UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 
 FORM 10-K
 
  [X]
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended May 31, 2009.
  or
  [_]
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 of incorporation)

(IRS Employer Identification No.)Room 503, Jinqiao Building, No.2077
West Yan’an Road, Shanghai, China

200336(Address of principal executive offices)

(Zip Code)
  Registrant's telephone number, including area code (86) 21 52067613
  Securities registered pursuant to Section 12(b) of the Act:
 None
  Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, US$0.001 par value.
 
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  [_]   No [X]
  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  [_]   No [X]
 
 Indicate by a 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 [_]
  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. [_]
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. (See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act).  (Check one):
 Large accelerated filer [_]
Accelerated filer [_]Non-Accelerated filer [_]
Smaller reporting company [X]
 
 Indicate by check mark wither the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]
 The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter on November 30, 2008
was US$ 10 million.
  The number of shares of common stock outstanding as of the latest practicable date, August 28, 2009, was 386,966,816.
  
  THE HARTCOURT COMPANIES, INC.
 FISCAL 2009 FORM 10-K
  INDEX
  Item
PagePART IITEM 1: Business
4ITEM 1A:  Risk Factors
6ITEM 1B:  Unresolved Staff Comments
9ITEM 2: Properties
9ITEM 3: Legal Proceedings
9ITEM 4: Submission of Matters to a Vote of Security Holders
10PART IIITEM 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
10ITEM 6: Selected Financial Data
12ITEM 7: Management's Discussion and Analysis of Financial Condition and Results of Operations
13ITEM 7A:Quantitative and Qualitative Disclosures About Market Risk
19ITEM 8: Financial Statements and Supplementary Data
19ITEM 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
40ITEM 9A:Controls and Procedures
40ITEM 9B: Other Information
41PART IIIITEM 10: Directors, Executive Officers and Corporate Governance
41ITEM 11: Executive Compensation
43ITEM 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
46ITEM 13: Certain Relationships and Related Transactions, and Director Independence
47ITEM 14: Principal Accountant Fees and Services
47PART IVITEM 15: Exhibits and Financial Statement Schedules
48Signatures
   2
  As used in this Annual Report on Form 10-K, the terms “we”, “our” or “us” mean The Hartcourt Companies, Inc., a Utah corporation, and its consolidated subsidiaries, unless the context indicates otherwise.
 
 Special Note on Forward-Looking Statements
 Certain statements contained in this report (including information incorporated by reference) are “forward-looking statements” and are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Our forward-looking statements include our current expectations and projections about future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as “may,” “might,” “will,” “expect,” “anticipate,” “believe,” “could,” “intend,” “plan,” “estimate” and similar expressions. These forward-looking statements are
based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
  These risks, uncertainties and other factors include, but are not limited to, those set forth under Item 1A Risk Factors. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to The Hartcourt Companies, Inc. or to persons acting on
our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
   3




PART I
  
 ITEM 1. BUSINESS.
  General
  The Hartcourt Companies, Inc. ("Hartcourt" “We/Our” or the "Company"), was incorporated in Utah in 1983.  Previously, we were a distributor of internationally well known brand named IT hardware products and related services in the People’s Republic of China. In August 2006, we announced our intention to change our business by
focusing on the vocational/training and education marketplace in the People’s Republic of China.
 
 Available Information
  We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all other reports, and amendments to these reports, required of public companies with the SEC. The public may read and copy the materials we file with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. We make available free of charge on the Investor Relations section of our corporate website all of the reports we file with the SEC as soon as reasonably practicable after the reports are filed. Copies of our
fiscal 2009 Form 10-K may also be obtained without charge by accessing a link to the SEC website on our website or contacting ir@hartcourt.com.
  Business Overview
  China’s Education Markets
  In 1986, the PRC government implemented a system of compulsory education that requires each child to have at least nine years of formal education. Chinese culture has historically placed a strong emphasis on education. Because of the “one child” policy of the PRC government, Chinese families are generally
willing to invest a substantial amount of their financial resources in their only child’s education. According to the Economist Intelligence Unit, the Chinese disposable income per capita increased at a compound annual growth rate, or CAGR, of 6.7% from 2002 to 2006 and will probably increase at a CAGR of 8.3% from 2007 to 2011. With greater amounts of disposable income, Chinese families are spending an even higher percentage of their disposable income on their children’s education. Education expenditure
as a percentage of GDP potentially will grow from 4.0% in 2005 to 4.5% in 2010, according to the China Education Human Resources Report of 2003.
  China’s education market is large and growing rapidly because of favorable demographic, consumer spending trends and the increased importance placed on higher and professional education.
  According to the Ministry of Education (MOE), 29 million students will reach college age in the next 5 years, a 40% increase and a US$36 billion market. While MOE-controlled universities and colleges still maintain dominant market share, the field is now open for private and foreign investment capital. In addition, MOE has set a timeline to privatize
all vocational schools and educational institutions that offer degrees lower than Bachelor by 2010.
  According to the China Statistical Yearbook (2007), in 2006, approximately 686 million people in China were between the ages of five and 39. Ongoing urbanization has increased the proportion of China’s population living in urban areas from 36.2% in 2000 to 43.9% in 2006, as stated in the China Statistical Yearbook
(2007), and potentially will continue to increase. According to the National Bureau of Statistics of China, average per capita annual consumption expenditures in urban areas in China have increased, from approximately RMB4,998 (US$712.8) in 2000 to approximately RMB8,697 (US$1,240.3) in 2006. Consumption expenditure on education, cultural and recreational services accounted for 13.8% of total annual consumption expenditures per capita in urban households in 2006, the second largest category after food. We believe
these demographic and consumer trends are making people in China increasingly willing to invest in higher and professional education.
  4
  China has one of the fastest growing economies in the world. As China’s economy continues to develop, its service industries are playing an increasingly important role. We believe this will increase opportunities in the education markets as people continue to seek advanced skills and professional licenses and
certifications.
 
 In August 2006, after reviewing our business condition, competitive position, and opportunities in China, we decided to change our business by focusing on the education market in China to take advantage of the substantial market demand for education services. We plan to not only acquire certain schools we have targeted,
but also to run these schools actively by putting together strong faculty teams, incentive plans and strategic expansion programs.
 
 On May 15, 2007, we completed the purchase of 100% of the equity interests in China Princely Education Technology Development Company Limited (“China Princely”), an authorized accrediting organization for China vocational education located in Beijing, PRC. Under the terms of the purchase agreement,
we paid to the shareholders of China Princely 5,400,000 shares of our restricted common stock at closing. After closing, we changed the name of China Princely to Hartcourt Princely Education Technology Development (Beijing) Co., Ltd.
  On July 23, 2008, we completed the acquisition of 60 percent of the outstanding equity of Beijing Yanyuan Rapido Education Company (“Beijing Yanyuan”) pursuant to the terms of the definitive agreement entered into between the two parties, a well-known training institution in China. Subject to the definitive agreement between the Company
and Beijing Yanyuan, the purchase price paid by the Company in connection with its acquisition of a controlling interest in Beijing Yanyuan was 69 million shares of the Company’s restricted common stock. Hartcourt has the right to waive the following commitment of profitability; Beijing Yanyuan commitment that its net profit would exceed RMB6 million (US$827,000) for the seven months of calendar year 2008, RMB10 million (US$1.379 million) for the calendar year 2009, and RMB14 million (US$1.931 million)
for the calendar year 2010. The restricted common shares issued for the Acquisition will be released to shareholders of Beijing Yanyuan in three installments based on the profit realized over a three-year period.
 
 On October 31, 2008, we completed the acquisition of 60 percent of the outstanding equity interests of China E & I Development Co. Ltd., which does business as the China Arts and Science Academy (“China Arts and Science Academy”), pursuant to the terms of the definitive agreement entered into between
the two parties. Under the agreement between the Company and China Arts and Science Academy, the purchase price paid by the Company in connection with its acquisition of a controlling interest in China Arts and Science Academy was 40 million shares of the Company’s restricted common stock. Hartcourt has the right to waive the following commitment of profitability; China Arts and Science Academy commitment that its net profit would exceed RMB5 million (US$735,294) for the first year (November 1, 2008 to
October 31, 2009) in which its results are consolidated with Hartcourt’s, RMB7.5 million (US$1.103 million) for the second year (November 1, 2009 to October 31, 2010) in which its results are consolidated with Hartcourt’s, and RMB10 million (US$1.471 million) for the third year (November 1, 2010 to October 31, 2011) in which its results are consolidated with Hartcourt’s. The restricted common shares issued by Hartcourt for the acquisition will be released to those shareholders of China Arts
and Science Academy whose equity interests were purchased by Hartcourt in three installments based on the profit realized by China Arts and Science Academy over the three-year period beginning on the date of Hartcourt’s purchase of 60% of the outstanding equity interests of China Arts and Science Academy.
 
 Corporate Structure
  We are incorporated in Utah and conduct business solely in China through wholly and majority owned subsidiaries and indirectly majority owned subsidiaries in order to comply with China's foreign ownership restrictions.
  As of May 31, 2009, we owned 100% of three 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.  Hartcourt Capital Inc. owns 100% of Hartcourt Hi-Tech Investment (Shanghai)
Inc. Hartcourt Hi-Tech Investment (Shanghai) Inc., through its employees as nominees, owns 100% of Shanghai Jiumeng Information Technology Co., Ltd. (“Jiumeng Shanghai”). Hartcourt Hi-Tech Investment (Shanghai) Inc., and Shanghai Jiumeng Information Technology Co., Ltd. are located in Shanghai, China. In April 2007, the Company decided to wind up Hartcourt Hi-Tech Investment (Shanghai) Inc. As of May 31, 2008, the wind-up process was completed. Shanghai Jiumeng Information Technology Co., Ltd owns
60% of the equity interest of Beijing Yanyuan Rapido Education Company. AI-Asia, Inc. owns 100% of Hartcourt Education Investment Management Consulting (Shanghai) Co., Ltd (former name is AI-Asia (Shanghai) Information Technology, Inc), located in Shanghai, China, and owns 100% of the equity interest of Hartcourt Princely. AI-Asia, Inc owns 60% of the equity interest of China Arts and Science Academy.
   5
 Intellectual Property
  The Company accounts for its intangible assets under the applicable guidelines of SFAS 142 “goodwill and other intangible assets” and SFAS 144 “accounting for the impairment or disposal of long lived assets”.  Where intangible assets have finite lives, they are amortized over their useful life unless factors exist to
indicate that the asset has been impaired.  The Company evaluates if the assets are impaired annually or on an interim basis if an event occurs or circumstances change to suggest that the assets value has diminished.  Under SFAS 142 intangible assets with indefinite useful lives are required to be tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets is measured
by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets.  If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.  During this year ended May 31, 2009, the Company recognized no impairment.
 
 Due to the acquisition of Beijing Yanyuan and China Arts and Science Academy in the first and second quarters respectively, we recorded the intangible assets above. For the intangible assets we acquired, we assigned an 20-years life each to Course Software and Course Material (See financial statement notes 12 &
13).
 
 The Company evaluates intangible assets and other long-lived assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and goodwill is measured by comparing
their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. The Company assessed the carrying value of goodwill in accordance with the requirements of SFAS
#142 "Goodwill and Other Intangible Assets".  Based on its assessment, the Company determined that goodwill resulting from the acquisition of China Princely amounted to US$682,988 is fully impaired as of May 31, 2008.
 
 Employees
  As of May 31, 2009, we had approximately 40 employees, all of which were located in China. We believe our future success and growth will depend on our ability to attract and retain qualified employees in all areas of our business. We do not currently have any collective bargaining agreements with our employees, and we believe employee relations
are generally good. Although we have employment-related agreements with a number of key employees (See financial statement notes 10), these agreements do not guarantee continued service. We believe we offer reasonable compensation and a good working environment. However, we face intense competition for qualified employees, and we expect to face continuing challenges in recruiting and retention.
  ITEM 1A.  RISK FACTORS.
  IMPORTANT FACTORS THAT MAY AFFECT OUR BUSINESS, OUR OPERATING RESULTS AND OUR STOCK PRICE
  In addition to the other information contained in this 10-K report, you should carefully read and consider the following risk factors. If any of these risks actually occur, our business, financial condition or operating results could be materially adversely affected and the trading price of our common stock could decline.
  RISKS RELATING TO THE VOCATIONAL TRAINING BUSINESS
  WE HAVE INCURRED SIGNIFICANT LOSSES IN THE PAST AND HAVE A HISTORY OF NEGATIVE CASH FLOW FROM OPERATIONS AND MAY NOT ACHIEVE OR SUSTAIN CONSISTENT PROFITABILITY, WHICH COULD RESULT IN A DECLINE IN THE VALUE OF OUR COMMON STOCK AND AN INABILITY TO CONTINUE OPERATIONS.
  Whether we can achieve cash flow levels sufficient to support our operations, and whether we will then be able to maintain positive cash flow, we cannot predict. Unless such cash flow levels are achieved, we will need to borrow additional funds or sell debt or equity security, or some combination thereof, to provide funding for our operations. There
can be no assurances that any additional debt or equity financing will be available to us on acceptable terms, if at all. The inability to obtain debt or equity financing could have a material adverse effect on our operating results, and as a result we could be required to cease or significantly reduce our operations, seek a merger partner or sell additional securities on terms that may be disadvantageous to shareholders. In addition, irrespective of our revenue, we may not achieve or sustain profitability in
future periods.
   6
  WE EXPECT TO MAKE A SIGNIFICANT INVESTMENT IN OUR NEW BUSINESS STRATEGIES AND INITIATIVES, INCLUDING ACQUISITIONS, WHICH COULD DISRUPT OUR BUSINESS AND HAVE ADVERSE EFFECT ON OUR OPERATING RESULTS.
  Our decision to changeour business by focusing on the vocational/training and education market in China will require us to invest in new business strategies and engage in acquisitions that complement our strategic direction. Such endeavors involve significant risks and uncertainties, including
distraction of management’s attention away from normal business operations; inability to raise the funds needed to close acquisitions; insufficient revenue generation to offset liabilities assumed and expenses associated with the strategy; difficulty in the integration of new employees, business systems and technology; inability to adapt to challenges of a new market; exposure to new regulations; and issues not discovered in our due diligence process. These factors could materially adversely affect our
operating results or financial condition.
  WE EXPECT TO EXPERIENCE SIGNIFICANT COMPETITION FROM BOTH PRIVATE AND PUBLIC EDUCATION INSTITUTIONS.
  We will face competition from non-profit private entities and from the public school system and public colleges, including those that offer distance-learning programs.  Most of our competitors in both the private and public sector have greater financial and other resources than us. Many public and private colleges and universities, as well
as other private career-oriented schools in the market, offer programs similarly, which intensifies the competition.
  Public institutions often receive government subsidies, government and foundation grants, tax-deductible contributions and other financial resources generally not available to private schools. Accordingly, public institutions may have facilities and equipment superior to those in the private sector, and can offer lower tuition prices.
  In addition, we may be subject to a variety of regulations which may adversely affect our ability to operate profitably.
  IF WE CANNOT FIND AND ACQUIRE THE TARGET SCHOOLS, OUR STRATEGY WILL LIKELY FAIL.
  As we expand our education business, our growth and success will depend upon attracting students and generating revenue through tuition. Moreover, we intend to implement our strategy through an aggressive acquisition plan. We intend to develop our educational operation assets by acquiring existing schools, especially those ones which were built around,
or used the faculty capacity of, the Ministry of Education (MOE) universities and colleges. However, as the profitable schools may not desire to be sold, such acquisitions may be more expensive or be impossible to effect. Moreover, although MOE has set a timeline to privatize all vocational schools and educational institutions that offer degrees lower than a Bachelor’s degree by 2010, there are still a number of political barriers for foreign invested companies, such as Hartcourt, to engage in the education
business. Thus, if we cannot find and acquire the target schools, our strategy may fail.
 
