SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)
              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                                 [Fee Required]
               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                                [No Fee Required]

                     For fiscal year ended December 31, 1996
                        Commission file number 001-12671

                            HARTCOURT COMPANIES, INC.
             (Exact name of registrant as specified in its charter)
          UTAH                                            87-0400541
(State of incorporation)                    (I.R.S. Employer Identification No.)

                             19104 S. Norwalk Blvd.
                            Artesia, California 90701
                                  310-403-1126
    (Address, including zip code, and telephone number, including area code,
                       of registrant's executive offices)

               Securities registered pursuant to Section 12(b) of
                                    the Act:
     Title of each class             Name of each exchange on which registered
            None                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock $.001 par value
                                (Title of class)

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

       Check if disclosure of delinquent filers in response to item 405 of
    Regulation S-B is not contained in this form, and no disclosure will 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-KSB
                   or any amendment to this Form 10-KSB. [X]

             Issuer's revenues for most recent fiscal year: $272,409

     State the aggregate market value of voting stock held by nonaffiliates
 computed by reference to the price at which the stock was sold, or the average
 bid and asked prices of such stock, as of a specified date within the past 60
                  days: As of February 24, 1997, $25,570,999.

     State the number of shares outstanding of each of the issuer's classes
 of common equity, as of the latest practicable date: As of February 24, 1997,
           there were 10,687,380 shares of common stock outstanding.

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                            HARTCOURT COMPANIES, INC.

                         1994 Form 10-KSB Annual Report
                                Table of Contents

                                                                        Page   
PART I                                                                     
                                                                           
  Item 1.  Description of Business                                        3     
                                                                           
  Item 2.  Description of Property                                        8     
                                                                           
  Item 3.  Legal Proceedings                                             10     
                                                                           
  Item 4.  Submission of Matters to a Vote of Security Holders           10    
                                                                           
PART II                                                                    
                                                                           
  Item 5.  Market for Common Equity and Related Stockholder Matters      10     
                                                                           
  Item 6.  Management's Discussion and Analysis or Plan of Operation     13    
                                                                           
  Item 7.  Financial Statements                                          13    
                                                                           
  Item 8.  Changes in and Disagreements with Accountants                   
           on Accounting and Financial Disclosure                        28     
                                                                           
                                                                           
PART III                                                                   
                                                                           
  Item 9.  Directors, Executive Officers, Promoters and Control Persons;   
           Compliance with Section 16(a) of the Exchange Act             28     
                                                                           
  Item 10. Executive Compensation                                        29     
                                                                           
  Item 11. Security Ownership of Certain Beneficial Owners and             
           Management                                                    31     
                                                                           
  Item 12. Certain Relationships and Related Transactions                32    
                                                                           
                                                                           
PART IV                                                                    
                                                                           
  Item 13.  Exhibits and Reports on Form 8-K                             33    
                                                                           
                                                                           
Signatures                                                               35     
                                                                        


                                        2

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Explanatory Note:
         Unless  otherwise  indicated  or the context  otherwise  requires,  all
references herein to the "Company" are to The Hartcourt Companies,  Inc., a Utah
corporation, and its wholly owned subsidiaries,  Harcourt Investments (USA) Inc.
("Harcourt  Investments") and the Hartcourt Pen Factory, Inc. ("Hartcourt Pen").
All  share and per share  information  contained  herein  has been  adjusted  to
reflect a five-for-seven reverse split of the Company's Common Stock effected on
October 6, 1995, and a one-for-five  reverse split of the Company's Common Stock
effected on August 1, 1996.
                                     PART 1
ITEM 1:  DESCRIPTION OF BUSINESS.

General
         Stardust,     Inc.-Production-recording-Promotion    ("Stardust"),    a
corporation  organized  under the laws of the State of Utah in  September  1983,
acquired  all of the  outstanding  shares  of  Harcourt  Investments,  a  Nevada
corporation,  for 6,110,337  shares of Stardust  common stock (after taking into
account a reverse stock split and stock  dividend)  pursuant to an Agreement and
Plan of Reorganization  dated November 5, 1994. At the time of this acquisition,
Stardust  was a "shell"  corporation  with no assets,  business  or  operations.
Subsequent to the acquisition of Harcourt Investments, Stardust changed its name
to "The Hartcourt Companies, Inc."

         Harcourt  Investments  was  organized  under  the laws of the  State of
Nevada in April 1993, to engage in the design,  manufacture  and sale of writing
instruments.  Harcourt Investments entered into a Stock Exchange Agreement dated
August 8, 1994 with Eastern  Rocester  Limited's  60% interest in Xinhui  Harchy
Modern Pens,  Ltd. (The "Xinhui  JV"), a joint venture  located in the Guangdong
province of the People's  Republic of China  ("China"),  in exchange for 250,000
shares of Harcourt  Investments  common  stock,  representing  80% of the common
stock of Harcourt Investments  outstanding  immediately  subsequent to the joint
venture  agreement  governing  the Xinhui JV entered into in October  1995,  the
Company's  interest  was  reduced to a 52%  interest  in the Xinhui JV, with the
remaining 48% held by the Xinhui Orient Light Industrial Corp.

         Hartcourt  Pen was  organized  under the laws of the State of Nevada in
October 1993 to engage in the sale of writing instruments. Hartcourt Pen entered
into an  Agreement  and Plan of  Reorganization  dated  December  1,  1994  with
Harcourt Investments, pursuant to which Harcourt Investments acquired all of the
outstanding  shares of Hartcourt  Pen in exchange for 38,625  shares of Harcourt
Investments  common stock. In connection with this transaction,  1,000 shares of
Harcourt  Investments  Original  Preferred Stock were issued to Dr. Alan Phan in
consideration of certain  intangible assets and services rendered by Dr. Phan in
connection with the  establishment of Hartcourt Pen.  Hartcourt Pen currently is
in the business of importing pens,  markers and components from China,  Germany,
Taiwan  and Italy for  assembly  (often by  others)  in the  United  States.  It
conducts  certain  limited  research and  development  activities  in the United
States, but engages in no domestic manufacturing activities.

         The Hartcourt  Companies,  Inc.  commenced limited business  activities
involving the design,  manufacture  and sale of writing  instruments in December
1994. The Company's present  operations involve the assembly and distribution of
writing  instruments.  The  Company's  current  primary  objective is to acquire
operating  companies with related products to maximize the marketing process and
expand the  distribution  of writing  instruments.  A secondary  objective is to
acquire real property  assets and to utilize profits from the development of the
Company's  present  real  property  assets in order to  diversify  and  create a
multi-dimensional company.
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<PAGE>
The  principal  executive  offices of the  Company  are  located at 19104  South
Norwalk Boulevard,  Artesia, California 90701. The Company's telephone number is
(310) 403-1126.

         In April 1993, the Xinhui JV commenced construction of a 170,000 square
foot manufacturing plant approximately ten miles north of Xinhui City. The plant
commenced limited  operations in December 1994 and was fully operational by July
1995. By July 1996, the plant was operating at approximately 20% of its capacity
and  employed  approximately  80 people.  It is  estimated  by  management  that
additional  working  capital in the amount of  approximately  $3,000,000 will be
required  to permit  the plant to  operate at full  capacity  (300,000,000  pens
annually).  There is no contractual  obligation on the part of the joint venture
partners to provide this additional financing.

