Yuans) into US dollars for financial reporting purposes, currency
        fluctuations can have an impact on our financial results. The historical
        impact
        of currency fluctuations has generally been immaterial. We believe that our
        exposure to currency exchange fluctuation risk is not significant primarily
        because the stability of the exchange rate between Chinese Yuan and US dollar.
        Although the impact of currency fluctuations on our financial results has
        generally been immaterial in the past and we believe that for the reasons
        cited
        above currency fluctuations will not be significant in the future, there
        can be
        no guarantee that the impact of currency fluctuations will not be material
        in
        the future. As of February 28, 2007, we did not engage in foreign currency
        hedging activities. We believe that a movement of 10% in foreign currency
        exchange rates would not have a material impact on our operating
        results.
  24
  **Item 4.** ***Controls
        and Procedures***
 
 **Evaluation
        of disclosure controls and procedures** *.* Our
        management evaluated, with the participation of our chief executive officer
        and
        our chief financial officer, the effectiveness of our disclosure controls
        and
        procedures as of the end of the period covered by this Quarterly Report on
        Form
        10-Q. Based on this evaluation, our chief executive officer and our chief
        financial officer have concluded that our disclosure controls and procedures
        are
        effective to ensure that information we are required to disclose in reports
        that
        we file or submit under the Securities Exchange Act of 1934 is recorded,
        processed, summarized and reported within the time periods specified in
        Securities and Exchange Commission rules and forms.
 
 **Changes
        in internal control over financial reporting** *.* There
        was
        no change in our internal control over financial reporting that occurred
        during
        the period covered by this Quarterly Report on Form 10-Q that has materially
        affected, or is reasonably likely to materially affect, our internal control
        over financial reporting. We are aware that any system of controls, however
        well
        designed and operated, can only provide reasonable, and not absolute, assurance
        that the objectives of the system are met, and that maintenance of disclosure
        controls and procedures is an ongoing process that may change over time.
 
 **PART
        II: OTHER INFORMATION**
 
 **Item
        1.** ***Legal
        Proceedings.***
 Hartcourt
        Hi-Tech Investment (Shanghai) Inc. filed a compliant against Beijing Yi Zhi
        He
        Lian Information Technology Co., Ltd for returning RMB 1,000,000 which they
        owed
        the Company. On December 19, 2006, Beijing Shi Jing Shan District Court entered
        the Judgment in this case. The court found that Hartcourt Hi-Tech Investment
        (Shanghai) Inc. has no rights to file the compliant against Beijing Yi Zhi
        He
        Lian Information Technology Co., Ltd. unless designated by Hartcourt Capital,
        Inc., which signed and bound by the acquisition agreement. The courts issued
        an
        order overruling the compliant from Hartcourt Hi-Tech Investment (Shanghai).,
        Inc. as the plaintiff. The plaintiff can appeal to Beijing No. 1 Intermediate
        People’s Court if objecting to the rule. The Company is currently preparing the
        petition to appeal to Beijing No. 1 Intermediate People’s Court.
 
 **Item
        1A.** ***Risk
        Factors Affecting Future Results***
 The
        risk
        factors facing the Company have not changed in any material way from those
        Risk
        Factors discussed on the Company’s Annual Report on Form 10-K for the fiscal
        year ended May 31, 2006.
 
 **Item
        2.** ***Unregistered
        Sales of Equity Securities and Use of Proceeds.***
 
 On
        December 4, 2006, we issued 3,709,118 shares of our common stock in an offshore
        transaction under Regulation S to Mr. Gang Liu and Mr. Jun Xu at US$0.068
        per
        share for gross proceeds of US$252,372. Proceeds will be used for working
        capital.
 
 On
        January 1, 2007, we issued 196,450 shares of our common stock valued at $20,168
        in lieu of cash compensation for director service compensation, which were
        approximately equal to the fair market value of the stock at issue date.
  On
        January 1, 2007, we issued 95,474 shares of our
        common stock valued at $6,492 in lieu of cash payment for employee service
        compensation, which were approximately equal to the fair market value of
        the
        stock at the issuance date. 
 The
          shares were issued in an offshore transaction under Regulation S under
          the U.S.
          Securities Act of 1933, as amended.
  25
 **Item
        3.** ***Defaults
        Upon Senior Securities.***
 
 None
 
 **Item
        4.** ***Submission
        of Matters to a Vote of Security Holders.***
  An
        annual
        meeting of the shareholders was held on February 24, 2007. A proposal to
        amend
        the 2005 Stock Option Plan to increase the number of shares of common stock
        reserved and available under the 2005 Stock Option Plan from 35,000,000 to
        70,000,000 was voted on at the meeting. The proposal received
        103,986,442 **** affirmative
        votes and 683,083 negative votes.
 
 **Item
        5.** ***Other
        Information.***
  The
        Compensation Committee increased the Chief Executive Officer’s salary on
        December 5, 2006. Effective September 1, 2006, Mr. Zhou’s annual base salary was
        increased to $150,000.
 
 **Item 6.** ***Exhibits.***
 
 **Exhibit**Number
              
              **Description**
              **Previously**
                **Filed**3.1
              
              Articles
                  of Incorporation, as amended
              (1)3.2
              
              Bylaws,
              (1)3.3
              
              Amendments
                  to the Bylaws
              (1)3.4
              
              Amendments
                  to the Articles of Incorporation
              (2)3.5
              
              Amendments
                  to the Articles of Incorporation10.1
              
              Cooperative
                  Agreement on Taishun Yucai Senior School
              (3)10.2
              
              Cooperative
                  Agreement on China Princely Education Technology Development (Beijing)
                  Company Limited
              (3)10.3
              
              Agreement
                  for sale and purchase of the entire issued share capital of Besteffort
                  Investments Limited
              (3)10.4
              
              Agreement
                  for sale and purchase of entire interest in the registered capital
                  of
                  Shanghai Jiumeng Information Technology Co., Ltd.31.1
              
              Rule 13a-14(a)/15d-14(a)
                  Certification of Principal Executive Officer31.2
              
              Rule 13a-14(a)/15d-14(a)
                  Certification of Principal Financial Officer32.1
              
              Section 1350
                  Certification of Principal Executive Officer32.2
              
              Section
                  1350 Certification of Principal Financial Officer
  (1) Previously
        filed as an exhibit to Hartcourt’s Form 10-KSB/A, dated July 3, 1997 and
        incorporated herein by reference.
 (2) Previously
        filed as an exhibit to Hartcourt’s Form 10-KSB, dated April 15, 2003,
        as amended by Hartcourt’s Form 10-KSB/A, dated April 25, 2003, incorporated
        herein by reference.
 (3)
        Previously filed as an exhibit to Hartcourt’s Form 10-Q, dated January 16,
        2007 and incorporated herein by reference.
  26
 
 **SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  THE
                HARTCOURT
                COMPANIES, INC.Dated:
                April 23, 2007
              By:
              /s/
                VICTOR ZHOUVictor
                ZhouChief
                Executive Officer
 Dated:
                April 23, 2007
              By:
              /s/
                YUNGENG HUYungeng
                HuChief
                Financial Officer & President
     27