 OUR EDUCATION BUSINESS WILL BE HIGHLY SEASONAL.
  Because most students want their vocational training during already established vacation periods, generally during the first and third fiscal quarters, we expect our education business to be highly seasonal. We may have more students attending courses and as a result earn most of our revenues during that time. To the extent we do not provide training
to students during the peak seasons, we will lose opportunities. This seasonality may cause our operating results to vary considerably from quarter to quarter and significantly impact our liquidity position.
  GENERALRISKS ASSOCIATED WITH OUR BUSINESS
 
 THE LIQUIDITY OF OUR COMMON STOCK IS AFFECTED BY ITS LIMITED TRADING ABILITY.
 
 Shares of our common stock are traded on the OTC Bulletin Board under the symbol "HRCT". There is currently no broadly followed established trading market for our common stock. An "established trading market" may never develop or be maintained. The absence of an active trading market reduces the liquidity of our shares.
The trading volume of our common stock historically has been limited and sporadic. As a result of this trading inactivity, the quoted price for our common stock on the OTC Bulletin Board is not necessarily a reliable indicator of its fair market value. Further, if we cease to be quoted, holders would find it more difficult to dispose of, or obtain accurate quotations as to the market value of our common stock, and the market value of our common stock would likely decline.
   7
  THE LACK OF BUSINESS INSURANCE COVERAGE IN CHINA COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL  CONDITION AND RESULTS OF OPERATION SHOULD ANY MAJOR CATASTROPHIC DISASTER OCCURS.
  We have limited business insurance coverage in China. The insurance industry in China is still at an early stage of development. In particular, PRC insurance companies offer limited business insurance products. As a result, we do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation
or natural disaster might result in our incurring substantial costs and the diversion of resources.
  OUR CURRENT CAPITAL STRUCTURE MAY NOT BE SUFFICIENT FOR US TO ACQUIRE NEW BUSINESS OR MAINTAIN ONGOING OPERATIONS.
  Although we believe that the current capital structure of the Company will be sufficient to allow us to consummate acquisitions, we cannot ascertain the capital requirements for any particular transaction. If our current financial resources prove to be insufficient, either because of the size of the business acquisition or the depletion of the available
financial resources in search of acquisitions, we will need to seek additional financing. We cannot assure you that such financing would be available on acceptable terms, if at all. To the extent that additional financing is unavailable when needed to consummate an acquisition, we could be compelled to restructure the transaction or abandon that particular business acquisition. In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth of the business.
The failure to secure additional financing could have a material adverse effect on the continued development or growth of our business. None of our officers, directors or shareholders is required to provide any financing to us in connection with or after an acquisition.
  COMPLIANCE WITH NEW RULES AND REGULATIONS CONCERNING CORPORATE GOVERNANCE MAY BE COSTLY AND TIME CONSUMING.
  The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, requires, among other things, that companies adopt new corporate governance measures and imposes comprehensive reporting and disclosure requirements, sets stricter independence and financial expertise standards for board and audit committee members and imposes increased civil and criminal penalties
for companies, their chief executive officers and chief financial officers for securities law violations. These laws, rules and regulations increase the scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert management's attention from business operations. These new rules and regulations may also make it more difficult and more expensive for us to obtain director and officer liability insurance and make it more difficult
for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee.
  IF THE PRC GOVERNMENT FINDS THAT THE STRUCTURE FOR OPERATING OUR CHINA BUSINESS DOES NOT COMPLY WITH PRC GOVERNMENT RESTRICTIONS ON FOREIGN INVESTMENT IN THE IT DISTRIBUTION INDUSTRY, WE COULD BE COMPELLED TO RESTRUCTURE OUR INVESTMENT OR ABANDON OUR INVESTMENT.
  We are a U.S. corporation and we conduct our operations solely in China through our directly owned subsidiaries and indirectly majority-owned subsidiary. To comply with foreign ownership restrictions, we operate our business in China through a subsidiary which is majority owned by our employees who are PRC citizens (our nominees). The nominees have
been transferred from certain employees to Victor Zhou, our Chief Executive Officer. We have entered into a series of contractual arrangements with our indirectly owned subsidiary, its shareholders and our nominees. As a result of these contractual arrangements, we are considered the majority beneficiary of all of our subsidiaries and accordingly we consolidate all of our subsidiaries' results of operations in our financial statements.
  We have in the past received an opinion from PRC legal counsel that: (1) the ownership structures of our subsidiaries is in compliance with existing PRC laws and regulations; (2) our contractual arrangements with each of our subsidiaries, our nominees and its shareholders are valid and binding, and will not result
in any violation of PRC laws or regulations currently in effect; (3) the business operations of our subsidiaries are in compliance with existing PRC laws and regulations in all material aspects and (4) the enforcement of foreign judgments made by courts outside the PRC has no direct and automatic operation in the PRC, but these judgments may be recognized and enforced by a PRC court in accordance with a bilateral or international treaty to which PRC is a party, or subject to the principles of reciprocity upon
a finding that the judgment does not conflict with fundamental principles, sovereignty, security and public interests of the PRC after review of the judgment.
   8
  There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. In addition, there is the possibility that current PRC laws and regulations could change and have an adverse affect on our business operations.  Accordingly, we cannot assure you that the PRC regulatory
authorities will not ultimately take a view that is contrary to the opinion of our PRC legal counsel.
  RISKS RELATING TO THE PEOPLE'S REPUBLIC OF CHINA.
  SUBSTANTIALLY ALL OF OUR ASSETS ARE LOCATED IN CHINA AND SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM OUR OPERATIONS IN CHINA. ACCORDINGLY, THE CHINESE LAWS, RULES AND REGULATIONS WHICH CAN BE DIFFERENT FROM THE US LAWS, ARE PREVALENT IN GOVERNING OUR BUSINESS ACTIVITIES IN CHINA.
  Chinese law and regulations strictly limit the repatriation of assets of Chinese companies. Payments to parties outside of the PRC are governed by the Foreign Exchange Bureau and its Regulations on Foreign Exchange Control (the “Regulations”). Pursuant to the Regulations, a Chinese enterprise may only make payments overseas in very limited
circumstances. Chinese enterprises are prohibited from sending payment abroad to cover the liabilities incurred by affiliated entities located overseas.
  The laws governing Chinese joint ventures require each partner to conduct its business for the benefit of the joint venture and not for the benefit of any particular partner. As a result, one partner may not withdraw funds from the joint venture to pay its own liabilities unrelated to the joint venture.
  Accordingly, we may not be able to repatriate any profits we realize to the United States so that our shareholders can receive dividends or other distributions from us.
  Because our directors and officers reside outside of the United States, it may be difficult for you to enforce your rights against them or enforce United States court judgments again them in the PRC. After the consummation of acquisitions, all of our assets are located outside of the United States. It may be difficult for investors in the United States
to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement of criminal penalties of the Federal securities laws.
  ITEM 1B. UNRESOLVED STAFF COMMENTS.
  None.
  ITEM 2. PROPERTIES.
  On July 23, 2008 we consummated the acquisition of Beijing Yanyuan. On October 31, 2008, we completed the acquisition of China Arts and Science Academy. We lease training centers and administrative facilities in the markets that we serve. Our management believes that our facilities are well-maintained, adequate for our current needs, and that we
will be able to locate additional facilities as needed. See Note 10 to the financial statements for more information about our lease commitments.
  ITEM 3. LEGAL PROCEEDINGS.
  Hartcourt Hi-Tech Investment (Shanghai) Inc. filed a complaint against Beijing Yi Zhi He Lian Information Technology Co., Ltd for returning RMB 1,000,000 (US $146,235) which it owed the Company. On December 19, 2006, Beijing Shi Jing Shan District Court entered the judgment in this case. The court found that Hartcourt Hi-Tech Investment (Shanghai) Inc.
has no rights to file the complaint against Beijing Yi Zhi He Lian Information Technology Co., Ltd. unless designated by Hartcourt Capital, Inc., which signed and was bound by the acquisition agreement. The court issued an order overruling the complaint from Hartcourt Hi-Tech Investment (Shanghai)., Inc. as the plaintiff. The plaintiff can appeal to Beijing No. 1 Intermediate People’s Court if objecting to the rule. The Company has prepared additional lawsuit material and lodged the petition to appeal to
Beijing No. 1 Intermediate People’s Court.
   9
 
 On August 10, 2007, Hartcourt Capital Inc filed a lawsuit in the Beijing No. 1 Intermediate People’s Court against Beijing Yi Zhi He Lian Information Technology Co., Ltd to return the RMB 1,000,000 which it owes the Company. On December 10, 2008, The Beijing Senior People’s Court issued an order to withdraw
the civil ruling of the Beijing No. 1 Intermediate People’s Court under no. 10077, order Beijing No. 1 Intermediate People’s Court to judge again.  The lawsuit is under judgment and the outcome cannot be estimated as of May 31, 2009.
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  An annual meeting of the shareholders was held on April 5, 2009. Proposals to elect five directors and to effect a 2:1 reverse split of the issued and outstanding common shares were voted on at the meeting.  With regard to the election of directors, 172,898,000shares were voted
in favor of the election of the slate of Victor Zhou, Wilson W.S. Li, George Xu, Zhenyu Hu, and Changzhi Ju, and 2,500,000 shares were voted against.  With regard to the Company’s proposal to effect 2:1 reverse split the issued and outstanding shares, 61,022,700 shares were voted in favor of the proposal, 27,121,200 shares were voted against, with no withheld votes and no broker non-votes. According to the voting results, the Company will not effect a 2:1 reverse split of the issued and outstanding
common shares as of May 31, 2009.
   PART II
  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
  Market Information for Common Stock
 
 Our common stock is quoted on the Over-the-Counter (OTC) Bulletin Board under the symbol "HRCT". The following table sets forth, for the quarters indicated, the range of closing high and low bid prices of our common stock as reported by the OTC Bulletin Board, as adjusted for all previously effected stock splits.
  COMMON STOCKBY QUARTER ENDED
HIGH
LOWYEAR ENDED MAY 31, 2008August 31, 2007
$0.07
$0.06November 30, 2007
$0.07
$0.04February 28, 2008
$0.07
$0.03May 31, 2008
$0.06
$0.03YEAR ENDED MAY 31, 2009August 31, 2008
$0.06
$0.03November 30, 2008
$0.04
$0.01February 28, 2009
$0.03
$0.01May 31, 2009
$0.02
$0.01
 
 The last reported sale price of our common stock on the OTC Bulletin Board on August 28, 2009 was US$0.02. As of August 28, 2009 we had approximately 800 shareholders of record. This number does not include shareholders whose shares are held in trust by other entities. The actual number of shareholders is greater
than this number of holders of record.
  Although our common stock is quoted on the OTC Bulletin Board, it trades with limited volume. Consequently, the information provided above may not be indicative of our common stock price under different conditions.
 
  10
  We did not pay any cash dividends on our common stock for fiscal year ended on May 31, 2009. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and the expansion of our business.
  Recent Sales of Unregistered Securities
  The following information sets forth the outstanding shares we sold without registration under the Securities Act of 1933 during the year ended May 31, 2009. All transactions were effected in reliance on exemptions from registration under the Securities Act of 1933 for transactions not involving a public offering. We relied upon Regulation S, Rule 903
for all issuances of unregistered securities described below, because all the unregistered securities were issued to individuals who do not reside in the United States.
  On July 22, 2008, the Company issued to the former shareholder of Beijing Yanyuan in an offshore transaction under Regulation S an aggregate of 69 million shares of the Company’s restricted common stock pursuant to the terms of the definitive purchase agreement.
 
 On October 31, 2008, the Company issued to the former shareholders of China Arts & Science Academy in an offshore transaction under Regulation S an aggregate of 40,000,000 shares of the Company’s restricted common stock pursuant to the terms of the definitive purchase agreement.
 
 On November 1, 2008, the Company issued 20,000,000 shares of the Company’s restricted common stock to fund raisers for cash in an offshore transaction under Regulation S at $0.02 per share for gross proceeds of $400,000. The proceeds were used for working capital.
 
 On November 24, 2008, the Company issued 872,716 shares of the Company’s restricted common stock valued at $31,446 to Wilson Li in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 272,120 shares of the Company’s restricted common stock valued at $9,805 to Stephen Tang in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 176,644 shares of the Company’s restricted common stock valued at $6,365 to George Xu in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 313,763 shares of the Company’s restricted common stock valued at $11,306 to Geferry Wei in lieu of cash payment for former director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On January 1, 2009, the Company issued 271,809 shares of the Company’s restricted common stock valued at $7,355 to the Chief Financial Officer in lieu of cash payment for service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On January 1, 2009, the Company issued 297,910 shares of the Company’s restricted common stock valued at $15,190 to the General Manager of China Princely in lieu of cash payment for service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On May 4, 2009, the Company issued 50,000,000 shares of the Company’s restricted common stock to fund raisers for cash in an offshore transaction under Regulation S at $0.01 per share for gross proceeds of $500,000. The proceeds were used for working capital.
 
 Warrants
  None.
   11
  Performance Graph
  The graph below compares the cumulative total return to shareholders on our common stock with the cumulative total return on NASDAQ Stock Market Index – U.S. (“NASDAQ US Index”) and Morgan Stanley High-Tech Index for the period commencing on January 1, 2002, and ending August 24, 2009. The following graph assumes the investment of US$100 in the Company’s
common stock and in the two other indices, and reinvestment of all dividends.
  The comparisons shown in the graph below are based upon historical data. The stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential future performance of our common stock.
  
  ITEM 6. SELECTED FINANCIAL DATA.
 Year
Ended
May 31


Year
Ended
May 31


Year
Ended
May 31


Period Ended
May 31


Year Ended
December 312009


2008


2007


2006


2005


2004


2003Thousands of US Dollars, except per share amountStatement of Income DataNet revenue

$
2,432


$
--


$
--


$
--


$
--


$
74,563


$
131,699Operating expenses


1,365



(1,996
)


(1,347
)


(866
)


(286
)


(3,883
)


(92
)Income (loss) from continuing operations


699



(1,996
)


(1,347
)


(861
)


123



(4,423
)


(1,453
)Net income (loss)


15



(1,973
)


(3,786
)


(2,835
)


123



(13,373
)


(571
)Basic and diluted earnings (losses) per weighted average share


0.00



(0.01
)


(0.02
)


(0.01
)


0.001



(0.076
)


(0.004
)Balance Sheet DataCash and cash equivalents


102



5



21



123



599



1,745



3,792Total assets


5,775



47



1,416



3667



8,009



19,732



33,808Working capital


68



(1,635
)


(1,157
)


(467
)


(141
)


2,530



3039Shareholders equity


3,897



(1,612
)


196



2,866



6,761



4,672



14,909Common Stock DataShares of Common Stock (Year-End)


386,967



205,762



205,082



194,844



193,739



171,659



171,157Shares of Common Stock (Average)


304,501



205,488



197,513



194,049



191,504



175,646



135,565Dividends Paid per Share


--



--



--



--



--



--



--Book Value Per Share (Year End)


0.00



(0.02
)


(0.02
)


(0.02
)


0.00



0.03



0.09
 
 Factors Affecting Comparability:
  We were incorporated in Utah in 1980. Historically, we have been in the business of selling information technology products in the people’s Republic of China (the “PRC”). However, in August of 2006 we decided to move away from that business and instead enter the business of vocational/training and education services in the PRC.
  