         In  April  1994,  the  Company  entered  into a  Lease  Agreement  with
Tokai-Anza-Scripto  Pen Company  ("Anja"),  for the use of five special ball pen
assembly machines by the Xinhui JV. The lease provides for semi-annual  payments
of $25,000 over a ten-year term, subject to adjustment based on future purchases
of  merchandise  by the Company  from the  lessor.  Consequently,  annual  lease
payments could range from zero, if annual purchases are in excess of $1,000,000,
to $100,000,  if annual  purchases  are less than  $100,000.  The  machinery was
delivered  by  Anja in June  1995.  However,  the  machinery  initially  did not
function properly and therefore,  the lease term did not commence until February
1996. In December 1996, the machinery was shipped by vessel back from the Xinhui
JV to the Company and is  scheduled to arrive in January  1997.  The Company and
Anja have agreed to terminate  the lease upon  delivery of the machinery to Anja
with no further obligation to the Company.  To date, there have been no payments
under this lease.

         CKES  Acquisitions,  Inc. ("CKES"),  a corporation  organized under the
laws of the State of Nevada in September 1996, and a non-affiliate, acquired all
of the  outstanding  shares of the Company's  wholly-owned  subsidiary  Harcourt
Investments, pursuant to a Purchase and Sale Agreement dated September 27, 1996,
thus replacing the Company as a joint venture partner in the Xinhui JV. Title to
the shares was  transferred to CKES in return for a Secured  Promissory  Note in
the principal sum of $3,000,000, payable monthly, with accrued compound interest
at six percent (6%) per annum. The Company has no present contractual obligation
to the Xinhui JV.

         In January 1996, the Company entered into a Memorandum of Understanding
to acquire Yafa Pen Company ("Yafa"), a California corporation,  with offices in
Los Angeles, California. The purchase price consisted of an initial cash payment
of $285,000 and 80,000 shares of the Company's Preferred Stock.  Pursuant to the
Memorandum of  Understanding,  the Company advanced to Yafa a total of $200,000,
secured by two promissory notes, the amount of this advance to be offset against
the purchase  price for Yafa.  Various  disputes  arose  between the Company and
Yafa, and in September 1996 the parties  entered into a confidential  settlement
agreement and agreed to terminate the Memorandum of Understanding.

         Pursuant  to a Purchase  Contract  dated  March 21,  1996,  between the
Company and  Exceptional  Specialty  Products,  Inc., a California  corporation,
located in Laguna  Hills,  California,  the Company  acquired a complete line of
cosmetics  valued at  $310,815,  including  creams,  cleansers,  scrubs,  liquid
makeup, eye shadow, accent pencils, mascara, makeup brushes, translucent powder,
makeup bags,  and mirrors,  for 60,000  shares of the  Company's  Common  Stock.
Included in this  purchase is the United States  trademarked  brand name Camille
St. Moritz,  under which the inventory will be marketed,  as well as containers,
labels,  packaging,  stationery and promotional  materials.  The Company had not
sold any of the cosmetic products since the purchase and market and is currently
seeking overseas importers, primarily in China, to purchase the entire inventory
and market the products. The Company does not intend to distribute the cosmetics
other than to importers who will be responsible for their own marketing networks
and money collection.
                                        4
<PAGE>




         In August 1996, The Company  entered into a Purchase and Sale Agreement
with NuOasis International,  Inc. ("NuOasis"),  a corporation incorporated under
the laws of the  Commonwealth of Bahamas,  for the purchase of a commercial real
estate  project,  consisting of three 5-7 story  apartment  buildings,  commonly
known as the Peony Gardens  Property,  ("Peony  Gardens") located in the eastern
part of Tongxian in Beijing city, mainland China. The purchase price consists of
a Convertible  Secured  Promissory Note,  granted NuOasis a security interest in
the  property,  in the  principal  amount  of  $12,000,000  and the  greater  of
10,000,000 shares of the Company's Common Stock, or that number of shares of the
Company's  Common Stock having a market value equal to  $10,000,000  immediately
preceding  the closing  date. On August 8, 1996, an Addendum to the Purchase and
Sale  Contract was agreed to by the Company and NuOasis,  by which the Company's
obligation  to issue  stock to NuOasis was  reduced to  4,000,000  shares of its
Common  Stock.   As  of  December  31,  1996,   the  apartment   buildings  were
approximately  35%  complete,  and it is  anticipated  by the  Company  that the
project  will be completed by August  1997.  The Company has no  obligation  for
construction  costs or any other costs relating to the project's  completion and
may at its option rescind the Purchase and Sale  Agreement,  if  construction is
not completed by August 1997. At completion, the Company will commence operation
of the  project.  It is  anticipated  that  the  Company  may  sell  some of the
buildings,  or units within the buildings,  to provide initial  operating funds.
There can be no assurance,  however,  as to when,  if ever,  the Company will be
successful  in selling some of the  buildings,  or units within the buildings to
obtain  operating  funds,  or whether,  or to what  extent,  the project will be
profitable.  See Part 1, Item 2,  "Description  of  Property  - Real  Estate and
Operating Data."

         In September  1996,  the Company  entered into a Sales  Agreement  with
Mandarin Overseas Investment Co., Ltd.  ("Mandarin"),  an unaffiliated Turks and
Caicos  chartered  company  located in Central Hong Kong,  for its undivided 50%
interest in thirty-four State of Alaska mineral lease gold lode claims, known as
Lodestar claims numbered 35-68, consisting of 160 acres each, all located in the
Melozitna mining district near Tanana, Alaska,  approximately 300 air-kilometers
west of the City of Fairbanks, Alaska. The Company will pay $3,000,000 in shares
of its Common  Stock to Mandarin for its  undivided  50% interest in the mineral
lease gold lode  claims,  all shares to be issued  pursuant to  Regulation  "S".
Certain  maintenance and  administrative  costs will be incurred to maintain the
claims in a good standing status with all regulatory  agencies.  The Company has
agreed to pay Mandarin  fifty  percent  (50%) of all such  administrative  costs
necessary  to maintain the claims in good  standing,  such costs not expected to
exceed  $2,500  annually  and,  at the end of two  years  from  the  date of the
Agreement,  the Company will pay an additional amount representing fifty percent
(50%) of no less than twenty-five  thousand dollars ($25,000) in connection with
the requirements of regulatory agencies.

         In September  1996,  the Company  entered into a Sales  Agreement  with
Promed International Ltd. ("Promed"), an unaffiliated Turks and Caicos chartered
company with offices in the British crown colony of Gibraltar,  for the purchase
of their  undivided 50% interest in  thirty-four  State of Alaska  mineral lease
gold lode claims,  known as Lodestar  claims  numbered  1-34,  consisting of 160
acres each, all located in the Melozitna  mining  district near Tanana,  Alaska,
approximately  300  air-kilometers  west of the City of Fairbanks,  Alaska.  The
Company  will pay  $3,000,000  in shares of its  Common  Stock to Promed for its
undivided 50% interest in the mineral  lease gold lode claims,  all shares to be
issued pursuant to Regulation "S." Certain maintenance and administrative  costs
will be incurred to maintain  the claims in good  standing  with all  regulatory
agencies.  The Company has agreed to pay Promed fifty  percent (50%) of all such
costs, not to exceed $2,500 annually,  and at the end of two years from the date
of the Agreement,  the Company will pay an additional amount  representing fifty
percent  (50%)  of no  less  than  twenty-five  thousand  dollars  ($25,000)  in
connection with requirements of regulatory agencies.

         Management intends to obtain the services of an independent  geo-survey
company to prepare  detailed  geo-maps  of the gold lode  claims  acquired  from
Mandarin and Promed, and to evaluate existing studies, at an

                                        5

<PAGE>



estimated cost of approximately $160,000. If these studies confirm the valuation
that has been represented, the Company intends to complete the Purchase and Sale
Agreement and raise sufficient capital to fulfill the requirements of the mining
project. Management does not expect this to affect other activities in which the
Company is involved.  There can be no assurance,  however,  as to when, if ever,
the Company will obtain the necessary capital to fulfill the requirements of the
mining project,  or whether,  or to what extent, the project will be profitable,
should operations commence. See Item 2. "Description of Property - Mineral Lease
Gold Lode Claims."

         During  1996 the  Company  entered  into a  Consulting  Agreement  with
American  Equities,  LLC, a California  Limited Liability  Company.  The Company
intends to acquire,  manage and develop a real estate portfolio through the year
2001. See Part II, F/S, "Consolidated Financial Statements, Years Ended December
31, 1996 and 1995 -- Notes to Financial  Statements,"  Note H.  "Commitments and
Contingencies."

         Except for certain  limited  operations  involving the  manufacture and
distribution  of  writing  instruments  in China  through  the Xinhui JV and the
assembly and  distribution  of writing  instruments in the United States through
Hartcourt  Pen, the Company's  activities to date  primarily  have  consisted of
raising  capital,   obtaining  financing,   locating  and  acquiring  equipment,
identifying   prospective  customers  and  suppliers,   installing  and  testing
equipment and administrative  activities  relating to the foregoing,  as well as
identifying  real  property for  potential  acquisition.  The  Company's  future
business,  including  expansion  of its  current  limited  operations,  requires
substantial additional equity and/or debt financing,  which may not be available
in a timely manner, on commercially reasonable terms, or at all.

         See Part III, Item 12, "Certain Relationships and Related Transactions"
for information about the interests of certain directors, executive officers and
promoters  of the  Company  in the  formation  and  reorganization  transactions
described above involving Stardust, Harcourt Investments and Hartcourt Pen.

         See Part I, Item 2,  "Description of Property," for  information  about
the Company's facilities.

PRINCIPAL PRODUCTS, DISTRIBUTION AND COMPETITIVE CONDITIONS

         The Company's present business  activities  consist of the assembly and
distribution  of a broad  range of writing  instruments,  ranging  from the most
commonly used and inexpensive  plastic ballpoint pens to high-priced  luxury and
collectible fountain pens. The Company also distributes special order stationery
items,  such as daily diaries and planners,  organizers  and desk sets and other
desk items, manufactured by others.

         Commonly used and inexpensive  writing  instruments  ("Popular  Items")
assembled  and sold by the  Company  include a broad  range of  ballpoint  pens,
roller pens, cosmetic pens, white board markers, water color markers,  permanent
markers, highlighters, erasable ballpoint pens and magic ink pens. The Company's
Popular  Items are  available  in  various  compositions  and  colors of plastic
barrels and in a variety of ink colors.

         Higher priced and luxury writing  instruments  ("Luxury Items") sold by
the Company  include  ballpoint,  roller and fountain pens as well as mechanical
pencils.  The  barrels  of  Luxury  Items  generally  are  composed  of brass or
stainless steel with lacquer or engraved designs and have nibs (the point of the
pen that regulates ink flow) of  German-made  iridium,  as well as  gold-planted
accessories.

         Management  believes  that  the  materials  and  equipment  used in the
assembly of the Company's products generally are available from multiple sources
on competitive terms. Therefore, the Company does not anticipate any significant
delays in the acquisition, of, or shortages of, either materials or equipment.


                                        6

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         The  Company  believes  that the markets for its broad range of writing
instruments  are relatively  fragmented and highly  competitive.  There are many
local, national and multinational importers of writing instruments in the United
States and elsewhere,  and the Company's ability to compete successfully will be
dependent  upon  numerous  factors,  including  its ability to obtain  necessary
financing in a timely manner and on  commercially  acceptable  terms, as well as
upon the design,  quality and price of its products  and its  customer  service.
Many of the  Company's  competitors  have  greater  experience  and far  greater
financial  and other  resources  than the Company,  which is in the  development
stage.  There  can be no  assurance  that the  Company  will be able to  compete
successfully in its markets.

DOING BUSINESS IN CHINA

         GENERAL.  Because the Company's  Peony Gardens  project is in China and
China  is  among  the  possible  markets  targeted  by the  Company  for  future
acquisitions,  as well as a market for the  purchase  of its  cosmetic  products
inventory,  China is  important  to the  Company's  success.  The  operation  of
facilities  in China  involves  certain  risks and  special  considerations  not
typically associated with operations in the United States.

         These risks  generally  related to: (i) social,  economic and political
uncertainty;  (ii) substantial  governmental involvement in and control over the
Chinese economy;  (iii) the possibility that the Chinese  government could elect
to discontinue its support of the economic  reform programs  implemented in 1978
and  return  to a  completely  centrally  planned  economy;  and  (iv)  possible
nationalization or expropriation of assets.  Accordingly,  government actions in
the future could have a significant effect on economic conditions in China. Such
actions, and result changes in the Chinese economy, could significantly aversely
affect, limit or eliminate  opportunities for foreign investment,  the prospects
of private sector enterprises  operating in China and the value of the Company's
investments in China.

         RESTRICTIONS  ON FOREIGN  CURRENCY  EXCHANGE.  In order to meet foreign
currency  obligations  and remit  dividends to foreign  owners,  a joint venture
operating  in China  must  convert  a  portion  of its  funds  from the  Chinese
currency,  the Chinese Renminbi (the "RMB"), to other currencies.  Because China
controls its foreign currency reserves, RMB earnings within China can not freely
be converted into foreign currencies,  except with government  permission and at
rates which are determined in part by supply and demand at authorized  financial
institutions,  such as the  People's  Bank of China  or at  government-regulated
foreign  exchange  swap  centers  established  by the  State  Administration  of
Exchange Control. In the event of shortages of foreign  currencies,  the Company
may be unable to convert  sufficient RMB's into foreign  currencies to enable it
to comply with foreign currency payment  obligations or to make distributions to
equity holders located outside of China.

         VOLATILITY OF EXCHANGE RATES. There has been significant  volatility in
the  exchange  rates of RMBs to U.S.  Dollars  in the  recent  past  and  future
exchange rates may also experience significant volatility.


         ENVIRONMENTAL REGULATION.  The Company's Chinese operations are subject
to central,  provincial and local environmental protection laws and regulations.
The costs and effects of compliance with  environmental  laws and regulations in
the United States (federal, state and local) and China (central,  provincial and
local) have not been material in the past and are not anticipated to be material
in the future.

EMPLOYEES

         The  Company  currently  employs  four  full-time  and three  part-time
employees at its principal executive offices in the United States. Hartcourt Pen
is located at this headquarters location, which also is the site for

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certain  research and  development  activities.  The Company does not expect any
significant changes in the number of employees during the next twelve months.

RESEARCH AND DEVELOPMENT

         The  Company  currently   conducts  limited  research  and  development
activities  involving the creation of ink formulas,  as well as the  engineering
design of pens and  material  used for the  components  of writing  instruments.
During the fiscal  years  ended  December  31,  1993,  1994 and 1995,  $100,650,
$180,440  and  $38,205  respectively,  was  expended  in  connection  with  such
activities.  During the 12 month period  ended  December 31, 1996 no expense was
incurred in connection  with  research and  development  activities.  Management
anticipates  that research and  development  costs as a percentage of sales will
not increase materially from current levels.