 12
  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  Management discussion and analysis contains comparisons of the results of our operations for the twelve months ended May 31, 2009, for the 12 months ended May 31, 2008.
  THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Fiscal year ended
May 31 (12 months)2009


2008Net revenues

$
2,431,955


$
-Cost of revenues


368,167



-Gross profit


2,063,788



-Operating expenses:General and administrative expenses


1,343,842



1,299,858Depreciation and amortization


20,839



13,510Impairment of goodwill


-



682,988Total operating expenses


1,364,681



1,996,356Income (loss) from operations


699,107



(1,996,356
)Other incomeForeign currency exchange gain


43,648



-Gain on settlement of debt


182,687



-Total other income


226,335



-Income (loss) from operations before income tax provision and minority interest


925,442



(1,996,356
)Provision for income taxes


(212,791
)


-Minority interest, net of taxes


(697,506
)


-Income (loss) from continuing operations


15,145



(1,996,356
)Discontinued operations:Gain/(loss) from discontinued operations


-



22,878Income/(loss) from discontinued operations


-



22,878NET INCOME (LOSS)


15,145



(1,973,478
)OTHER COMPREHENSIVE ITEM:Foreign currency translation loss


(48,226
)


(60,754
)NET COMPREHENSIVE LOSS

$
(33,081
)

$
(2,034,232
)BASIC AND DILUTED EARNINGS/ (LOSS) PER COMMON SHARE:Income/(loss) from continued operations basic

$
0.00


$
(0.01
)Income from discontinued operations basic

$
-


$
0.00Income/(loss) per share basic

$
0.00


$
(0.01
)Basic weighted average number of shares outstanding


304,501,261



205,761,854Income (loss) from continued operations diluted

$
0.00


$
(0.01
)Loss from discontinued operations diluted

$
-


$
0.00Income (loss) per share diluted

$
0.00


$
(0.01
)Diluted weighted average number of shares outstanding


304,561,261



205,488,066
  13
 
 The following discussion contains forward-looking statements. Forward looking statements are identified by words and phrases such as “anticipate”, “intend”, “expect” and words and phrases of similar import. We caution investors that forward-looking statements are only predictions based
on our current expectations about future events and are not guarantees of future performance. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements due to risks, uncertainties and assumptions that are difficult to predict, including those set forth in Item 1A above. We encourage you to read those risk factors carefully along with the other information provided in this Report and in our other filings with the SEC before deciding
to invest in our stock or to maintain or change your investment. We undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law.
  You should read this MD&A in conjunction with the Consolidated Financial Statements and Related Notes in Item 8.
  Critical Accounting Policies and Estimates
  In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our balance sheets. We believe that the estimates, assumptions and judgments involved in the accounting
policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Senior management has discussed the development and selection of these critical accounting policies and their disclosure in this Report with the Audit Committee of our Board of Directors.  We believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments: revenue recognition; allowance for
doubtful accounts; income taxes; stock-based compensation; asset impairment.
  Revenue Recognition
  In accordance with generally accepted accounting principles (“GAAP”) in the United States, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collection of the resulting receivable is reasonably assured. Noted below are brief descriptions of the
product or service revenues that the Company recognizes in the financial statements contained herein.
  The Company recognized the revenue only when the service or products (training software) has been fully delivered or downloaded.
  Allowance for doubtful accounts
  We maintain an allowance for doubtful accounts to reduce amounts to their estimated realizable value. A considerable amount of judgment is required when we assess the realization of accounts receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were
to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts could be required. We initially record a provision for doubtful accounts based on our historical experience, and then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. In estimating the provision for doubtful accounts, we consider: (i) the aging of the accounts receivable; (ii) trends within
and ratios involving the age of the accounts receivable; (iii) the customer mix in each of the aging categories and the nature of the receivable; (iv) our historical provision for doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic conditions of the customer’s industry as well as general economic conditions, among other factors.
  Income taxes
  We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS 109 prescribes the use of the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of
assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance, or increase or decrease this allowance
in a period, we increase or decrease our income tax provision in our statement of operations. If any of our estimates of our prior period taxable income or loss prove to be incorrect, material differences could impact the amount and timing of income tax benefits or payments for any period.
  14
 
 The Company operates in several countries. As a result, we are subject to numerous domestic and foreign tax jurisdictions and tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases: income before taxes, deemed profits and withholding taxes
based on revenue. The calculation of our tax liabilities involves consideration of uncertainties in the application and interpretation of complex tax regulations in a multitude of jurisdictions across our global operations.
  We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. The tax liabilities are reflected net of realized tax loss carry forwards. We adjust these reserves upon specific events; however,
due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the contingency has been resolved
and the liabilities are no longer necessary.
  Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that we provide during any given year.
  Stock-Based Compensation
  The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS No. 123R”), under the modified-prospective transition method on June 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair
value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all share-based payments granted prior to and not yet vested as of June 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based
payments granted after June 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for the Company’s stock option plans using the intrinsic value method in accordance with the provisions
of APB Opinion No. 25 and related interpretations.
  The fair value of common stock grant is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk - free interest rates, expected volatility, expected life of the common stock options and future dividend. Compensation expense is recorded based upon the values derived from the Black-Scholes option pricing
model, based on an expected forfeiture rate that is adjusted for actual expensece. If our Black-Scholes option pricing model assumptions or our actual or estemated forfeiture rate and different in the future, that could materially affect compensaion expense recorded in future periods.
  Asset Impairment
  We periodically evaluate the carrying value of other long-lived assets, including, but not limited to, property and equipment,intangible assets and goodwill, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset is less than its
carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Significant estimates are utilized to calculate expected future cash flows utilized in impairment analyses. We also utilize judgment to determine other factors within fair value analyses, including the applicable discount rate.
  15
  Recently Issued Accounting Standards
  In December 2007, the Financial Accounting Standards Board (“FASB”) simultaneously issued SFAS No. 141R, “Business Combinations (2007 Amendment),” and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51.”  Both standards update United States guidance on accounting for
“noncontrolling interests,” sometimes referred to as minority interests, which interests represent a portion of a subsidiary not attributable, directly or indirectly, to a parent. FASB and the International Accounting Standards Board (“IASB”) have been working together to promote international convergence of accounting standards. Prior to promulgation of these new standards there were specific areas in accounting for business acquisitions in which conversion was not achieved. The objective
of both standards is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in “business combinations” and consolidated financial statements by establishing accounting and reporting standards. In business combinations it is accomplished by establishing principles and requirements concerning how an “acquirer” recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling interest in the acquiree,
as well as goodwill acquired in the combination or gain from a bargain purchase; and determines information to be disclosed to enable users to evaluate the nature and effects of business combinations. In consolidated financial statements the standards require: identification of ownership interests held in subsidiaries by parties other than the parent be clearly identified, labeled and presented in consolidated financial position within equity (rather than “mezzanine” between liabilities and equity)
separately from amounts attributed to the parent, with net income attributable to the parent and to the minority interest clearly identified and presented on the face of consolidated statements of income. The standards also provide guidance in situations where the parent’s ownership interest in a subsidiary changes while the parent retains its controlling financial interest. The standard also provides guidance on recording a gain or loss based on fair value in situations involving deconsolidation of a subsidiary.
Entities must provide sufficient disclosures that distinguish between interests of the parent and that of the noncontrolling interest.
  Both standards are effective for fiscal years and interims beginning on or after December 15, 2008 (that is January 1, 2009) for entities with calendar years. Earlier adoption is prohibited. The standards shall be applied prospectively as of the beginning of the fiscal year in which initially applied, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented. The Company does not anticipate that the adoption of SFAS No. 141R and No. 160 will have an impact on the Company's overall results of operations or financial position, unless the Company makes a business acquisition in which there is a noncontrolling interest.
  In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable
dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. This FSP is effective for us beginning July 1, 2009 and the Company does not expect that FSP EITF No. 03-6-1 would have a material impact on the financial statements.
 
 In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 require companies to disclose in interim financial statements the fair value of financial instruments within
the scope of FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments. However, companies are not required to provide in interim periods the disclosures about the concentration of credit risk of all financial instruments that are currently required in annual financial statements. The fair-value information disclosed in the footnotes must be presented together with the related carrying amount, making it clear whether the fair value and carrying amount represent assets or liabilities and how
the carrying amount relates to what is reported in the balance sheet. FSP FAS 107-1 and APB 28-1 also requires that companies disclose the method or methods and significant assumptions used to estimate the fair value of financial instruments and a discussion of changes, if any, in the method or methods and significant assumptions during the period. The FSP shall be applied prospectively and is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. An entity early adopting FSP FAS 107-1 and APB 28-1 must also early adopt FSP FAS 157-4 as well as FSP FAS 115-2 and FAS 124-2. The Company will adopt the disclosure requirements of this pronouncement for the quarter ended June 30, 2009, in conjunction with the adoption of FSP FAS 157-4, FSP FAS 115-2 and FAS 124-2.
  In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (“SFAS 165”). SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 will be effective for interim or annual period ending after June 15, 2009 and will be applied prospectively. The Company will adopt the requirements of this pronouncement for the quarter ended June 30, 2009. The Company does not anticipate the adoption of SFAS 165 will
have an impact on its consolidated results of operations or consolidated financial position.
 
 In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies that
the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company’s involvement in variable interest entities
and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after November 15, 2009.
  
 16
  Results of Operations
  Our operations for the fiscal years ended May 31, 2009 and 2008 consisted of operations of Beijing Yanyuan (60% indirect ownership interest), China Arts and Science Academy (60% indirect ownership interest), Hartcourt Capital Inc. (100% ownership interest), Hartcourt China, Inc. (100% ownership interest), and Ai-Asia Inc. (100% ownership interest),
and Hartcourt’s investments in other entities located in Hong Kong and China.
  The following discussion and analysis are based on the historical figures and information and reflect our education business.  As noted above, the Company is focusing on the growing Chinese vocational training market instead.
  Fiscal Year Ended May 31, 2009 Compared to Fiscal Year Ended May 31, 2008
  Net Revenue:
 
 Revenues were $2,431,955 for the twelve months ended May 31, 2009 compared to zero for the same period in 2008. The increased revenues were primarily due to revenue generated by Beijing Yanyuan and China Arts & Science Academy, two subsidiaries in which we acquired a 60% equity interest during the twelve months
ended May 31, 2009. We currently derive revenues from the following sources:
 
 ●
educational programs and services, which accounted for 90% of our total net revenues as of May 31, 2009; and
 
 ●
books and others, which accounted for 10% of our total net revenues as of May 31, 2009.
 
 Cost of revenue:
      Our general and administrative expenses were $1,343,843 for the fiscal year ended May 31, 2009 compared to $1,299,858 for the same periods in 2008, an decrease of $43,985 or 3% compared to the fiscal year ended May 31, 2008. The increase of expenses for the fiscal year ended May 31, 2009 and year ended May 31, 2008 were primarily due to expenses increase
by management.
  Depreciation and amortization expenses in operating expenses:
  Our depreciation and amortization expenses in operating expenses were $20,839 for the fiscal year ended May 31, 2009 compared to $13,510 for the same periods in 2008 or 54% increase. The increase was primarily due to the acquisition of Beijing Yanyuan and China Arts & Science Academy, two subsidiaries in which we acquired a 60% equity interest during
the twelve months ended May 31, 2009.
  Income (Loss) from Continuing Operations:
  Income from continuing operations for the fiscal year ended May 31, 2009 was $699,107, compared to loss amounted to $1,996,356 for the fiscal year ended May 31, 2008.  The increased income was primarily due to revenue generated by Beijing Yanyuan and China Arts & Science Academy, two subsidiaries in which we acquired a 60% equity interest
during the twelve months ended May 31, 2009.
   17
  Gain on Settlement of Debt:
  During the fiscal years ended May 31, 2009 and 2008, the Company has gain on settlement of debt amount of $182,687 and $0, respectively. This amount is due to the negotiation between the Company and non related third party. The third party agreed to settle for a lesser amount as they will continue to do business with the Company.
  Discontinued operations:
  During the fiscal years ended May 31, 2009 and May 31, 2008, the discontinued operations represent the operating results of Shanghai Huaqing, which was determined by the management to be disposed in 2008.
  Income Tax:
  The Company has income tax during the fiscal years ended May 31, 2009 compared with prior year, due to the new profitable acquisitions.
  Minority interest:
  Minority interest represented the profit shared by the minority shareholders of Beijing Yanyuan and China Arts & Science (40%).
  Liquidity and Capital Resources:
  As shown in our accompanying financial statements, we had a net income of $15,145 for the fiscal year ended May 31, 2009 as compared to a net loss of $1,973,478 for the same period in 2008.
  The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
 
 The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included:
  ·
Look for growth opportunities through acquisitions of profitable education businesses;
 ·
Raise additional capital through public offerings or private placements; and
 ·
Take measures to control costs and operating expenses.
 
 Please refer to subsequent even (See financial statement notes 15) for most current acquisition on August 20, 2009 which will give us additional revenue on education business.
  Operating activities:
  During the fiscal year ended May 31, 2009, net cash provided by operating activities was $664,643, compared to net cash used in operating activities of $638,514 during the fiscal year ended May 31, 2008. The cash used in operating activities in the fiscal year ended May 31, 2009 resulted mainly from income of $15,145 , and an increase of account receivable
of $758,055, and an decrease of accounts payable of $316,394, and stock option costs of $309,960, and accrued expenses and other current liabilities of $333,078. The cash used in operating activities in the fiscal year ended May 31, 2008 resulted from loss of $1,973,478 netted against, among other things, stock option costs of $151,060, provision for investment of $70,436, goodwill impairment of $682,988, and accrued expenses and other current liabilities of $432,377.
  Investing activities:
  Net cash used in investing activities during the fiscal year ended May 31, 2009 were $816,959 compared to net cash provided by investing activities of $524,844 for the fiscal year ended May 31, 2008. The cash used in investing activities during the fiscal year ended May 31, 2009 was mainly due to the loan receivable of $822,551 and cash received upon
acquisition of $6,177. The cash provided by investment activities in the fiscal year ended May 31, 2008 was due to the cash received upon disposal of assets of $535,704 and cash decrease due to purchase of property and equipment of $10,860.
  
 18
  Financing activities:
  Cash provided by financing activities during the fiscal year ended May 31, 2009 was $297,719 compared to net cash provided by financing activities of $97,966 during the fiscal year ended May 31, 2008. Net cash provided by financing activities during the fiscal year ended May 31, 2009 was mainly due to proceeds of $900,000 paid by purchasers of shares
of our common stock in private placements and $653,139 cash dividend paid to two subsidaries. Cash provided by financing activities during the fiscal year ended May 31, 2008 was primarily due to $38,414 of sales of common stock and proceed of $59,552 from related parties.
  Off-Balance Sheet Arrangements
  During the fiscal year ended on May 31, 2009, 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.
  ITEM 7A. 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 May 31, 2009, all our cash equivalents represent cash on hand and cash deposit in PRC banks, the interest rate earned on our money market accounts ranged from 0.81% to 1.71% per annum.
 
 Interest Rate Risk
 
 Our cash equivalents are subject to market risk due to changes in interest rates. Interest rate movements affect the interest income we earn on cash equivalents, and funds held for payroll customers and the value of those investments.
  Impact of Foreign Currency Rate Changes
  Since we translate foreign currencies (primarily Chinese Yuans and Hong Kong Dollars) into US dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results. The historical impact of currency fluctuations has generally been immaterial. We believe that our exposure to currency exchange fluctuation risk is
not significant primarily. 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 May 31, 2009, we did not engage in foreign currency hedging activities.
  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  The consolidated financial statements of The Hartcourt Companies, Inc. and its subsidiaries including the notes thereto, together with the report thereon of Kabani & Company, Inc. are presented below.
  
 19
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Stockholders and Board of Directors
 The Hartcourt Companies, Inc.
 
 We have audited the accompanying consolidated balance sheets of The Hartcourt Companies, Inc., a Utah Corporation, and subsidaries (the “Company”) as of May 31, 2009 and 2008 and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended May 31, 2009 and
2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
 We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Hartcourt Companies, Inc. and subsidaries as of May 31, 2009 and 2008 and the results of their operations and their cash flows for the years ended May 31, 2009 and 2008, in conformity with
accounting principles generally accepted in the United States of America.
 
 
 /s/ Kabani & Company, Inc.
 
 CERTIFIED PUBLIC ACCOUNTANTS
 
 Los Angeles, California
 
 September 8, 2009
 
 
 20
 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 As of May 31,


As of May 31,2009


2008ASSETSCash and cash equivalents

$
102,085


$
4,907Accounts Receivable


863,244



-Inventories


1,797



-Loans receivable


822,551



-Prepaid expenses and other current assets


3,995



17,837TOTAL CURRENT ASSETS


1,793,672



22,744PROPERTY & EQUIPMENT – NET


57,640



23,772INTANGIBLE ASSETS - NET


3,923,356



-TOTAL ASSETS

$
5,774,668


$
46,516LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)CURRENT LIABILITIESAccounts payable

$
141,331


$
457,725Accrued expenses and other current liabilities


1,337,571



1,004,489Due to officers


246,862



196,004TOTAL CURRENT LIABILITIES


1,725,764



1,658,218COMMITMENTS & CONTINGENCIESMINORITY INTEREST


152,261



-SHAREHOLDERS' EQUITY (DEFICIENCY)Preferred Stock:Original preferred stock, $0.01 par value, 1,000 shares authorized, issued and cancelled

$
-


$
-Class A preferred stock, 10,000,000 shares authorized, none issued and outstanding


-



-Common stock:$0.001 par value, 424,999,000 authorizedMay 31, 2009: 389,015,544 issued  386,966,816 outstandingMay 31, 2008: 207,810,582 issued 205,761,854 outstanding


386,967



205,762Additional paid in capital


77,156,131



71,795,909Treasury stock, at cost, 2,048,728 shares


(48,728
)


(48,728
)Other comprehensive loss


(143,579
)


(95,353
)Accumulated deficit


(73,454,148
)


(73,469,292
)TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)


3,896,643



(1,611,702
)TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

$
5,774,668


$
46,516
 
 The accompanying notes form an integral part of these consolidated financial statements.
 
 21
 
 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Fiscal Years Ended
May 312009


2008Net revenues

$
2,431,955


$
-Cost of revenues


368,167



-Gross profit


2,063,788



-Operating expenses:General and administrative expenses


1,343,842



1,299,858Depreciation and amortization


20,839



13,510Impairment of goodwill


-



682,988Total operating expenses


1,364,681



1,996,356Income (loss) from operations


699,107



(1,996,356
)Other incomeForeign currency exchange gain


43,648



-Gain on settlement of debt


182,687



-Total other income


226,335



-Income (loss) from operations before income tax provision and minority interest


925,442



(1,996,356
)Provision for income taxes


(212,791
)


-Minority interest, net of taxes


(697,506
)


-Income (loss) from continuing operations


15,145



(1,996,356
)Discontinued operations:Gain/(loss) from discontinued operations


-



22,878Income/(loss) from discontinued operations


-



22,878NET INCOME (LOSS)


15,145



(1,973,478
)OTHER COMPREHENSIVE ITEM:Foreign currency translation loss


(48,226
)


(60,754
)NET COMPREHENSIVE LOSS

$
(33,081
)

$
(2,034,232
)BASIC AND DILUTED EARNINGS/ (LOSS) PER COMMON SHARE:Income/(loss) from continued operations basic

$
0.00


$
(0.01
)Income from discontinued operations basic

$
-


$
0.00Income/(loss) per share basic

$
0.00


$
(0.01
)Basic weighted average number of shares outstanding


304,561,261



205,488,066Income (loss) from continued operations diluted

$
0.00


$
(0.01
)Loss from discontinued operations diluted

$
-


$
0.00Income (loss) per share diluted

$
0.00


$
(0.01
)Diluted weighted average number of shares outstanding


304,561,261



205,488,066
 
 The accompanying notes form an integral part of these consolidated financial statements.
 * Weighted average number of shares used to compute basic and diluted loss per share is the same as the effect of dilutive securities are anti dilutive.
 22
 
 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
 FOR THE FISCAL YEARS ENDED MAY 31, 2009 AND 2008


Common Stock


Additional paid In


Treasury Stock


Comprehensive


Accumulated


Total
Shareholders'
EquityShares


Amount


Capital


Shares


Amount


Income (Loss)


Deficit


(Deficit)Balance -May 31,2007


205,081,997


$
205,082


$
71,570,246



2,048,728


$
(48,728
)

$
(34,598
)

$
(71,495,815
)

$
196,187Shares issued for compensation and service


679,857



680



36,190



-



-



-



-



36,870Shares received from Huaqing


-



-



69,829



997,500



(69,829
)


-



-



-Issuance of shares for cash


-



-



(31,415
)


(997,500
)


69,829



-



-



38,414Other comprehensive loss (foreign currency translation)


-



-



-



-



-



(60,755
)


-



(60,755
)Stock options issued for services


-



-



151,060



-



-



-



-



151,060Net loss


-



-



-



-



-



-



(1,973,477
)


(1,973,477
)Balance -May 31,2008


205,761,854


$
205,762


$
71,795,909



2,048,728


$
(48,728
)

$
(95,353
)

$
(73,469,292
)

$
(1,611,702
)Shares issued for compensation and service


2,204,962



2,205



79,262



-



-



-



-



81,467Issuance of shares for cash


70,000,000



70,000



830,000



-



-



-



-



900,000Other comprehensive loss (foreign currency translation)


-



-



-



-



-



(48,226
)


-



(48,226
)Shares issued for acquisition of Beijing Yanyuan


69,000,000



69,000



3,381,000



















3,450,000Shares issued for acquisition of China Arts and Science Academy


40,000,000



40,000



760,000



















800,000Stock options issued for services


-



-



309,960



-



-



-



-



309,960Net income


-



-



-



-



-



-



15,145



15,145Balance -May 31,2009


386,966,816


$
386,967


$
77,156,131



2,048,728


$
(48,728
)

$
(143,579
)

$
(73,454,148
)

$
3,896,643
 The accompanying notes form an integral part of these consolidated financial statements.
 
 
 23
 
 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Year Ended May 312009


2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
15,145


$
(1,973,478
)Adjustments to reconcile net income (loss) tonet cash provided by (used in) operating activities:Gain on disposal of assets


-



(22,832
)Depreciation and Amortization


185,642



13,510Provision for investment


-



70,436Goodwill impairment


-



682,988Minority interest


697,506



-Stock options issued for services


309,960



151,060Stock issued for services and compensations


81,467



36,190Changes in operating assets and liabilities, net of effect of acquisition of businesses:Accounts receivable


(758,055
)


-Inventory


15,965



-Prepaid expenses and other current assets


100,329



23,712Accounts payable


(316,394
)


(52,478
)Accrued expenses and other current liabilities


333,078



432,377NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES


664,643



(638,514
)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of assets, net of cash acquired


6,177



-Cash received from disposal of fixed assets


(585
)


-Loan receivable


(822,551
)


-Purchase of property and equipment


-



(10,860
)Proceeds from disposal of Subsidiary


-



535,704NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES


(816,959
)


524,844
 The accompanying notes form an integral part of these consolidated financial statements.
 
 24
  THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)
 Fiscal Year Ended May 312009


2008CASH FLOWS FROM FINANCING ACTIVITIESProceeds from related parties


-



59,552Due to officer


50,858



-Cash dividend paid to subsidiaries


(653,139
)


-Proceeds on sale of common stock


900,000



38,814NET CASH USED IN FINANCING ACTIVITIES


297,719



97,966EFFECT OF EXCHANGE DIFFERENCE


(48,225
)


-NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENT


97,178



(15,705
)CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR


4,907



20,611CASH AND CASH EQUIVALENTS - END OF YEAR

$
102,085


$
4,907SUPPLEMENTAL DISCLOSURE OF CASH FLOWSCash paid for interest

$
-


$
-Cash paid for income taxes

$
-


$
-NON-CASH INVESTING AND FINANCING ACTIVITIES:In Conjunction with acquisition/disposal of subsidiaries:Fair value of shares issued

$
4,250,000


$
69,829-COMPANY ACQUIRED TWO SUBSIDARIES DURING THE YEAR FORM THE ASSETS AND LIABILITIES:Account receivable

$
105,189


$
-Inventories

$
17,762


$
-Prepaid expenses and other current assets

$
86,487


$
-Property and equipment

$
54,121


$
-
  The accompanying notes form an integral part of these consolidated financial statements.
 25
 
 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1GENERAL
 
 The Hartcourt Companies, Inc. ("Hartcourt" “We/Our” or the "Company"), was incorporated in Utah in 1983.  Previously, we were a distributor of internationally well known brand named IT hardware products and related services in the People’s Republic of China (“PRC”). In August 2006, we
announced our intention to change our business by focusing on the vocational/training and education marketplace in the People’s Republic of China.
 
 On May 15, 2007, we completed the purchase of 100% of the equity interests in China Princely Education Technology Development Company Limited (“China Princely”), an authorized accrediting organization for China vocational education located in Beijing, PRC. Under the terms of the purchase agreement,
we paid to the shareholders of China Princely 5,400,000 shares of our restricted common stock at closing.  After closing, we changed the name of China Princely to Hartcourt Princely Education Technology Development (Beijing) Co., Ltd.
  On June 13, 2008, The Hartcourt Companies, Inc. (the “Company”) entered into a definitive agreement to purchase 60% of the equity interests in Beijing Yanyuan Rapido Education Company (“Beijing Yanyuan”), a well-known training institution in China. Under the terms of the definitive agreement executed between Beijing Yanyuan and
the Company, the purchase price that the Company agreed to pay to the shareholders of Beijing Yanyuan 69 million shares of the Company’s restricted common stock, which, pursuant to the purchase agreement, will be payable upon closing of the acquisition. Hartcourt has the right to waive the following commitment of profitability; Beijing Yanyuan committed that its net profit would exceed RMB 6 million (US$827,000) for the seven months of calendar year 2008, RMB10 million (US$1.379 million) for the calendar
year 2009, and RMB14 million (US$1.931 million) for the calendar year 2010.
 
 On July 23, 2008, The Hartcourt Companies (the “Company”) completed the acquisition of 60 percent of the outstanding equity interests of Beijing Yanyuan Rapido Education Company (“Beijing Yanyuan”) pursuant to the terms of the definitive agreement entered into between the two parties. Subject
to the definitive agreement between the Company and Beijing Yanyuan, the purchase price paid by the Company in connection with its acquisition of a controlling interest in Beijing Yanyuan was 69 million shares of the Company’s restricted common stock.
 
 On October 18, 2008, the Company entered into a definitive agreement to purchase 60% of the outstanding equity interests of China Arts and Science Academy. Under the terms of the definitive agreement executed between China Arts and Science Academy and Hartcourt; Hartcourt has the right to waive the following commitment
of profitabilitiy; China Arts and Science Academy committed that its net profit would exceed RMB5 million (US$735,294) for the first year (November 1, 2008 to October 31, 2009) in which its results are consolidated with Hartcourt’s, RMB7.5 million (US$1.103 million) for the second year (November 1, 2009 to October 31, 2010) in which its results are consolidated with Hartcourt’s, and RMB10 million (US$1.471 million) for the third year (November 1, 2010 to October 31, 2011) in which its results are
consolidated with Hartcourt’s. The restricted common shares issued by Hartcourt for the acquisition will be released to those shareholders of China Arts and Science Academy whose equity interests were purchased by Hartcourt in three installments based on the profit realized by China Arts and Science Academy over the three-year period beginning on the date of Hartcourt’s purchase of 60% of the outstanding equity interests of China Arts and Science Academy.
 
 On October 31, 2008, The Hartcourt Companies Inc. (the “Company”) completed the acquisition of 60 percent of the outstanding equity interests of China E & I Development Co. Ltd., which does business as the China Arts and Science Academy (“China Arts and Science Academy”), pursuant to the
terms of the definitive agreement entered into between the two parties.  Under the agreement between the Company and China Arts and Science Academy, the purchase price paid by the Company in connection with its acquisition of a controlling interest in China Arts and Science Academy was 40 million shares of the Company’s restricted common stock.
  26
 
 As of May 31, 2009, the Company owns 100% of three (3) British Virgin Island (“BVI”) incorporated companies: (1) Hartcourt China Inc., (2) Hartcourt Capital Inc., and (3) AI-Asia Inc. All three of these BVI subsidiaries are holding companies for assets located in China.
 
 As of May 31, 2009, Hartcourt Capital Inc. owns 100% of the equity interest of Hartcourt Hi-Tech Investment (Shanghai) Inc. while Hartcourt Hi-Tech Investment (Shanghai) Inc., through nominee shareholder, owns 100% of the equity interest of Shanghai Jiumeng Information Technology Co., Ltd. These two companies are located
in Shanghai, China. In April 2007, the Company decided to wind up Hartcourt Hi-Tech Investment (Shanghai) Inc. As of May 31, 2008, the wind-up process was completed. Shanghai Jiumeng Information Technology Co., Ltd owns 60% of the equity interest of Beijing Yanyuan Rapido Education Company.
 
 As of May 31, 2009, AI-Asia, Inc., the third holding company, owns 100% of the equity interest of Hartcourt Education Investment Management Consulting (Shanghai) Co., Ltd (former name is AI-Asia (Shanghai) Information Technology, Inc), located in Shanghai, China, and owns 100% of the equity interest of Hartcourt Princely.
AI-Asia, Inc owns 60% of the equity interest of China Arts and Science Academy.
 
  NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  a)Basis of Consolidation
  For purposes of these consolidated financial statements, the Hartcourt Companies Inc. and subsidiaries are referred to collectively as the "Company" or "Hartcourt".  The accompanying consolidated financial statements for the Company include the accounts balances of its majority owned subsidiaries.
  All material inter-company balances and transactions have been eliminated in consolidation.
  b)Use of Estimates
  The preparation of the consolidated financial statements in conformity with Generally Accepted Accounting Principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date
of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
  c)Cash and Cash Equivalents
  The Company considers all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less to be cash equivalents. As Hartcourt’s business activities are located in China, substantial amounts of cash are deposited in foreign banks located
in China, which do not have the protection programs similar to that of the US (FDIC).
  d)Prepaid expenses
  Prepaid expenses are expenses that are allocated into the period in which they are incurred and in subsequent periods, and be amortized within one year (inclusive). They include amortization of low-valued consumables, prepaid insurance expenses, lump-sum payment for stamps in large amount that need to be amortized.
  Prepaid expenses generally will be amortized in equal installments and charged as costs or expenses of periods benefiting within one year. If certain prepaid expense item cannot benefit the Company any more, its un-amortized amount is recorded as an expense for the current period. Prepaid expenses amounted to $3,995 and $17,837 at May 31, 2009 and 2008 respectively and
is included in “Prepaid expenses and other current assets” in the accompanying financial statements.
  e) Inventories
  Inventories are valued at the lower of cost, determined by the first-in, first-out method, or market value.
  f)Property and Equipment
  Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over useful lives of 3 to 10 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected
in current operations. Expenditures for maintenance and repairs are charged to operations as incurred.
  g)Intangible Assets
  The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing
their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired.
  27
 
 h)Impairment of Long-Lived Assets
  Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of May 31, 2009, there was no impairments of its long-lived assets used in operations.
For the year ended May 31, 208, goodwill was impaired in the amount of $682,988.
 
 i) Revenue Recognition
  Revenue is recognized upon the service provided. No allowance for doubtful account derived necessary for the years ended May 31, 2009 and 2008, respectively.
  j)Income Taxes
  The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
  k)Stock-Based Compensation
  The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS No. 123R”), under the modified-prospective transition method on June 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments
based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all share-based payments granted prior to and not yet vested as of June 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R
for all share-based payments granted after June 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for the Company’s stock option plans using the intrinsic value method in accordance
with the provisions of APB Opinion No. 25 and related interpretations.
  l)Foreign Currencies Translation
  Assets and liabilities in foreign currency are recorded at the balance sheet date at the rate prevailing on that date. Items of income statement are recorded at the average exchange rate. Gain or loss on foreign currency transactions are reflected on the income statements. Gain or loss on financial statement translation
from foreign currency are recorded as a separate component in the equity section of the balance sheets, as component of comprehensive income (loss). The functional currencies of the Company are Chinese Renminbi and Hongkong Dollars. The following companies are using Chinese Renminbi: Al-Asia Inc., Hartcourt Princely, Hartcourt Education Investment Management Consulting (Shanghai) Co., Ltd, Beijing Yanyuan Rapido Education Company, China Arts and Science Academy, Hartcourt Hi-Tech Investment (Shanghai) Inc., and
Shanghai Jiumeng Information Technology Co., Ltd. The following companies are using Hongkong Dollars: Hartcourt China Inc. and Hartcourt Capital.
  m) Fair Value of Financial Instruments
  Statement of Financial Accounting Standard No. 107, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial
instruments are a reasonable estimate of fair value.
  28
  The Company’s financial instruments consists of primarily cash, accounts receivable, loan receivables,  advances, accounts payable and accrued expenses, and other current liabilities which approximates fair value because of the relatively short maturity of those instruments.
 
 n)Basic and diluted earning per share
  Earning per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net earning per share for all periods presented has been restated to reflect the adoption
of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net earning per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common
stock at the average market price during the period.
  o)Recently Issued Accounting Standards
 
 In December 2007, the Financial Accounting Standards Board (“FASB”) simultaneously issued SFAS No. 141R, “Business Combinations (2007 Amendment),” and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51.”  Both standards update United
States guidance on accounting for “noncontrolling interests,” sometimes referred to as minority interests, which interests represent a portion of a subsidiary not attributable, directly or indirectly, to a parent. FASB and the International Accounting Standards Board (“IASB”) have been working together to promote international convergence of accounting standards. Prior to promulgation of these new standards there were specific areas in accounting for business acquisitions in which conversion
was not achieved. The objective of both standards is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in “business combinations” and consolidated financial statements by establishing accounting and reporting standards. In business combinations it is accomplished by establishing principles and requirements concerning how an “acquirer” recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling
interest in the acquiree, as well as goodwill acquired in the combination or gain from a bargain purchase; and determines information to be disclosed to enable users to evaluate the nature and effects of business combinations. In consolidated financial statements the standards require: identification of ownership interests held in subsidiaries by parties other than the parent be clearly identified, labeled and presented in consolidated financial position within equity (rather than “mezzanine” between
liabilities and equity) separately from amounts attributed to the parent, with net income attributable to the parent and to the minority interest clearly identified and presented on the face of consolidated statements of income. The standards also provide guidance in situations where the parent’s ownership interest in a subsidiary changes while the parent retains its controlling financial interest. The standard also provides guidance on recording a gain or loss based on fair value in situations involving
deconsolidation of a subsidiary. Entities must provide sufficient disclosures that distinguish between interests of the parent and that of the noncontrolling interest.
  Both standards are effective for fiscal years and interims beginning on or after December 15, 2008 (that is January 1, 2009) for entities with calendar years. Earlier adoption is prohibited. The standards shall be applied prospectively as of the beginning of the fiscal year in which initially applied, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented. The Company does not anticipate that the adoption of SFAS No. 141R and No. 160 will have an impact on the Company's overall results of operations or financial position, unless the Company makes a business acquisition in which there is a noncontrolling interest.
  In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable
dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. This FSP is effective for us beginning July 1, 2009 and the Company does not expect that FSP EITF No. 03-6-1 would have a material impact on the financial statements.
  29
  In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 require companies to disclose in interim financial statements the fair value of financial instruments within
the scope of FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments. However, companies are not required to provide in interim periods the disclosures about the concentration of credit risk of all financial instruments that are currently required in annual financial statements. The fair-value information disclosed in the footnotes must be presented together with the related carrying amount, making it clear whether the fair value and carrying amount represent assets or liabilities and how
the carrying amount relates to what is reported in the balance sheet. FSP FAS 107-1 and APB 28-1 also requires that companies disclose the method or methods and significant assumptions used to estimate the fair value of financial instruments and a discussion of changes, if any, in the method or methods and significant assumptions during the period. The FSP shall be applied prospectively and is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. An entity early adopting FSP FAS 107-1 and APB 28-1 must also early adopt FSP FAS 157-4 as well as FSP FAS 115-2 and FAS 124-2. The Company will adopt the disclosure requirements of this pronouncement for the quarter ended June 30, 2009, in conjunction with the adoption of FSP FAS 157-4, FSP FAS 115-2 and FAS 124-2.
  In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (“SFAS 165”). SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 will be effective for interim or annual period ending after June 15, 2009 and will be applied prospectively. The Company will adopt the requirements of this pronouncement for the quarter ended June 30, 2009. The Company does not anticipate the adoption of SFAS 165 will
have an impact on its consolidated results of operations or consolidated financial position.
 In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct
the activities of the entity that most significantly impact the entity’s economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after November 15, 2009.
  NOTE 3     EARNINGS/(LOSSES) PER SHARE
 
 Basic and diluted (loss) income per common share is computed as follows:
 May 31,
2009


May 31,
2008Net Income (loss)

$
15,145


$
(1,973,477
)Weighted average shares outstanding


304,561,261



205,488,066Basic and dilutive earnings/(losses) per share

$
0.00


$
(0.01
)
 
 As of May 31, 2009, we had 29,200,000 options outstanding, each exercisable for one share of our common stock. Weighted average number of shares used to compute basic and diluted loss per share is the same as the effect of dilutive securities are anti dilutive.
  NOTE 4SHAREHOLDERS’ EQUITY
 
 a) Capitalization
 
 The total number of shares of stock which the Company has the authority to issue is 434,999,000 consisting of 424,999,000 shares of common stock, $0.001 par value, 1,000 shares of original preferred stock, $0.01 par value (the Original Preferred Stock), and 10,000,000 shares of Class A preferred stock. The total number
of shares of the Company’s common stock outstanding as of May 31, 2009 and May 31, 2008 are 386,966,816 and 205,761,854 respectively.
   30
 
 b) Original Preferred Stock
 
 On July, 14, 2004, the founder of Hartcourt, Dr. Alan V Phan, converted his 1,000 shares of Original Preferred Stock into 2,000,000 shares of Hartcourt common stock. After the conversion, no Original Preferred Stock was outstanding as of May 31, 2008.
 
 c) Class A Preferred Stock
 
 The 10,000,000 shares of authorized and un-issued Class A Preferred Stock may be split with such designations, power, preferences and other rights and qualifications, limitations and restrictions thereof as the Company’s Board of Directors elects for a given series. No shares have been issued.
 
 d) Equity Transactions during the Year
 
 Following is the summary of equity transactions during the year ended May 31, 2009.
 
 On July 22, 2008, the Company issued to the former shareholder of Beijing Yanyuan in an offshore transaction under Regulation S an aggregate of 69 million shares of the Company’s restricted common stock pursuant to the terms of the definitive purchase agreement.
 
 On October 31, 2008, the Company issued to the former shareholders of China Arts & Science Academy in an offshore transaction under Regulation S an aggregate of 40,000,000 shares of the Company’s restricted common stock pursuant to the terms of the definitive purchase agreement.
 
 On November 1, 2008, the Company issued 20,000,000 shares of the Company’s restricted common stock to fund raisers for cash in an offshore transaction under Regulation S at $0.02 per share for gross proceeds of $400,000. The proceeds were used for working capital.
 
 On November 24, 2008, the Company issued 872,716 shares of the Company’s restricted common stock valued at $31,446 to Wilson Li in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 272,120 shares of the Company’s restricted common stock valued at $9,805 to Stephen Tang in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 176,644 shares of the Company’s restricted common stock valued at $6,365 to George Xu in lieu of cash payment for director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On November 24, 2008, the Company issued 313,763 shares of the Company’s restricted common stock valued at $11,306 to Geferry Wei in lieu of cash payment for former director service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On January 1, 2009, the Company issued 271,809 shares of the Company’s restricted common stock valued at $7,355 to the Chief Financial Officer in lieu of cash payment for service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On January 1, 2009, the Company issued 297,910 shares of the Company’s restricted common stock valued at $15,190 to the General Manager of China Princely in lieu of cash payment for service compensation, which was approximately equal to the fair market value of the stock at issue date.
 
 On May 4, 2009, the Company issued 50,000,000 shares of the Company’s restricted common stock to fund raisers for cash in an offshore transaction under Regulation S at $0.01 per share for gross proceeds of $500,000. The proceeds were used for working capital.
  31
 
 Stock Option Plan
 
 In November 2005, the Company adopted a stock option plan to attract and retain qualified persons for positions of substantial responsibility as officers, directors, consultants, legal counsel, and other positions of significance to the Company (the “2005 Plan”). The 2005 Plan provides for the issuance of
stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock-related awards and performance awards that may be settled in cash, stock, or other property. The total number of shares of our common stock that may be subject to awards under the 2005 Plan is equal to 35,000,000 shares, plus (i) the number of shares with respect to which awards previously granted under the 2005 Plan that terminates without the issuance of the shares or where the shares are
forfeited or repurchased; (ii) with respect to awards granted under the 2005 Plan, the number of shares which are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award and (iii) the number of shares that are surrendered or withheld in payment of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2005 Plan. Unless earlier terminated by our Board of Directors, the
2005 Plan will terminate on the earlier of (1) ten years after the later of (x) its adoption by our Board of Directors, or (y) the approval of an increase in the number of shares reserved under the 2005 Plan by our Board of Directors (contingent upon such increase being approved by our shareholders) and (2) such time as no shares of our common stock remain available for issuance under the 2005 Plan and we have no further rights or obligations with respect to outstanding awards under the 2005 Plan. Options granted
under the 2005 Plan are restricted as to sale or transfer.
 
 The 2005 Plan was approved on November 23, 2005 during the annual shareholders meeting.
 
 The number of shares of common stock reserved and available under the 2005 Plan was increased from 35,000,000 to 70,000,000 at the annual meeting of shareholders on February 24, 2007.
 
 On September 1, 2008, the Company granted Victor Zhou CEO of the Company, an option to purchase the Company’s common stock at exercise price of $0.03 according to the following vesting schedule and based on the 2005 Plan.
 -
7,500,000 stock options vested pro rata over 2 years of the employment contract period.-
3,000,000 stock options vested upon each successful new business acquisition of the Company.-
3,000,000 stock options vested upon each full profitable year.
 
 The following assumptions were used to calculate the fair value of the options granted:
 Risk-free interest rate
4.92%Weighted average expected life of the options
6.25 yearsExpected volatility
127.39%Expected dividend yield
0
 
 On September 11 2008, the Company granted Wilson Li, Chairman of the Board, an option to purchase 5,000,000 shares of the Company’s common stock at exercise price of $0.03. The option will vest on September 11, 2010 and is exercisable within five years time after vesting.
 
 The following assumptions were used to calculate the fair value of the options granted:
 Risk-free interest rate
4.92%Weighted average expected life of the options
7.00 yearsExpected volatility
127.39%Expected dividend yield
0
 
 On September 11 2008, the Company granted each of Stephen Tang and George Xu, independent directors of the Company, an option to purchase 1,000,000 shares of the Company’s common stock at exercise price of $0.03. Each option will vest on September 11, 2010 and is exercisable within five years time after vesting.
 
 The following assumptions were used to calculate the fair value of the options granted:
 Risk-free interest rate
4.92%Expected life of the options
7.00 yearsExpected volatility
127.39%Expected dividend yield
0
   32
 
 The following table summarizes the activity of stock options:
  WeightedAverage


AggregateNumber of


Exercise


IntrinsicOptions


Price


ValueShares under options at May 31, 2007


24,600,000


$
0.13


$
-Granted


29,000,000


$
0.05Exercised


-



-Expired


3,000,000


$
0.30Cancelled


16,000,000


$
0.09Shares under options at May 31, 2008


34,600,000


$
0.06


$
690,000Granted


20,500,000



-Exercised


-



-Expired


-



-Cancelled


25,900,000



-Shares under options at May 31, 2009


29,200,000


$
0.03


$
-
 Additional information relating to stock options outstanding and exercisable at May 31, 2009 summarized by the exercise price is as follows:
 
 WeightedNumber of

Average

Weighted

Number

WeightedRange of

Outstanding at

Remaining

Average

Exercisable at

AverageExercise

May 31,

Contractual

Exercise

May 31,

ExercisePrice

2009

Life

Price

2009

Price$0.03 - $0.05

29,000,000

4.84 Year

$0.04

10,375,000

$0.04$0.09

200,000

1.77 Year

$0.09

200,000

$0.09
 
 During the year ended May 31, 2009, 6,812,500 vested and the Company recorded $309,960 amortization in stock based compensation expense.
 
 Additional information relating to stock options outstanding and exercisable at May 31, 2008 summarized by the exercise price is as follows:
 
 WeightedNumber of

Average

Weighted

Number

WeightedRange of

Outstanding at

Remaining

Average

Exercisable at

AverageExercise

May 31,

Contractual

Exercise

May 31,

ExercisePrice

2008

Life

Price

2008

Price$0.04 - $0.05

29,000,000

4.2 Year

$0.05

18,250,000

$0.05$0.09

5,300,000

2.8 Year

$0.09

5,300,000

$0.09$1.00

300,000

0.44 Year

$1.00

300,000

$1.00
 
 During the year ended May 31, 2008, a total of 14,500,000 options vested and the Company recorded $151,060 amortization in stock based compensation expense.
 
 b) Warrants
  There are no warrants outstanding for the years ended May 31, 2009 and 2008.
   33
 NOTE 5     ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  Accrued expenses and other current liabilities as of May 31, 2009 and 2008 are summarized as follows:
  Amount


AmountMay 31, 2009


May 31, 2008Accrued professional fees

$
51,583


$
148,675Income tax payable


293,166



126Payroll payable


681,306



547,463Welfare


10,073



10,108Other payable


501,443



298,117Total

$
1,337,571


$
1,004,489
 
  NOTE 6     PROPERTIES AND EQUIPMENT
  The Company’s property and equipment as of May 31, 2009 and 2008 are summarized as follows:
  My 31, 2009


My 31, 2008Office equipment and computers


$
126,739


$
72,032Less: accumulated depreciation



(69,099
)


(48,260
)Property and equipment, net


$
57,640


$
23,772
 
 Depreciation expense from operating expenses for the year ended May 31, 2009 and 2008 were $20,839 and $13,510, respectively.
    Year ending May 31:2010

$
23,9512011


21,3352012


5,6082013


3,9752014


1,532Thereafter


1,239$
57,640
  NOTE 7      RELATED PARTY TRANSACTIONS
 
 The following is a summary of related party transactions for the year ended May 31, 2009:
 
 During the year ended May 31, 2009, Hartcourt issued 1,321,480 shares of common stock valued at $39,644 to its directors in lieu of cash compensation, issued 271,809 shares of common stock valued at $7,355 to its Chief Financial Officer in lieu of cash compensation. The stocks were valued at the average market price for
the period for which service were provided.
  Due to officer amount of $246,862 for the year ended May 31, 2009 is non-interest bearing and due on demand.
  The following is a summary of related party transactions for the year ended May 31, 2008:
 
 During the year ended May 31, 2008, Hartcourt issued 383,120 shares of common stock valued at $25,001 to its directors in lieu of cash compensation. The stocks were valued at the average market price for the period for which service were provided.
 