ITEM 2.  DESCRIPTION OF PROPERTY

PRINCIPAL PLANTS AND OTHER PROPERTY

         The Company's  principal  executive  offices are located at 19104 South
Norwalk Boulevard,  Artesia,  California 90701. Hartcourt Pen is located at this
headquarters  site,  which  also is the site of  certain  limited  research  and
development  activities.  The  premises,  which are leased from an  unaffiliated
party, consist of 5,200 square feet, approximately 2,000 square feet of which is
used for  warehousing,  approximately  2,000 square feet for assembly of writing
instruments,  and  approximately  1,200 square feet for  executive  and clerical
offices.  Monthly rent is $1,230  until May 31,  1997,  $1,640 from June 1, 1997
through May 31, 1998 and $2,050 for the remainder of the lease term, through May
31,  2001;  provided,  however,  that no rent will be due for the months of June
1999 and June 2000.

         See Part I, Item 1, "Description of Business--General"  for information
about the manufacturing facilities of Xinhui JV.

         The Company  believes  that its property and equipment are adequate for
its present activities.  See Part I, Item 1, "Description of  Business--Proposed
Activities," and Part II, Item 6, "Management's  Discussion and Analysis or Plan
of Operation--Liquidity and Capital Resources."

INVESTMENT POLICIES

         The Company has placed no limitation on the  percentage of assets which
may be  invested  in any one  investment.  This  policy  may be  changed  by the
Company's  Board of  Directors  and  without  a vote of the  Company's  security
holders.  It is the Company's  policy to acquire assets  primarily to add to its
equity base and for income.

REAL ESTATE INVESTMENTS

         The  Company's  investments  in  real  estate  are  not  restricted  to
developed or  undeveloped  properties,  or  properties  of any specific  type or
location.  It  is  the  present  intent  of  Management  to  acquire  commercial
properties  that can be  operated by outside  management  and do not require the
Company's  hands-on  operation.  With the exception of the Peony Gardens Project
(See Item 1,  "Description  of  Business General"),  it is the present intent of
Management  that real estate will be purchased,  free and clear of any mortgage,
with shares of the Company's Common Stock. Any necessary  management services in
connection with the Peony Gardens

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<PAGE>



Project, and any future acquisitions,  will be compensated, if possible, through
the issuance of the Company's Common Stock.

REAL ESTATE AND OPERATING DATA

         On  September  8,  1996,  the  Company  completed  the  purchase  of  a
commercial  real estate  project,  commonly  known as the Peony Gardens  Project
("Peony  Gardens"),  located in mainland China. See Part I, Item 1, "Description
of  Business."  The land use right of the  property  has been granted to Beijing
Grand Canal Real Estate  Development  Co. Ltd., the project's  developer,  for a
term of seventy (70) years,  commencing from May 3, 1994.  NuOasis,  the seller,
holds the Company's  Convertible Secured Promissory Note in the principal amount
of $12,000,000,  granting NuOasis a security interest in the property,  which is
otherwise free of any mortgages, liens or encumbrances.

         Peony Gardens,  upon its anticipated  completion,  will be comprised of
three 5-7 story apartment  buildings  located at the eastern part of Tongxian of
Beijing city. The property is connected to a network of highways and roads,  and
is located in one of the city's  strategic areas for outward  expansion,  with a
relatively good transport system consisting of public buses and taxicabs between
the city center and the development.

         As of December 1996, the development is approximately 35% complete, and
it is  anticipated  that it will be fully  developed by August 1997. The Company
has no obligation  for  construction  costs,  or any other costs relating to the
project's completion,  and will not assume operating costs until full completion
of the  project.  It is the opinion of the  Company's  management  that  present
insurance coverage is adequate. Upon completion of the project, it is the intent
of the Company to acquire,  if  possible,  the services of an  independent  real
estate  management  company  for the  properties  through  the  issuance  of the
Company's Common Stock. At present, real estate management company fees in China
are 4% of total rents  collected.  It is estimated  that the total annual rental
income, after completion of the project's four residential  apartment buildings,
will  be  $5,764,000  at 70%  occupancy.  Management  estimates  expenses  to be
approximately $1,441,000 annually.  Depreciation is based on twenty years, which
is standard  depreciation for apartment buildings.  Real estate and governmental
taxes in connection  with the Peony Gardens  purchase are the  obligation of the
developer and were included in the purchase price. All rental taxes will be paid
by the tenants. Management estimates that leases will be for a minimum period of
two years,  which is the standard  lease term for the area. The property is not,
at present,  subject to the usual competitive  conditions associated with rental
or leased residential  apartment  property,  since the apartment  buildings have
been  mandated by the  Chinese  government  as a special  project for the use of
foreigners.  However,  should the  government  rescind that  mandate,  or should
conditions occur which would cause the Chinese  government to expel  foreigners,
the apartments would be subject to extremely competitive lease and sale pricing.
See Part I, Item 1, "Description of Business--Doing Business in China."

MINERAL LEASE GOLD LODE CLAIMS

         In September  1996, the Company,  through  separate  transactions  with
Mandarin Overseas  Investment Co., Ltd.  ("Mandarin") and Promed  International,
Ltd.  ("Promed"),  acquired an undivided  50% interest in a total of 68 (34 from
each transaction) mineral lease gold lode claims,  consisting of 160 acres each,
all located in the  Melozitna  mining  district  near Tanana,  Alaska,  some 300
air-kilometers  west of the City of Fairbanks,  Alaska.  A gravel  landing strip
near Golden Creek,  about 12 kilometers north of the Yukon River, can be used to
access and service the area during snow-free months.  Aircraft up to the size of
DC-3 can land on this strip to supply fuel and other supplies to mining camps in
the area.  Scheduled  passenger  flights from Fairbanks west to points along the
Yukon River can be persuaded to provide passenger service to and from the Golden
Creek landing strip.  Larger equipment and fuel supplies can be barged down from
the Yukon  River to several  points  where  tractor  roads lead into the mineral
lease area.

                                        9

<PAGE>


         Certain  maintenance and  administrative  costs will be incurred by the
Company to maintain  the claims in a good  standing  status with all  regulatory
agencies.  Pursuant to the Sales  Agreements,  with  Mandarin  and  Promed,  the
Company has agreed to pay fifty percent (50%) of all such  administrative  costs
necessary  to maintain the claims in good  standing,  such costs not expected to
exceed a total of $5,000 annually,  payable to Mandarin and Promed in the amount
of  $2,500  each,  respectively.  At the end of two  years  from the date of the
Agreements, the Company will pay an additional amount representing fifty percent
(50%) of no less than twenty-five thousand dollars ($25,000) to Mandarin, and an
additional amount  representing  fifty percent (50%) of no less than twenty-five
thousand  dollars  ($25,000) to Promed,  in connection with the  requirements of
regulatory agencies. See Part I, Item 1., "Description of Business--General."

         Recent  exploration  activity  in  Alaska  has been  stimulated  by the
discovery  of  low-grade  bulk  tonnage  gold  mineralization  at the Fort  Knox
deposit,  near  Fairbanks.  The gold is associated with high  concentrations  of
tungsten and bismuth.  Other  unaffiliated  companies,  with gold lode claims in
areas  adjacent to the  Company's  gold lode claims,  commenced  field work on a
portion of the adjacent area in July and August 1996. However,  the Company does
not expect to enter into any mining  operations  on its gold lode  claims  until
such time as detailed  geo-maps and  evaluation of existing  studies of the gold
lode claims are obtained from an independent geo-survey company, at an estimated
cost of  $160,000.  If  these  studies  confirm  the  valuation  that  has  been
represented,  the  Company  intends to raise  sufficient  capital to fulfill the
requirements of the mining project.  There can be no assurance,  however,  as to
when,  if ever,  the company  will obtain the  necessary  capital to fulfill the
requirements of the mining project,  or whether,  or to what extent, the project
will be profitable, should operations commence.

ITEM 3.  LEGAL PROCEEDINGS

         Neither the Company nor any of its  subsidiaries  currently  is a party
to, or owns  property  subject to, any pending or threatened  legal  proceedings
which,  in the  opinion of  management,  are  likely to have a material  adverse
impact on the financial condition of the Company.

ITEM 4.  SUBMISSION OF MATTERS OF SECURITY HOLDERS

         None

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common  Stock is quoted on the  bulletin  board  maintained  by the
National Association of Securities Dealers,  Inc. The following table sets forth
the range of high and low bid and asked  quotations  for the Common stock during
the two most recent calendar years ended December 31, 1996 and 1995:



                      High Bid     Low Bid     High Asked     Low Asked
March 31, 1995          5.00         3.00         8.00          3.62
June 30, 1995           3.62         3.50         4.25          3.87
September 30, 1995      3.75         3.62         4.37          4.00
December 31, 1995       5.75         3.50         7.12          4.25


                                       10

<PAGE>



                      High Bid     Low Bid     High Asked     Low Asked
March 31, 1996          5.75         4.25         6.37          5.00
June 30, 1996           5.75         4.62         6.50          5.12
September 30, 1996      7.50         3.00        12.25          5.00
December 31,1996        5.00         1.50         6.00          2.75

         The above prices were obtained from the National Quotation Bureau, Inc.
The prices shown in the above table represent  inter-dealer  quotations  without
retail  mark-up,  mark-down or  commission,  and may not  necessarily  represent
actual transactions.  On December 31, 1996, there were broker-dealers publishing
quotes for the Common Stock.

         All of the Company's  issued stock has been issued pursuant to Rule 144
of the  Securities  Act and could come into any market  which  exists under Rule
144.

         As of December 31, 1996 there were 428 holders of the Company's  Common
Stock. The Company believes there are numerous  additional  beneficial owners of
the Common Stock whose shares are held in "street name".

         In  September  1995 the  Company  declared a 3% stock  dividend  on its
Common  Stock.  Certain  holders  of shares of the Common  Stock of the  Company
waived their rights to receive this dividend.  As a result, on October 31, 1995,
the Company  issued a dividend of an aggregate of 21,753  shares of Common Stock
to holders of 713,010 shares of the Company's Common Stock.

         In May 1996,  the  Company  declared  3% stock  dividend  on its Common
Stock.  As a  result,  on May 3,  1996,  the  Company  issued a  dividend  of an
aggregate of 83,574 shares of Common Stock to holders of 2,785,813 shares of the
Company's Common Stock.

         In June 1996,  the Company  declared a 3% stock  dividend on its Common
Stock.  As a result,  on July 31,  1996,  the  Company  issued a dividend  of an
aggregate of 86,277 shares of Common Stock to holders of 2,875,906 shares of the
Company's  Common Stock.  The Company does not  anticipate  payment of any other
stock or cash dividends in the foreseeable future.

         The  following  information  sets  forth  certain  information  for all
securities  the Company  sold during the past three years  without  registration
under the Securities Act of 1933 (the "Securities  Act"). All transactions  were
effected in reliance on the exemption  from  registration  afforded by Section 4
(2) of the  Securities  Act for  transactions  not involving a public  offering.
There were no underwriters in any of these transactions.

         Pursuant to a Stock Exchange Agreement,  dated August 8, 1994, Harcourt
Investments  issued 250,000 shares of its common stock  (representing 80% of its
common stock outstanding  immediately  subsequent to the transaction) to Eastern
Rocester Limited, a Hong Kong corporation, in exchange for a 60% interest in the
Xinhui JV. After the transaction,  Harcourt  Investments was 80% held by Eastern
Rocester  Limited,  2% by Dr.  Alan Phan,  a  director,  executive  officer  and
promoter  of  the  Company,  and  18%  by an  unaffiliated  person.  All  of the
outstanding   common  stock  of  Eastern  Rocester   Limited   subsequently  was
transferred to Tiana Corporation, of which Dr. Phan beneficially owns 20% of its
common stock.

         Dr. Phan acquired ten Harcourt Investments shares in April 1993 for
nominal consideration.

                                       11

<PAGE>




         The Company acquired all of the outstanding Harcourt Investments shares
for 6,110,337  shares of the Company's Common Stock pursuant to an Agreement and
Plan of Reorganization dated November 5, 1994. Dr. Phan received 291,500 of such
shares in exchange for his Harcourt Investments shares.

         Pursuant to an Agreement and Plan of  Reorganization  dated December 1,
1994, the Company  acquired all of the  outstanding  shares of Harcourt Pen from
Dr. Phan for 38,625 shares of the Company's Common Stock and 1,000 shares of its
Original Preferred Stock.

         On March 27, 1996,  the Company  acquired a complete line of cosmetics,
including  inventory,  valued at $161,250 and marketed  under a brand name,  for
12,000 shares of the Company's Common Stock.

         On June 3, 1996,  the  Company  issued  5,000  shares of the  Company's
Common Stock to Cavaform,  Inc. for  outstanding  liabilities,  in the amount of
$106,775, on behalf of Xinhui JV.

         On June 3,  1996,  the  Company  issued a total of 1,267  shares of its
Common  Stock for the  purchase  of  inventory  valued  at  $30,164  to  Kenneth
Johnson/Marvin  Lieberman  and Edmund Murray in the amount of 667 shares and 600
shares, respectively.

         On June 11, 1996, the Company issued 112 shares of the Company's Common
Stock to Idea International, Inc. in settlement of $2,814 in accounts payable.

         Pursuant to a Sales  Agreement  dated  September  17,1996,  the Company
acquired a fifty percent (50%) interest in thirty four gold lode claims,  valued
at approximately $3,000,000 from Promed International, Ltd.
for 649,350 shares of the Company's Common Stock.

         Pursuant to a Sales  Agreement  dated  September 17, 1996,  the Company
acquired a fifty percent (50%) interest in thirty four gold lode claims,  valued
at  approximately  $3,000,000  from Mandarin  Overseas  Investment Co., Ltd. for
649,350 shares of the Company's Common Stock.

         Pursuant to a Purchase and Sales  Agreement,  dated September 27, 1996,
CKES Acquisitions,  Inc., a Nevada corporation,  acquired all of the outstanding
25,000 shares of the Company's wholly-owned  subsidiary Harcourt Investments for
a Secured  Promissory  Note in the  principal  sum of  $3,000,000,  with accrued
compound interest at six percent (6%) per annum.

         On  September  30, 1996,  pursuant to a purchase  and Sales  Agreement,
dated July 8, 1996, and its Addendum, dated August 8, 1996, the Company acquired
a commercial real estate project,  commonly known as the Peony Gardens Property,
located in mainland China,  for 4,000,000  shares of the Company's Common Stock,
and a Convertible  Secured  Promissory Note. On September 30, 1996,  Pacific Rim
Capital  received 400,000 shares of the Company's Common Stock and Philip Cavana
received  200,000  shares  of the  Company's  Common  Stock  for  $1,000,000  in
brokerage fees in connection with this purchase.

         On September 30, 1996,  pursuant to a Resolution of the Company's Board
of Directors, the Company issued 425,000 shares of the Company's Common Stock to
Pacific  Rim  Capital  on account of funds  advanced  in the amount of  $271,395
during the January 1, 1996 to September 30, 1996 period.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

See Part II, Item 7, "Financial Statements".