 Due to officer amount of $196,004 for the year ended May 31, 2008 is non-interest bearing and due on demand.
 
 
 34
 
 
 NOTE 8   LOAN RECEIVABLE
 
 Company advanced loans to agents to market their courses to the students and individual. As at May 31, 2009, these loans comprised of the following:
  1

Loan to sales agent, interest free, secured and amount due January 15, 2010

$
175,6342

Loan to sales agent, interest free, secured and amount due February 15, 2010


190,2703

Loan to sales agent, interest free, secured and amount due February 28, 2010


175,6344

Loan to individual, 10% interest, secured and amount due March 31, 2010


105,3805

Loan to individual, 10% interest, secured and amount due April 15, 2010


175,634$
822,552
  All loans are secured by pledge of building license owned by the agents and individual. Managment expects these loans receivable to be collectible.
 
 NOTE 9INTANGIBLE ASSETS
 
 The Company accounts for its intangible assets under the applicable guidelines of SFAS 142 “goodwill and other intangible assets” and SFAS 144 “accounting for the impairment or disposal of long lived assets”.  Where intangible assets have finite lives, they are amortized over their useful life unless factors exist to
indicate that the asset has been impaired.  The Company evaluates if the assets are impaired annually or on an interim basis if an event occurs or circumstances change to suggest that the assets value has diminished.  Under SFAS 142 intangible assets with indefinite useful lives are required to be tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets is measured
by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets.  If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.  During year ended May 31, 2009, the Company recognized no impairment. During the year ended May 31, 2008, the Company impaired its goodwill in the amount of $682,988.
 
 At May 31, 2009, intangibles consist of the following:
 
 Intangibles

Gross Carrying
Amount


Accumulated
Amortization


NetCourse Software

$
724,882


$
(21,057)


$
703,825Course Material


3,363,276



(143,745)



3,219,531$
4,088,158


$
(164,802)


$
3,923,356
 
 Life of intangible assets is twenty years. Amortization expense from continuing operation included cost of revenue for the year ended May 31, 2009 was $164,802.  We expect amortization expense for the next five years to be as follows:
 
 Year ending May 31:2010

$
204,4082011


204,4082012


204,4082013


204,4082014


204,408Thereafter


2,901,316$
3,923,356
 
  35
 
 NOTE 10     COMMITMENTS AND CONTINGENCIES
 
 a) Employment Agreements
 
 On and effectiveAugust 11, 2008, the Board of Directors of the Company appointed Ms. Rachel Zhang to be the Chief Financial Officer. Ms. Zhang will be employed part time in this capacity. Ms Zhang’s compensation is $2,000 per month.
 
 On September 1, 2008, The Company signed the new employment contract with Mr. Victor Zhou. The compensation includes an annual base salary of $150,000, payable by equal monthly installment of $12,500. In addition, Mr. Zhou was granted stock options with exercise price of $0.03. The stock option vesting schedule is as
following.
 -
7,500,000 stock options vested pro rata over 2 years of the employment contract period.
 -
3,000,000 stock options vested upon each successful new business acquisition of the Company.
 -
3,000,000 stock options vested upon each full profitable year.
 
 b) Operating Leases
  The Company leases its offices and facilities under long-term, non-cancelable lease agreements expiring at various dates through January 27, 2010. 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 fiscal year ended May 31, 2009 and 2008 were $90,455 and $87,391, respectively.
  The future minimum annual lease payments required under this operating lease are as follows:
  Year Ending May 31,

Payments2010

$
15,807
 
 c) Legal Proceedings
  Hartcourt Hi-Tech Investment (Shanghai) Inc. filed a compliant against Beijing Yi Zhi He Lian Information Technology Co., Ltd for returning RMB 1,000,000 (US $146,235) which it owed the Company. On December 19, 2006, Beijing Shi Jing Shan District Court entered the judgment in this case. The court found that Hartcourt
Hi-Tech Investment (Shanghai) Inc. has no rights to file the compliant against Beijing Yi Zhi He Lian Information Technology Co., Ltd. unless designated by Hartcourt Capital, Inc., which signed and was bound by the acquisition agreement. The court issued an order overruling the complaint from Hartcourt Hi-Tech Investment (Shanghai)., Inc. as the plaintiff. The plaintiff can appeal to Beijing No. 1 Intermediate People’s Court if objecting to the rule. The Company has prepared additional lawsuit material
and lodged the petition to appeal to Beijing No. 1 Intermediate People’s Court.
 
 On August 10, 2007, Hartcourt Capital Inc filed a lawsuit in the Beijing No. 1 Intermediate People’s Court against Beijing Yi Zhi He Lian Information Technology Co., Ltd to return the RMB 1,000,000 which it owes the Company. On December 10, 2008, The Beijing Senior People’s Court issued an order to withdraw
the civil ruling of the Beijing No. 1 Intermediate People’s Court under no. 10077, order Beijing No. 1 Intermediate People’s Court to judge again.  The lawsuit is under judgment and the outcome cannot be estimated as of May 31, 2009.
   36
 
 NOTE 11INCOME TAXES
 
 As of the fiscal years ended May 31, 2009 and 2008, the Company had a net operating income (loss) for tax purposes of approximately $322,000 and ($1,349,000), respectively. The net operating loss carry forward may be used to reduce taxable income through the year 2027.
 
 The gross deferred tax asset balance as of May 31, 2009 and May 31, 2008 was $1,056,000and $1,007,000 respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot reasonably be assured. Components of deferred tax asset are as follows:
  May 31, 2009


May 31, 2008Deferred tax asset net operation loss

$
1,079,000


$
1,007,000Less: valuation allowance


(1,079,000
)


(1,007,000
)$
-


$
-
 
 The following is a reconciliation of the income tax rate to the income taxes reflected in the Statement of Operations:
 
 May 31, 2009


May 31, 2008Income tax expense (credit) at statutory rate-federal

$
(870,000
)

$
(770,000
)State tax expense (credit) net of federal tax


(209,000
)


(237,000
)Valuation allowance


1,056,000



1,007,000Foreign income tax


212,791



-Income tax expense

$
212,791


$
-
  Income tax expense for the year ended May 31, 2009 is $212,791, consists of tax on income of the Company’s subsidiaries in China, for the year ended May 31, 2008 was $0 which is none part of discontinued operations.
 
 For all years presented, the Company did not recognized any deferred tax assets or liabilities. The net change in valuation allowance for the years ended May 31, 2009 and 2008 were an increase of $72,000 and a decrease of $329,000, respectively.
 
 NOTE 12      ACQUISITION OF BEIJING YANYUAN
 
 On June 13, 2008, the Company entered into a definitive agreement to purchase 60% of the outstanding equity interests of Beijing Yanyuan. Under the terms of the agreement between Beijing Yanyuan and the Company; Hartcourt has the right to waive the following commitment of profitability; Beijing Yanyuan commitment
that its net profit would exceed RMB 6 million (US $827,000) for the seven months of calendar year 2008, RMB 10 million (US $1.379 million) for the calendar year 2009, and RMB 14 million (US $1.931 million) for the calendar year 2010. In connection with the acquisition, the Company issued 69 million common shares issued to the former shareholder of Beijing Yanyuan. As per the agreement the restriction on the shares will be released in three installment based on
the realization of profit over the thirty-one months period from 2008 to 2010. If the profit realized by Beijing Yanyuan in any of the three years in the period from 2008 to 2010 is less than the profit target committed by Beijing Yanyuan for such calendar year, then the number of shares will be recalculated and equal to the shares issuable time the percentage of profit realized divided by the profit target. The Company has the right to take back the rest of the shares for free.
 
 On July 23, 2008, The Hartcourt Companies (the “Company”) completed the acquisition of 60 percent of the outstanding equity interests of Beijing Yanyuan Rapido Education Company (“Beijing Yanyuan”) pursuant to the terms of the definitive agreement entered into between the two parties. Subject
to the definitive agreement between the Company and Beijing Yanyuan, the purchase price paid by the Company in connection with its acquisition of a controlling interest in Beijing Yanyuan was 69 million shares of the Company’s restricted common stock.
 
  37
 The purchase price was determined using fair market value at the closing date of the transaction. The purchase price per share of the Company’s common stock was $0.05. Each share of common stock was valued at $0.05 resulting in a purchase price of $3,450,000. The assets acquired in this acquisition include
course material. A summary of the Beijing Yanyuan assets acquired and the consideration for such assets is as follows:
 
 Estimated Fair ValuesCurrent Assets, including cash $1,505

$
63,452Property & equipment


23,272Net Assets Acquired


86,724Shares issued as consideration


3,450,000Course material

$
3,363,276
 
 The operating results of Beijing Yanyuan have been consolidated with those of the Company beginning July 23, 2008. No pro-forma financial information has been presented as the operations of Beijing Yanyuan before the acquisition, were insignificant.
 
 Mr. Zhenyu Hu, was the former owner of Beijing Yanyuan and currently the officer of Beijing Yanyuan, guaranteed, as per the terms of the agreement, if Beijing Yanyuan will not achieve 75% of the profit target for the following three years starting 2008 to 2010, Mr. Hu will compensate Hartcourt in cash equivalent
to the amount of profit target not achieved. In addition, as per the terms of the agreement, if Beijing Yanyuan can not achieve 60% of the profit target for any year starting 2008 to 2010, Hartcourt has the right to receive the entire 69 million shares from Beijing Yanyuan which were paid as part of purchase consideration.
 
 NOTE 13     ACQUISITION OF CHINA ARTS & SCIENCE ACADEMY
 
 On October 18, 2008, the Company entered into a definitive agreement to purchase 60% of the outstanding equity of China Arts and Science Academy. Under the terms of the definitive agreement executed between China Arts and Science Academy and Hartcourt; Hartcourt has the right to waive the following commitment of
profitability; China Arts and Science Academy committed that its net profit would exceed RMB5 million (US$735,294) for the first year (November 1, 2008 to October 31, 2009) in which its results are consolidated with Hartcourt’s, RMB7.5 million (US$1.103 million) for the second year (November 1, 2009 to October 31, 2010) in which its results are consolidated with Hartcourt’s, and RMB10 million (US$1.471 million) for the third year (November 1, 2010 to October 31, 2011) in which its results are consolidated
with Hartcourt’s. The restricted common shares issued by Hartcourt for the acquisition will be released to those shareholders of China Arts and Science Academy whose equity interests were purchased by Hartcourt in three installments based on the profit realized by China Arts and Science Academy over the three-year period beginning on the date of Hartcourt’s purchase of 60% of the outstanding equity interests of China Arts and Science Academy.  If the profit realized by China Arts and Science
Academy in any of the three one-year periods is less than the profit target committed to by China Arts and Science Academy for such one-year period, then the number of shares issuable by the Company equal to the shares issuable time the percentage of profit realized divided by the profit target. The Company has the right to take back the rest of the shares for free.
 
 On October 31, 2008, The Hartcourt Companies Inc. (the “Company”) completed the acquisition of 60 percent of the outstanding equity interests of China E & I Development Co. Ltd., which does business as the China Arts and Science Academy (“China Arts and Science Academy”), pursuant to the
terms of the definitive agreement entered into between the two parties.  Under the agreement between the Company and China Arts and Science Academy, the purchase price paid by the Company in connection with its acquisition of a controlling interest in China Arts and Science Academy was 40 million shares of the Company’s restricted common stock.
 
 The purchase price was determined using fair market value at the closing date of the transaction. The purchase price per share of the Company’s common stock was $0.02. Each share of common stock was valued at $0.02 resulting in a purchase price of $800,000. The assets acquired in this acquisition include course
software. A summary of the China Arts & Science Academy assets acquired and the consideration for such assets is as follows:
 
 Estimated Fair ValuesCurrent Assets, including cash $4,672

$
65,917Property & equipment


9,201Net Assets Acquired


75,118Shares issued as consideration


800,000Course Software

$
724,882
   38
 
 The operating results of China Arts and Science Academy have been consolidated with those of the Company beginning November 1, 2008. No pro-forma financial information has been presented as the operations of China Arts and Science Academy before the acquisition, were insignificant.
  NOTE 14     CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
 
 The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and 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 factors.
 
 NOTE 15     SUBSEQUENT EVENTS (UNAUDITED)
 
 On August 20, 2009, Hartcourt and its subsidiaries, Maple China Education Incorporated, a Delaware corporation, and Hartcourt Education Investment Management Consulting (Shanghai) Co., Ltd., a company existing under the Company Law of the People’s Republic of China, entered into a plan of reorganization and
share exchange agreement (the “Share Exchange Agreement”) with Sino-Canada, its subsidiaries, Sino-Canada High School, a private educational non-enterprise institution existing under the laws of the People’s Republic of China, Wujiang Huayu Property Management Company, a company existing under the Company Law of the People’s Republic of China, Canadian Learning Systems Corporation, a company existing under the laws of the British Virgin Islands, each of the shareholders of Sino-Canada
(the “Shareholders”) and Ross Yuan, in the capacity as representative of the Shareholders. Unless the context requires otherwise, reference herein to Hartcourt includes reference to its subsidiaries and reference to Sino-Canada includes reference to its subsidiaries referenced above.
 
 Transactions
 
 The Share Exchange Agreement provides that Hartcourt will acquire all of the issued and outstanding shares of Sino-Canada. Immediately prior to the closing of the acquisition, Hartcourt will effect a reincorporation from the State of Utah to the State of Delaware, a 1 for 80 reverse stock split and a name change,
by merging into its wholly-owned subsidiary, Maple China Education Incorporated. The surviving corporation in the reincorporation will be Maple China Education Incorporated.
 
 Acquisition Consideration
 
 In exchange for all of the issued and outstanding shares of capital stock of Sino-Canada, Hartcourt will issue approximately $33,623,963, worth of shares of its common stock at an agreed upon price of $0.88 per share (post-split) to the Sino-Canada shareholders in exchange for all of the issued and outstanding capital
stock of Sino-Canada. Hartcourt will issue 38,209,049 shares of Hartcourt common stock in a private placement in satisfaction of the purchase price. The aggregate purchase price and the actual number of shares to be issued in the exchange remain subject to potential purchase price adjustments at the closing. The number of shares of Hartcourt common stock issued in the transaction will be decreased in the event Sino-Canada’s working capital (measured by current assets less current liabilities) decreases
by more than five percent at the closing as compared to March 31, 2009, and will be increased in the event that Hartcourt’s total liabilities at closing exceeds $600,000, up to a maximum of 45,850,859 shares. The purchase price adjustment for Hartcourt’s outstanding liabilities at closing will exclude Hartcourt’s outstanding loan of up to $1,300,000 from Yuan Dian Investment Inc. that will be repaid upon the closing in accordance with its terms by issuing shares of common stock of Hartcourt
at a price of $0.88 per share.
 