                                       12

<PAGE>





ITEM 7.  FINANCIAL STATEMENTS

The audited consolidated  financial statements of Hartcourt Companies,  Inc. and
Subsidiaries  as of  December  31,  1996 and 1995 are  omitted  from this 10K-SB
filing due to a delay in the parents'  subsidiary  completing  its audit for the
period ending December 31, 1996.  Management estimates that the subsidiary audit
will be completed in three to four weeks or there abouts.  However, no assurance
can be given at this time with regards to this completion date.

Once the audit is complete,  an amended  10K-SB/A will be filed with the audited
statements along with the Accountants Report immediately.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
   
         None

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The following table sets forth certain  information about the directors
and executive officers of the Company.

Name                   Age   Position
----                   ---   --------
Dr. Alan V. Phan       51    Chairman of the Board, President,
                             Chief Executive Officer and Chief Financial Officer

Frederic Cohn          57    Secretary, Treasurer and Director

Kenneth Silva          70    Vice-President, Marketing and Sales and Director

Michael L. Caruana     53    Director

James De Rosa          65    Director

Dr. Alan V. Phan is the founder of the Company and has been Chairman, President,
Chief Executive Officer and Chief Financial Officer since November 1993. He also
is the founder of Harcourt  Investments  and Hartcourt  Pen. See Part I, Item 1,
"Description of Business--General."  From 1986 to October 1993, Dr. Phan was the
owner of Hartcourt Consulting, an export management firm and, from 1980 to 1986,
he was the  Executive  Vice  President of EM Kay Group (which owned Magic Marker
Industries).  In addition to his activities in the export and writing instrument
business,  Dr. Phan has been involved in gold mining  operations,  as manager in
the  Phillippines  (1971-1972) for Eisenberg Group, a company located in Israel.
He was active in the real estate industry from 1976 until 1982 as owner of Alpha
Development,  a California real estate  company.  Dr. Phan received his academic
training and degrees at Pennsylvania State University (1967), and Sussex College
of Technology, Sussex England (1975).

                                       13

<PAGE>



         Frederic Cohn has been a director and Secretary since November 1993. He
is  responsible  for  all  financial,  tax,  accounting,  personnel,  management
information system and administrative functions. From 1990 to 1993, Mr. Cohn was
the  President  and Chief  Executive  Officer of Aladdin  Enterprises,  Inc., an
entertainment equipment leasing firm, located in Santa Monica,  California.  Mr.
Cohn is a graduate of New York Law School (1978).

         Kenneth  Silva  has been Vice  President,  Sales  and  Marketing  and a
director, since January 1996. Prior to joining the Company, Mr. Silva was a Vice
President and a Manager for a number of banks,  including  Capital National Bank
(two years),  Bank of Downey (four years),  Interstate  Bank (10 years),  and 22
years at Wells  Fargo  Bank  where  he  served  as Vice  President  of  Business
Development.  Mr.  Silva holds a B.A.  degree in  accounting  and  banking  from
Armstrong  College in San Francisco,  California  (1964),  and attended graduate
courses at American Institute of Banking.

         Michael L. Caruana has been a director  since June 1994. Mr. Caruana is
a graduate of California  State University at Long Beach (1972) with a degree in
engineering. He currently is the President, Chief Executive Officer and majority
owner  of  Pego  Systems,   Inc.,  an  engineering   and  industrial   equipment
manufacturing  company, and has held various positions with Pego since 1975. See
Part I,  Item 1,  "Description  of  Business-General"  and  Part  III,  Item 12,
"Certain Relationships and Related Transactions."

         James De Rosa has been a director of the Company since  September 1996.
A  graduate  of  Tufts  College   (1960),   and  Suffolk  Law  School,   Boston,
Massachusetts  (1963),  Mr. De Rosa is a Real Estate  investor and developer and
has been active in the real estate business since 1974. Mr. De Rosa is President
of De Rosa Properties, Inc.

         Directors  serve for a term of one year or until their  successors  are
elected  and  qualified.  Directors  do not receive  any cash  compensation  for
serving as such, although the Company is contemplating the adoption of a plan to
compensate  directors  through the issuance of shares of Common Stock. The terms
of such a plan currently are under  consideration  and there can be no assurance
as to when, if ever, it will be implemented.

         Executive  officers are appointed by and serve at the will of the Board
of  Directors.  There are no family  relationships  between  or among any of the
directors or executive officers of the Company.

         As the  sole  holder  of  the  1,000  outstanding  shares  of  Original
Preferred  Stock,  Dr. Phan is entitled to elect 3/5 of the number of members of
the Company's Board of Directors,  whereas the holders of the outstanding shares
of Common Stock are  entitled to elect 2/5 of that  number.  See Part I, Item 8,
"Description of Securities" for more information about the rights of the Common,
and Original Preferred stockholders.

         By virtue of his activities in founding and organizing the Company,  as
well as his  beneficial  ownership  of its voting  securities,  Dr.  Phan may be
deemed to be a "promoter" of the Company.

ITEM 10.  EXECUTIVE COMPENSATION.

         The following summary compensation table sets forth certain information
regarding compensation paid during each of the three fiscal years ended December
31,1996,  1995 and 1994 to the person serving as the Company's  Chief  Executive
Officer  during the years ended  December 31, 1996.  No annual  compensation  in
excess  of  $100,000  was  awarded  to,  earned  by or paid to any  director  or
executive officer of the Company for services  rendered in any/all  capacity/ies
in any of the fiscal years indicated.



                                       14

<PAGE>



Name and Principal Position                  Fiscal Year          Annual Salary
---------------------------                  -----------          -------------
Dr. Alan V. Phan, Chief Executive Officer       1996                 $100,000
                                                1995                 $ 70,000
                                                1994                 $ 35,000

         There is no employment agreement with any executive officer.  There are
no salary,  bonus or incentive  plans  covering  cash or  securities  except the
Company's  1995 Stock Option Plan (the  "Plan").  Under the Plan,  incentive and
non-qualified  stock  options  may be granted  to  directors,  officers  and key
employees to purchase up to 2,000,000  shares of Common Stock at an option price
not less  than the fair  market  value of the  stock at the time the  option  is
granted;  the option  period  shall not exceed ten years from the date of grant.
Except  in the case of the  death or  disability  of an  option  holder,  vested
options lapse 90 days  following  termination  of  continuous  employment by the
Company.  Vested  options  lapse one year  after the death or  disability  of an
option holder. No options have been granted under the Plan.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information as of December 31, 1996 with
respect to persons known to the Company to be the beneficial owners of more than
5% of its voting securities and with respect to the beneficial ownership of such
securities  by each  director of the Company and by all  directors and executive
officers of the Company as a group.

Name and Address of             Amount and Nature of                Percent of
Beneficial Owner                Beneficial Ownership (1) (2)        Common Stock
-------------------             ----------------------------        ------------
Dr. Alan V. Phan                     1,478,878  (3)                    14.0%
19104 South Norwalk Boulevard
Artesia, California 90701

Frederic Cohn                            1,609                           *
19104 South Norwalk Boulevard
Artesia, CA 90701

Michael L. Caruana                       1,609                           *
19104 South Norwalk Boulevard
Artesia, CA 90701

James De Rosa                            1,609                           *
19104 South Norwalk Boulevard
Artesia, CA 90701

Philadep & Co.                         617,989                          5.8%
P.O. Box 15891
Philadelphia, PA 19103-0891

CEDE & Co.                             536,351                          5.1%
55 Water Street 2SL
New York, NY 10041


                                       15

<PAGE>



Tiana Corporation                    1,022,949  (4) (5)                 9.7%
Kai Tak Commercial Building
Room 704A
317 Des Voeux Road Central
Hong Kong, China

NuOasis International, Inc.          4,000,000                         37.8%
2 Park Plaza, Suite 470
Irvine, California 92714

All officers and directors
as a group                           1,483,705                         14.1%


*        Less than 1%

(1)      Except as  otherwise  indicated,  each of the  parties  listed has sole
         voting and investment  power with respect to all shares of Common Stock
         indicated.  Beneficial  ownership is calculated in accordance with Rule
         13-d-3(d) under the Securities Exchange Act of 1934, as amended.

(2)      Except as otherwise indicated, shares held are Common Stock.

(3)      Includes (i) an aggregate of 1,000,000  shares issuable upon conversion
         of 1,000  shares of Original  Preferred  Stock and (ii) an aggregate of
         171,718  shares  held by two sons who  reside  with Dr.  Phan  when not
         attending college and law school, respectively.  the sole holder of the
         1,000  outstanding  shares of  Original  Preferred  Stock,  Dr. Phan is
         entitled to elect 3/5 of the number of members of the  Company's  Board
         of Directors.

(4)      As the owner of 204,589 shares of stock in Tiana corporation,  Dr. Alan
         V. Phan's son, Art Phan, holds a 20% interest in Tiana Corporation. Dr.
         Phan disclaims any beneficial ownership in these shares.

(5)      Tiana  Corporation  is a British Virgin  Islands  corporation  owned by
         various  Asian  business  groups  located  in  Hong  Kong,   Singapore,
         Malaysia, and Indonesia.

The Company is not aware of any  arrangement  which might  result in a change in
control in the future.

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Dr.  Alan Phan,  a  director,  executive  officer  and  promoter of the
Company,  acquired ten shares of Hartcourt Investments for nominal consideration
upon its  organization  in April 1993.  Pursuant to a stock  exchange  agreement
dated  August  8, 1994  with  Eastern  Rocester  Limited,  Harcourt  Investments
acquired a 60%  interest  in the Xinhui JV in  exchange  for  250,000  shares of
Harcourt  Investments  common  stock,  representing  80% of the common  stock of
Harcourt  Investments  outstanding  immediately  subsequent to the  transaction.
After giving effect to this  transaction,  Harcourt  Investments was held 80% by
Eastern Rocester Limited, 3% by Dr. Phan and 18% by an unaffiliated  person. See
Part I,  Item I,  "Description  of  Business--General"  and  Part  III,  Item 9,
"Directors, Executive Officers, Promoters and Control Persons."


                                       16

<PAGE>



         The  Company  acquired  all  of  the  outstanding  shares  of  Harcourt
Investments  in exchange  for  6,110,337  shares of the  Company's  Common Stock
pursuant to an Agreement and Plan of  Reorganization  dated November 5, 1994. In
connection  with this  transaction,  Dr. Phan  received  38,625 of such  shares.
Michael  Caruana,  who currently  serves as a director of the Company,  was Vice
President  of the Company at the time of this  transaction.  See Part I, Item 1,
"Description of business--General"  and Part III, Item 9, "Directors,  Executive
Officers, Promoters and Control Persons.

         Dr. Phan acquired ten shares of Hartcourt Pen for nominal consideration
upon  its  organization  in  October  1993.  All of the  outstanding  shares  of
Hartcourt Pen were acquired by the Company  pursuant to an Agreement and Plan of
Reorganization dated December 1, 1994. As the sole stockholder of Hartcourt Pen,
Dr. Phan  received  all 38,625  shares of the  Company's  Common Stock and 1,000
shares of Original Preferred Stock issued by the Company in connection with this
transaction.  See Part I, Item 1,  "Description of  Business--General"  and Part
III, Item 9, "Directors, Executive Officers, Promoters, and Control Persons."

         During 1994 and 1995, the Company made advances in the aggregate amount
of  $168,575 to the  Company's  joint  venture  partner in the Xinhui JV. All of
these advances are non-interest bearing and due on demand.

         During  1994  and  1995,   Pacific  Rim  Capital   ("Pacific  Rim"),  a
non-affiliated  financier  for the  Company  advanced a total of $272,416 to the
Company.  The advance  was  unsecured,  bearing  interest at the rate of 24% per
annum and subject to no fixed repayment  terms.  On September 30, 1996,  Pacific
Rim agreed to  convert  this loan for  425,000  shares of the  Company's  Common
Stock.

         In June  1995,  the  Company  entered  into an  Agreement  and  Plan of
Reorganization with Pego Systems,  Inc. to acquire all of the outstanding shares
of Pego common stock in exchange for 1,500,000  shares of the Company's  Class A
Preferred  Stock.  The transaction was terminated  prior to its completion.  The
owner of Pego, Michael L. Caruana is a current director of the Company.


                                    PART IV.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         The following  list describes the exhibits filed as part of this Annual
Report Form 10-KSB.

Exhibit No.                  Description of Document                            
-----------                  -----------------------
     2.01         Agreement and Plan of Reorganization, dated November
                    5, 1994 among Stardust, Inc.-Production-Recording-Promotion,
                    Harcourt Investments (USA) Inc. ("Harcourt USA") and the
                    shareholders of Harcourt USA. (1)

     2.02         Agreement and Plan or Reorganization dated December 1, 1994
                    Among Harcourt USA.  The Hartcourt Pen Factory, Inc.
                    ("Hartcourt Pen") and the Hartcourt Pen shareholder. (1)

                                       17

<PAGE>




     3.01         Articles of Incorporation of the Company, as amended. (1)

     3.02         Bylaws of the Company. (1)

     3.03         Amendment to the Bylaws of the Company. (1)

     4.01         Articles of Amendment to Articles of Incorporation of the
                    Company regarding the Creation of Preferred Stock and the
                    Statement of Rights and Preferences of Common Stock,
                    Original Preferred Stock and Class A Preferred Stock. (1)

    10.01         Lease between the Company and Larry M. Mitobe for the
                    Company's headquarters facility, dated April 9, 1996. (1)

    10.02         Equipment Lease between Harcourt USA and Anja
                    Engineering Corporation, dated April 4, 1994. (1)

    10.03         Stock Exchange Agreement between Harcourt USA
                    and Eastern Rocester, 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)


                                       18

<PAGE>



    10.11         Purchase and Sale Agreement, dated September 27, 1996,
                    between The Harcourt 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
                    Hartcourt  Companies,  Inc.  and  American  Equities  LLC, a
                    California limited liability company.

    21.01         Subsidiaries of the Company. (1)

    27.01         Financial Data Schedule. (1)

Pursuant to Rule 12b-32 under Securities and Exchange Act of 1934, as amended.

(1)   Incorporated by reference to the  Registrant's  Registration  Statement on
      Form 10 and exhibits  thereto,  as filed with the  Securities and Exchange
      Commission, Registration Number 001-12671 and which was declared effective
      on March 24, 1997.

(b)   Reports on Form 8-K - none

         SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

         The Registrant  did not send an Annual Report  covering the fiscal year
ending December 31, 1996 nor did it send proxy materials to security holders. If
such report and proxy materials are mailed to security  holders,  the Registrant
shall furnish to the  Commission,  for its  information,  four (4) copies of the
Annual Report to security holders and four (4) copies of the proxy materials.

                                       19

<PAGE>



                                   SIGNATURES

         In accordance with Section 13 or 15 (d) of the Securities  Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.



                                              THE HARTCOURT COMPANIES, INC.