 Following the acquisition, the former shareholders of Sino-Canada will own approximately 86% of the issued and outstanding shares of Hartcourt.
 
 Post-Closing Officers and Directors
 
 Upon the consummation of the transaction, Hartcourt’s existing officers will resign and the new management team will take over.
 
 Further, upon the consummation of the acquisition, Hartcourt’s board of directors of Hartcourt will consist of seven directors, of which Sino-Canada will designate five members and Hartcourt will designate two members. Hartcourt and the Shareholders will enter into a voting agreement (the “Voting Agreement”)
at closing to elect the respective parties nominees to Hartcourt’s board of directors following closing until immediately prior to the next annual Hartcourt meeting of stockholders.
 
 NOTE 16       RECLASSIFICATION
 
 Certain prior period amounts have been reclassified to conform to the year ended May 31, 2009 presentation.
 
 39
 
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  None.
  ITEM 9A. CONTROLS AND PROCEDURES.
 
 We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The effectiveness of our disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions
used in identifying the likelihood of future events, and the inability to eliminate errors or misconduct completely. As a result, there can be no assurance that our disclosure controls and procedures will detect all errors or fraud. By their nature, any system of internal control, including our system, can provide only reasonable assurance regarding management’s control objectives.
 
 Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of
May 31, 2009, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of May 31, 2009.
 
 Management does not expect that the Company’s disclosure controls and procedures or its internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
 
 These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The
design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
 
 Changes in Internal Control over Financial Reporting
 
 The internal controls over financial reporting are ineffective as it relates to the accounting and disclosures of stock options and contingencies.
 
 
  40
 Management’s Report on Internal Control Over Financial Reporting
  Our management’s report on internal control over financial reporting included in Part II, Item 9A, on page 56, of this Form 10-K.
  ITEM 9B. OTHER INFORMATION.
  None.
  PART III
  
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
  Board of Directors
 
 The following table sets forth certain information regarding our Board of Directors and Executive Officers, as of August 17, 2009:
  Director Name
Age
PositionVictor Zhou
40
Chief Executive Officer and DirectorRachel Zhang
35
Chief Financial OfficerZhenyu Hu
32
Director,President of subsidiaryWilson W. S. Li(2)(3)
47
DirectorChangzhi Ju(1)(3)
40
DirectorGeorge Xu(1)(2)
41
Director
 
 There are no family relationships between any director or executive officer and any other director or executive officer of Hartcourt. With the exception of Mr. Zhou and Mr. Hu, all directors are independent under the independence standards applicable to the Company.
  (1) Member of the Audit Committee
 (2) Member of the Compensation Committee
 (3) Member of the Nomination Committee
  Set forth below is the biographical information on all directors.
 
 VICTOR ZHOU, age 40 Victor Zhou has been a director of the Company since 2004.  Mr. Zhou was acting Chief Executive Officer from June 1, 2006 to August 31, 2006.  On September 1, 2006 Mr. Zhou was appointed Chief Executive Officer of the Company.  Previously, Mr. Zhou was the President of
Fixed Assets Investment of Huatai Securities, one of the top ten securities firms in China, since November 2003. He was with Huatai Securities since 1997 and served in other senior management positions with increasing responsibilities. Before joining Huatai Securities, Mr. Zhou was the General Manager with Jiangsu Securities from 1993 until 1997. Mr. Zhou has extensive experiences in securities trading, private equity investment, and asset management. Mr. Zhou received his B.A. in Economics from Hunan University
and EMBA degree from China Europe International Business School.
 
 ZHENYU HU, age 32. Mr. Hu has been the president of Beijing Yanyuan Rapido Education Company (“Beijing Yanyuan”) since December 2004. He is the editor of the magazine “Successful Way,” and has been the director of the Science Park of Peking University since 2002.  He is also a well-known
speaker in the education and training areas. He has appeared in numerous newspaper articles and television programs, and has published many articles and books on education.
 
 WILSON W.S. LI, age 47. Wilson W.S. Li has been a director of Company since 2004.  Dr. Li has been the First Vice President of Shenzhen Capital Group, the largest Chinese investment holding company, since August 1999. Prior to that, he served in the Shenzhen Planning Bureau. Dr. Li has extensive experience in fund management, risk control, investment, and international
business. Dr. Li received his Masters degree in Social Science from Zhongshan University, Ph.D. in Management Science from Xian Jiaotong University and Ph.D. in Public Administration & Government Policy from the Chinese Academy of Social Science.
  41
 
  Changzhi Ju, age 40. Mr. Ju is dean of International Education Academy of Jiangsu Economic and Trade Institute, a position he has held since February 2001, and Mr. Ju has been engaged in the education business for 15 years. Mr. Ju is member of Vocational Education Center in Ministry of Education of Jiangsu Province.
He is director of Institute of Business and Economics of Jiangsu Province. Mr. Ju is chief editor of examination center in Ministry of Education of Jiangsu Province.
 
 GEORGE XU, age 41. Mr. Xu is a partner in the G&D Law Firm, a position he has held since September 2002.  Mr. Xu has been engaged in the practice of law for 17 years. He is a registered lawyer in China, and is a qualified securities legal adviser under Chinese law.  He has considerable experience in establishing joint ventures
and advising companies on acquisitions in China.
 
 Section 16(a) Beneficial Ownership Reporting Compliance.
 
 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and
10% stockholders are also required by SEC rules to furnish us with copies of all forms they file pursuant to Section 16(a).
  Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that, for the fiscal year ended May 31, 2009, all Section 16(a) filing requirements applicable to our officers, directors and 10% stockholders were complied with.
 
 Code of Ethics
 
 We have adopted a corporate code of ethics, which is applicable to our principal officers. A copy of the code of ethics is filed as an exhibit to this annual report. We believe that our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely
and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations of our code of ethics; and provide accountability for adherence to our code of ethics.  A copy of the code of ethics is available without charge to any person who submits a written request The Hartcourt Companies, Inc., Room 503, Jinqiao Building, No. 2077, West Yan’an Road, Shanghai, China 200552.
  Changes to Security Holder Recommendation Procedures for Nominees to Board of Directors
  None.
  Audit Committee and Audit Committee Financial Expert
  The Company has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The audit committee oversees the accounting and financial reporting process and the external audit process of the Company and assists the board of directors in the oversight and
monitoring of (i) the integrity of the financial statements of the Company, (ii) the internal accounting and financial controls of the Company, (iii) compliance with legal and regulatory requirements, and (iv) the qualifications, performance, and independence of the Company’s independent registered public accounting firm. In this capacity, the audit committee is responsible for appointing, approving the compensation of, and overseeing the work of the independent registered public accounting
firm. In addition, the audit committee reviews and approves all work performed by the independent registered public accounting firm. The audit committee meets regularly with management and with our independent registered public accounting firm, which has access to the audit committee without the presence of management representatives.  Currently, George Xu and Changzhi Ju serve as members of the Audit Committee. During the fiscal year ended May 31, 2009, George Xu and Stephen Tang also served as members
of the Audit Committee. Both Mr. Xu and Mr. Ju are independent under applicable securities laws and regulations.
 
 42
  ITEM 11.EXECUTIVE COMPENSATION.
  SUMMARY COMPENSATION TABLE
 
 
 Name and Principal Position
Year
Salary (US$)
Bonus (US$)
Stock Awards
(US$)
Option Awards (US$)
Non-equity Incentive Plan Compensation
(US$)
Change in Pension Value and Nonqualified Deferred Compensation Earnings
(US$)
All
Other Compensation (US$)
TotalMr. Victor Zhou, CEO
2009
2008
150,000(1)
150,000(1)
--
--
--
--
200,652(2)
--
--
--
--
--
--
--
350,652
150,000Mr. Yungeng Hu,
CFO and President(3)
2009
2008
--
150,000(4)
--
--
--
--
--
--
--
--
--
--
--
--
--
150,000Ms. Rachel ZhangCFO
2009
19,290(5)






19,290
  Explanatory Notes:
  (1)
On September 1, 2006, the Board of Directors of the Company promoted Mr. Victor Zhou to be the Chief Executive Officer. The Company signed the employment contract with Mr. Zhou on September 1, 2006. The compensation includes an annual base salary of $150,000, payable by equal monthly installment of US$12,500. On September 1, 2008, The Company signed the
new employment contract with Mr. Victor Zhou. The compensation includes an annual base salary of $150,000, payable by equal monthly installment of $12,500.
  (2)
On September 1, 2008 Mr. Zhou was granted 13,500,000 stock options with an exercise price of $0.03 under the 2005 Stock Option Plan. The stock option vesting schedule is as follows: a) 7,500,000 stock options vest one fourth (1⁄4) every six months for 2 years of the employment contract period; b) 3,000,000 stock options vested upon each successful new
business acquisition of the Company; and c) 3,000,000 stock options vested upon each full profitable year. The grant date fair value was computed in accordance with FAS 123R.  (See footnote4 in the Notes to Consolidated Financial Statements).
  (3)
Mr. Hu’s employment with the Company terminated as of May 31, 2008.
  (4)
On May 31, 2006, the Board of Directors of the Company appointed Mr. Hu to be the President & Chief Financial Officer, effective on June 1, 2006. Mr. Hu’s employment agreement was signed on June 1, 2006. The compensation includes an annual base salary of $150,000, payable by equal monthly installment
of US$12,500.
  (5)
On August 11, 2008, the Board of Directors of the Company appointed Ms. Rachel Zhang to be the Chief Financial Officer, effective August 11, 2008. Ms. Zhang was employed part time in this capacity. Ms Zhang’s compensation is $2,000 per month.
 
  
 43
 
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 Option Awards
Stock AwardsName
Number of Securities Underlying Unexercised Options
(#) Exercisable
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
Option Exercise Price
($)
Option Expiration
Date
Number of Shares or Units of Stock That Have Not Vested
(#)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not
Vested
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)Mr. Victor Zhou, CEO (1)
100,000


0.09
2011-3-81,875,000


0.05
2012-2-291,875,000
1,875,000
1,875,000
1,875,000
1,875,000
1,875,000
1,875,000

0.05
0.05
0.05
0.03
0.03
0.03
0.03
2012-8-31
2013-2-28
2013-8-31
2014-2-28
2014-8-31
2015-2-28
2015-8-316,000,000
0.03
 
 Explanatory Notes:
  (1)  7,500,000 options were granted to Mr. Zhou on September 1, 2006 and vest pro rata every half year over the two years employment contract period. 2,000,000 options granted to Mr. Zhou will vest upon each successful new acquisition of the Company and 1,500,000 options will vest upon each full profitable year.  All
the options are exercisable within 5 years time after vesting. 7,500,000 options were granted to Mr. Zhou on September 1, 2008 and vest pro rata every half year over the two years employment contract period. 3,000,000 options granted to Mr. Zhou will vest upon each successful new acquisition of the Company and 3,000,000 options will vest upon each full profitable year.  All the options are exercisable within 5 years time after vesting.
 
 (2)  The expiration date for this grant is contingent upon the vesting date.  When the conditions have been met, and the shares vest, then the expiration date will be five years after the vesting date.
 44
  DIRECTOR COMPENSATION
 
 Name
Fees Earned or
Paid in Cash
($)
Stock
Awards
($)
Option
Awards ($)(1)
Non-Equity
Incentive Plan Compensation ($)
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
All Other Compensation
($)
Total
($)Wilson Li
-
26,181(2)
136,209
-
-
-
162,390Stephen Tang
-
8,164(3)
27,242
-
-
-
35,406George Xu
-
5,299(4)
27,242
-
-
-
32,541
 (1)
The amounts provided in this column represent the compensation cost as calculated in accordance with FAS 123R with respect to all option awards granted under the 2005 Stock Option Plan in the fiscal year ended May 31, 2009.
 
 (2)
Duringthe year ended May 31, 2009, the Company issued 872,716 shares of the Company’s common stock to Mr. Livalued at $26,181 for his director service.
 
 (3)
Duringthe year ended May 31, 2009, the Company issued 272,120 shares of the Company’s common stock to Mr. Tang valued at $8,164 for his director service. Mr. Tang did not stand for reelection to the Company’s Board of Directors, and his term of service ended as
of the Company’s annual meeting on April 5 2009.
 
 (4)
Duringthe year ended May 31, 2009, the Company issued 176,644 shares of the Company’s common stock to Mr. Xuvalued at $5,299 for his director service.
 
 Currently, our directors serve for a term of two years or until their earlier resignation or removal. Independent directors are compensated $12,000 each year, through the issuance of restricted shares of common stock at the average closing market price of the common shares valued each month.Additionally,
for each committee that a non-employee director serves on, we compensate our independent directors $6,000 each year, through the issuance of restricted shares of common stock.
 
 On September 11 2008, the Company granted each of Stephen Tang and George Xu, independent directors of the Company, an option to purchase 1,000,000 shares of the Company’s common stock at exercise price of $0.03. Each option will vest on September 11, 2010 and is exercisable within five years time after vesting.
 
 As of September 11, 2008, we compensated Mr. Li, our Chairman of the Board, $50,000 each year for service on our Board of Directors, pro rated on an annual basis. Additionally, On September 11 2008, the Company granted Wilson Li, Chairman of the Board, an option to purchase 5,000,000 shares of the Company’s common
stock at exercise price of $0.03. The option will vest on September 11, 2010 and is exercisable within five years time after vesting.
 
 On August 23, 2006, the Board passed a resolution that all the options granted or to be granted cease to be exercisable after 90 days of termination of continuing services by the option holder with the Company.
 
 
 45
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
  The following table shows shares of our common stock that we believe are owned as of August 22, 2009 by:
  ·
Each shareholder owning 5% or more of our common stock,
 ·
Each Named Executive Officer,
 ·
Each director, and
 ·
All current directors and executive officers as a group.
  
  Name & Address of
Beneficial Owner(1)
Amount and Nature of
Beneficial Ownership(2)
Percent of ClassVictor Zhou, Director and Chief Executive Officer
9,718,977(3)
2.5%Wilson Li, Director and Chairman
2,693,318(4)
*Zhenyu Hu, Director
46,000,000(5)
11.9%Stephen Tang, Director
272,120(6)
*George Xu, Director
176,644(7)
*Rachel Zhang, Chief Financial Officer
271,809(8)
*Changzhi Ju
-
*All Executive Officers and Directors as a Group
59,132,868(9)
15.3%
  *
Indicates ownership of less than 1%.
 
 (1) Unless otherwise indicated, the address for each beneficial owner listed above is c/o The Hartcourt Companies, Inc., Room 503, Jinqiao Building , No. 2077, West Yan’an Road, Shanghai, China.
 
 (2) Unless indicated in the notes, each shareholder has sole voting and investment power for all shares shown, subject to community property laws that may apply to create shared voting and investment power.
  (3) Shares beneficially owned by Victor Zhou include (a) 243,977 shares of common stock held by Mr. Zhou; (b) options to purchase 100,000 shares of our common stock that are currently exercisable; (c) options to purchase 9,375,000 shares of our common stock that are currently exercisable.
 
 (4) Shares beneficially owned by Wilson Li include (a) 1,593,318 shares of common stock held by Mr. Li; (b) options to purchase 100,000 shares of our common stock that are currently exercisable; and (c) options to purchase 1,000,000 shares of our common stock that are exercisable currently exercisable.
 
 (5) Shares beneficially owned by Zhenyu Hu is 46,000,000 shares of common stock held by Mr.Hu.
 
 (6) Shares beneficially owned by Stephen Tang include (a) 272,120 shares of common stock held by Mr. Tang.
  (7) Shares beneficially owned by George Xu include (a) 176,644 shares of common stock held by Mr. Xu.
 
 (8) Shares beneficially owned by Rachel Zhang include (a) 271,809 shares of common stock held by Ms. Zhang.
  (9) Shares beneficially owned by all Executive Officers and Directors as a group includes the shares held by each and options granted as in above (3), (4), (5), (6),(7) and (8).
   46
 Equity Compensation Plans
  The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of the fiscal year ended May 31, 2009, including the 2005 Stock Plan.
  EQUITY COMPENSATION PLAN INFORMATIONNumber of securities to be issued
upon exercise of outstanding
options, warrants and rights (a)
Weighted average exercise
price of outstanding options,
warrants and rights (b)
Number of securities remaining
available for future issuance
under equity compensation
plansEquity compensation plans
approved by security holders (1)
32,200,000
0.04
37,800,000Equity compensation plans not approved by security holders
Nil
Nil
N/ATotal
32,200,000
0.04
37,800,000
 
 (1) Our 1995 Stock Option Plan expired pursuant to its terms in March, 2005. Our 2005 Stock Option Plan was approved by our shareholders at our annual meeting of shareholders on November 23, 2005. The amendment to increase the number of shares reserved and available from 35,000,000 to 70,000,000 for 2005 Stock Option
Plan was approved at our annual meeting of shareholders on February 24, 2007.
  ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
  Director Independence
 
 The Board has determined that each of our directors, except Mr. Zhou and Mr. Hu, is independent within the meaning of the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the director independence standards of The NASDAQ Stock Market, Inc. (“NASDAQ’), as currently in effect.  Furthermore,
the Board has determined that each of the members of each of the committees of the Board is “independent” under the applicable rules and regulations of the SEC and the director independence standards of NASDAQ, as currently in effect.
 
 ITEM 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES.
 
 The following table is a summary of the fees billed to us by Kabani & Company, Inc. for professional services for the fiscal year ended May 31, 2009 and the year ended May 31, 2008 (Kabani & Company, Inc. was selected as our independent auditor on December 30, 2004 upon the resignation of our former accountants,
Loral International LLP):
  FY 2009
FY 2008
FY 2007Audit Fees
$57,500
$50,000
$80,000Audit-Related Fees
$70,000 (1)

-Tax Fees


-All Other Fees


-Total
$127,500
$50,000
$80,000
 
 Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of our quarterly interim consolidated financial statements, as well as services that are normally provided by Kabani & Company,
Inc. in connection with statutory and regulatory filings or engagements.
 
 Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not reported under “Audit Fees.”
 
 Tax Fees. Consists of fees billed for professional services including assistance regarding federal, state and international tax compliance and related services.
 
 All Other Fees. Consists of fees billed for special investigation services requested by the Board of Directors concerning management and accounting practices.
 
 (1)  The audit related fee in fiscal year 2009 represent the professional audit fee for the audit of our acquisitions, as well as, the fee related to the review of these related filing documents.
 
  47
  Policy on Audit Committee Pre-Approval of Services Performed by the Independent Registered Public Accounting Firm
 
 It is the policy of the Audit Committee to pre-approve at the beginning of each fiscal year all audit and permissible non-audit services to be provided by the independent registered public accounting firm during that fiscal year. The Audit Committee authorizes specific projects within categories of services, subject to
a budget for each category. The Audit Committee may also pre-approve particular services on a case-by-case basis. The independent auditor and management report to the Audit Committee actual fees versus the budget periodically throughout the fiscal year. The Audit Committee pre-approved 100% of the audit and non-audit services performed by Kabani & Company, Inc. for Hartcourt as disclosed above.
  PART IV
  ITEM 15.      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
  1.  Financial Statements - See Index to Consolidated Financial Statements in Part II, Item 8.
  2.Financial Statement Schedules - See Index to Consolidated Financial Statements in Part II, Item 8.
  3. Exhibits
  The following list describes the exhibits filed as part of this report on Form 10-K:
 Exhibit No.
Description
Previously
Filed
  2.05
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Huaqing Corporation Development Co Ltd (“Huaqing”) dated February 14, 2003 between Hartcourt Capital, Inc. and Huaqing shareholders
(13)2.06
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Guandgdong NewHauSun Computer Co. Ltd. (“NewHauSun”) dated April 24, 2003 between Hartcourt Capital, Inc. and NewHauSun shareholders.
(13)2.07
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Shanghai GuoWei Science and Technology Ltd (“GuoWei”) dated April 30, 2003 between Hartcourt Capital, Inc. and GuoWei shareholders.
(13)2.08
Agreement for the Sale and Purchase of Equity Capital in Shanghai Sinobull Information Corporation Limited dated May 20, 2003 between Hopeful Internet Technologies Limited and Genius Technology Inc.
(13)2.09
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Zhongnan Group (“Zhongnan”) dated June 25, 2003 between Hartcourt Capital, Inc. and Zhongnan shareholders.
(13)2.10
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Shanghai Huaqing Corporation Development Co Ltd (“Shanghai Huaqing”) dated June 30, 2003 between Hartcourt Capital, Inc. and Shanghai Huaqing shareholders.
(14)2.11
Agreement for Sale and Purchase of Shanghai PengYang Computer Co., Ltd. dated November 21, 2003 between Hartcourt Capital, Inc and PengYang shareholders.
(14)2.12
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Beijing Challenger Wanzhong Info Tech Co., LTD (“Challenger”) dated December 9, 2003 between Hartcourt Capital, Inc. and Challenger shareholders.
(14)2.13
Agreement for Sale and Purchase of the Entire Issued Share Capital of Besteffort Investments Limited, dated November 1, 2004
(18)2.14
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Guangdong NewHuaSun Computer Co., Ltd. ("NewHuaSun") dated August 30, 2004 between Hartcourt Capital, Inc and ShenZhen Raiser Industrial and Development Co., Ltd.
(19)2.15
Agreement for Sale and Purchase of Certain Interest in the Registered Capital of Hopeful Internet Technologies Ltd. ("Hopeful") dated June 29, 2004 between Hartcourt China Inc, Mr. Lee Lu Ping and First Information Technology Ltd.
(19)2.16
Cooperative Agreement on Taishun Yucai Senior School
(21)2.17
Cooperative Agreement on China Princely Education Technology Development (Beijing) Company Limited
(21)2.18
Agreement for sale and purchase of the entire issued share capital of Besteffort Investments Limited, dated November 1, 2004 between Hartcourt Capital, Inc. and Great Focus Holdings Limited.
(21)3.01
Articles of Incorporation of Hartcourt, dated Sept 6, 1983
(23)3.02
Bylaws of Hartcourt.
(23)3.03
Amendment to the Bylaws of Hartcourt, dated Dec 2, 1996
(1)3.04
Amendment to the Bylaws of Hartcourt, dated Oct 25, 20043.05
Amendment to the Articles of Incorporation of Hartcourt, dated Nov 21, 1994
(1)3.06
Amendment to the Articles of Incorporation of Harcourt, dated Mar 23, 1995
(23)3.07
Amendment to the Articles of Incorporation of Hartcourt, dated Oct 1997
(24)3.08
Amendment to the Articles of Incorporation of Hartcourt, dated Mar 13, 2003
(25)3.09
Amendment to the Articles of Incorporation of Hartcourt, dated Nov 24, 2005
(20)   48
   10.01
Lease between Hartcourt and Larry M. Mitobe for Hartcourt’s headquarters facility, dated April 9, 1996.
(1)10.02
Equipment Lease between Hartcourt USA and Anja Engineering Corporation, dated April 4, 1994.
(1)10.03
Stock Exchange Agreement between Hartcourt USA and Eastern Rochester, dated August 8, 1994.
(1)10.04
1995 Stock Option Plan.
(1)10.05
Purchase Contract between The Hartcourt Companies, Inc. and Exceptional Specialty Products, Inc., dated March 21, 1996.
(1)10.06
Purchase and Sale Agreement, dated August 8, 1996, between The Hartcourt Companies, Inc. and NuOasis International, Inc., and Addendum to Purchase and Sale Contract.
(1)10.07
Convertible Secured Promissory Note, dated August 8, 1996, in connection with Purchase and Sale Agreement, dated August 8, 1996 between The Hartcourt Companies, Inc. and NuOasis International, Inc.
(1)10.08
Convertible Secured Promissory Note, dated August 8, 1996, in connection with Purchase and Sale Agreement, dated August 8, 1996 between The Hartcourt Companies, Inc. and NuOasis International, Inc., as amended.
(1)10.09
Sales Agreement, dated September 17, 1996, between The Hartcourt Companies, Inc. and Promed International, Ltd.
(1)10.10
Sales Agreement, dated September 17, 1996, between The Hartcourt Companies, Inc. and Mandarin Overseas Investment Co., Ltd.
(1)10.11
Purchase and Sale Agreement, dated September 27, 1996, between The Hartcourt Companies, Inc. and CKES Acquisitions, Inc.
(1)10.12
Secured Promissory Note, dated September 27, 1996, in connection with Purchase and Sale Agreement between The Hartcourt Companies, Inc. and CKES Acquisitions, Inc.
(1)10.13
Consulting Agreement, dated December 30, 1996, between The Hartcourt Companies, Inc. and American Equities LLC, a California limited liability company.
(3)10.14
Investment Banking Agreement, dated March 1998, between The Hartcourt Companies, Inc. and DanAllen Investment Group.
(2)10.16
Marketable Securities Agreement, dated July 31, 1997, between The Hartcourt Companies, Inc. and Capital Commerce, Ltd.
(2)10.17
Lease Termination Agreement, dated March 24, 1998, between Hartcourt Investment (USA) Corporation and Scripto-Tokai Corporation.
(2)10.18
Share Purchase Agreement with Enova Holdings, Inc., dated February 1, 1999, Exchange Agreement, dated March 23, 1999, and Distribution Agreement, dated March 24, 1999, File # 99579493.
(7)10.19
1999 Agreement with Beijing UAC Stock Trading Online Co. Ltd.
(8)10.19
A Financial Statements of Beijing UAC Stock Exchange Online Co. Ltd. for the period from October 18, 1999 (date of inception) to December 31, 1999.
(8)10.20
Agreement with GoCall.com
(8)10.21
FTL Stock Purchase Agreement
(8)10.22
Advisory Agreement and 1999 Stock Plan with NuVen Advisors, Inc. and Hartcourt dated March 18, 1999, File No. 333-74933.
(9)10.23
Consulting Agreement with Fred G. Luke, dba NuVen Advisors, File No. 99768860.
(10)10.24
Consulting Agreement with Archer & Weed, File No. 99768860.
(10)10.26
Regulation  D  Subscription  Agreement between PYR Management LLC
and The Hartcourt Companies, Inc, dated January 26, 2000, File No. 524390.
(12)10.27
Interim CFO Employment Agreement, dated January 5, 2005
(17)10.28
CEO Employment Agreement, dated March 9, 2005
(19)10.29
Acting CEO Employment Agreement, dated May 31, 2006
(22)10.30
CEO Employment Agreement, dated August 30, 2006
(22)14.01
Code of Ethics16.01
Letter from Loral International CPA & Advisor, LLC, to the Company resigning as independent auditor, dated December 29, 2004.
(15)16.02
Letter from Loral International CPA & Advisor, LLC, to the Company indicating disagreement with the Company’s Form 8-K filing regarding Loral’s resignation, dated January 3, 2005.
(16)21.01
Subsidiaries of the registrant23.01
Consent of Kabani & Company, Inc. - Independent Registered Accounting Firm24.01
Power of Attorney (See signature page)27.01
Financial Data Schedule. Pursuant to Rule 12b-32 under Securities and Exchange Act of 1934, as amended.31.01
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.02
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.01
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 49
  (1)Previously filed as an exhibit to Hartcourt’s Form 10SB12B, dated January 21, 1997 and incorporated herein by reference.
  (2)Previously filed as an exhibit to Hartcourt’s 10-KSB, dated April 13, 1998 and incorporated herein by reference.
  (3)Previously filed as an exhibit to Hartcourt’s 10-KSB, dated April 15, 1997, and as amended by Hartcourt’s Form 10-KSB40/A, dated July 3, 1997, incorporate herein by reference.
  (4)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated October 21, 1997, and as amended by Hartcourt’s Form 8-K/A, dated October 27, 1997, incorporated herein by reference.
  (5)Previously filed as exhibit to Hartcourt’s Form 8-K, dated November 12, 1997, incorporated herein by reference.
  (6)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.
  (7)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated March 31, 1999, incorporated herein by reference.
  (8)Previously filed as an exhibit to Hartcourt’s Form 10-KSB, dated April 14, 1999, incorporated herein by reference.
  (9)Previously filed as an exhibit to Hartcourt’s Form S-8, dated March 24, 1999, incorporated herein by reference.
  (10)Previously filed as an exhibit to Hartcourt’s Form S-8, dated December 3, 1999, incorporated herein by reference.
 
 (11)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated December 8, 1999, incorporated herein by reference.
  (12)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated February 4, 2000, incorporated herein by reference.
  (13)Previously filed as an exhibit to Hartcourt’s Form 10-KSB/A, dated April 15, 2004, incorporated herein by reference.
  (14)Previously filed as an exhibit to Hartcourt’s Form 10-KSB/A, dated April 19, 2004, incorporated herein by reference.
  (15)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated January 6, 2005, incorporated herein by reference.
  (16)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated January 20, 2005, incorporated herein by reference.
  (17)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated January 12, 2005, incorporated herein by reference.
  (18)Previously filed as an exhibit to Hartcourt’s Form 8-K, dated February 28, 2005, incorporated herein by reference.
  (19)Previously filed as an exhibit to Hartcourt’s Form 10KSB/A, dated April 15, 2005, incorporated herein by reference.
  (20)Previously filed as an exhibit to Hartcourt’s Form 10-Q, dated April 23, 2007, as amended by Hartcourt’ Form 10-Q/A, dated April 24, 2007, incorporated herein by reference.
 
 (21)Previously filed as an exhibit to Hartcourt’s Form 10-Q, dated January 16, 2007 and incorporated herein by reference.
  (22) Previously filed as an exhibit to Hartcourt’s Form 10-Q, dated September 28, 2006 and incorporated herein by reference.
  (23) Previously filed as an exhibit to Hartcourt’s Form 10SB12G/A, dated July 3, 1997 and incorporated herein by reference.
  (24) Previously filed as an exhibit to Hartcourt’s Form 10KSB, dated April 13, 1998 and incorporated herein by reference.
  (25) Previously filed as an exhibit to Hartcourt’s Form 10KSB/A, dated April 25, 2003 and incorporated herein by reference.
   50
  SIGNATURES
  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
  THE HARTCOURT COMPANIES, INC.Date: September 14, 2009
By:
/s/ Victor ZhouVictor ZhouChief Executive Officer




Date: September 14, 2009
By:
/s/ Rachel ZhangRachel ZhangChief Financial Officer




In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
  SIGNATURE

TITLE

DATEBy: /s/ Victor Zhou

Chief Executive Officer, Director

September 14, 2009Victor ZhouBy: /s/ Rachel Zhang

Chief Financial Officer

September 14, 2009Rachel ZhangBoard of DirectorsBy: /s/ Wilson Li

Chairman

September 14, 2009Wilson LiBy: /s/ Changzhi Ju

Director

September 14, 2009Changzhi JuBy: George Xu

Director

September 14, 2009George XuBy: Zhenyu Hu

Director

September 14, 2009Zhenyu Hu