Date:    April 15, 1997                          By:/s/ Alan V. Phan
                                                 ----------------
                                                 Alan V. Phan, President


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
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                           Date
     ---------                       -----                           ----  

/s/ Alan V. Phan              Chairman of the Board,             April 15, 1997
---------------------         President, Chief Executive
Alan V. Phan                  Officer and Chief Financial
                              Officer
                  
/s/ Frederick Cohn            Secretary, Treasurer and           April 15, 1997
---------------------         Director
Frederic Cohn                 

/s/ Kenneth Silva             Vice President, Marketing          April 15, 1997
---------------------         and Sales and Director
Kenneth Silva                 

/s/ Michael Caruana           Director                           April 15, 1997
---------------------
Michael Caruana

/s/ James De Rosa             Director                           April 15, 1997
---------------------
James De Rosa

                                       20

<PAGE>



Exhibit 10.13

                              CONSULTING AGREEMENT

         This Consulting Agreement (the "Agreement") is entered into on December
30, 1996, by and between Hartcourt  Companies,  Inc., a Utah corporation and its
subsidiaries  or  affiliates  (the  "Company"),  and  American  Equities  LLC, a
California limited liability company ("Consultant").

         WHEREAS,  the Company's desires to acquire,  manage and develop a large
real estate portfolio for its real estate division (the "Business"),  including,
but not limited to, office, retail, industrial and multi-family properties,  and
raw land;

         WHEREAS,  the Company  recognizes that the Consultant can contribute to
the acquisition, management and development of a real estate portfolio;

         WHEREAS,  the Company  believes it to be  important  both to the future
prosperity  of the  Business  and to the  Company's  general  interest to retain
Consultant  as an  exclusive  consultant  to the  Company  and  have  Consultant
available  to the Company for  consulting  services in the manner and subject to
the terms, covenants, and conditions set forth herein;

         WHEREAS,  the Company and  Consultant  have entered into that agreement
dated December 20, 1996 which  contains a summary of the provisions  herein (the
"Term Sheet") and hereby desire to more fully  document the agreement  contained
in the Term Sheet in accordance with the provisions therein; and

         WHEREAS,  in  order  to  accomplish  the  foregoing,  the  Company  and
Consultant desire to enter into this Agreement, effective on January 1, 1997, to
provide certain assurances as set forth herein.

         NOW  THEREFORE,  in view of the foregoing and in  consideration  of the
premises  and  mutual  representations,   warranties,   covenants  and  promises
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged,  the parties hereto,  intending to
be legally bound hereby agree as follows:

1.       RETENTION.  The  Company  hereby  retains  the  Consultant  during  the
         Consulting  Period  (as  defined in  Section 2 below),  and  Consultant
         hereby  agrees to be so  retained  by the  Company,  all subject to the
         terms and provisions of this Agreement.

2.       CONSULTING  PERIOD.  The Consulting Period shall commence on January 1,
         1997 and  terminate no earlier than December 31, 2001.  After  December
         31, 2001,  either party may terminate  this  agreement upon at least 30
         days written notice.

3.       DUTIES OF  CONSULTANT.  During the  Consulting  Period,  the Consultant
         shall use  reasonable  and best  efforts to perform  those  actions and
         responsibilities  necessary to analyze,  purchase,  sell, refinance and
         manage real property (the "Services"), throughout the world. Consultant
         shall render such services  diligently  and to the best of its ability.
         Consultant  shall  report to Dr.  Alan V. Phan,  President.  Consultant
         shall present  various  opportunities  to the Company,  and the Company
         shall be under no obligation to accept such opportunities.  The Company
         shall not retain or hire any other person to perform  services  similar
         or related to the  Services,  including but not limited to, real estate
         brokers,  mortgage  brokers or property  managers.  The  Company  shall
         provide  all  necessary   financing   required  in  order  to  purchase
         properties  approved by the Company,  including cash or freely tradable
         or restricted securities. Such securities

                                       21

<PAGE>



         may include  freely  tradable  Common Stock,  restricted  Common Stock,
         preferred  stock in the Company,  debt,  convertible  debt or any other
         security.

4.       OTHER ACTIVITIES OF CONSULTANT.  The Company  recognizes the Consultant
         shall  perform  only those  services  that are  reasonably  required to
         accomplish  the  goals  and  objectives  set  forth  herein,  and  that
         Consultant  shall  provide  services to other  businesses  and entities
         other  than  the  Company.  Consultant  shall  be free to  directly  or
         indirectly  own,  manage,  operate,  join,  purchase,  organize or take
         preparatory  steps for the  organization  of, build,  control,  finance
         acquire,  lease or invest or participate in the ownership,  management,
         operation,  control or  financing  of, or be  connected  as an officer,
         director, employee, partner, principal, manager, agent, representative,
         associate,    consultant,   investor,   advisor   or   otherwise   with
         (collectively,  be "Affiliated"  with), any business or enterprise,  or
         permit its name or any part thereof to be used in  connection  with any
         business  or  enterprise  engaged in any  business,  including  but not
         limited to, any business that is the same as, substantially  similar to
         or  otherwise   competitive  with,  adverse,  to  affiliated  with,  or
         otherwise related to the Company. Consultant may be Affiliated with any
         entity  which  may  provide  services  to the  Company.  In  the  event
         Consultant  is Affiliated  with any entity which  proposes to sell real
         property to, or purchase real property  from,  the Company,  Consultant
         shall disclose the nature of such  relationship to the Company prior to
         the Company  making any decision,  and shall obtain the approval of the
         Company,  which  approval  shall be  conclusively  deemed  granted upon
         written notice from Dr. Alan V. Phan or his or the Company's designated
         representative. The Company hereby waives any conflict of interest that
         may arise from a relationship  between  Consultant and any entity which
         Consultant  is  Affiliated  with.  This  Agreement  may be  assigned by
         Consultant to an entity designated by Consultant, whether Affiliated or
         not Affiliated with Consultant, and wherever located.


         Consultant   shall  present  any  real  estate   project  which  it  is
         considering  acquiring  for its own account  first to the Company,  and
         Consultant  hereby grants to the Company an exclusive  right to acquire
         any  such  real  estate   project  prior  to  Consultant   making  such
         acquisition  for its own account.  In the event that the Company elects
         not to go forward with said  acquisition of real  property,  Consultant
         may, in and for its own account, acquire said property.

5.       COMPENSATION.  In  consideration  for  Consultant  entering  into  this
         Agreement, the Company shall compensate Consultant as follows:

         a.   MONTHLY FEES AND BENEFITS:
              i.    Retainer.  The  Company  shall  pay  to  Consultant  a  non-
                    refundable monthly retainer of $5,000.

              ii.   Expenses. The Company shall pay all such expenses reasonably
                    incurred during the Consulting  Period by the Consultant for
                    business  purposes related to or in furtherance of the goals
                    and  objectives  of the Company  and/or the provision of the
                    Services  (collectively,   "Company  Purposes"),  including,
                    without  limitation,  expenses  incurred with respect to the
                    Consultant's  travel  (including  business  class travel for
                    flights of less than three hours and first class  travel for
                    flights of three hours or more), meals and entertainment and
                    other   customary  and   reasonable   expenses  for  Company
                    Purposes.  The Company shall pay such expenses directly, or,
                    upon  submission of bills,  receipts  and/or vouchers by the
                    Consultant, by direct reimbursement to the Consultant.

              iii.  Automobile Allowance. The Company shall pay to Consultant an
                    automobile  allowance  of $750 per month,  and shall pay for
                    fuel,  maintenance  and  automobile  insurance.  The Company
                    acknowledges that Consultant may have a master

                                       22

<PAGE>



                    automobile   insurance   policy   covering   more  than  one
                    automobile,  and  that,  for  purposes  of  this  paragraph,
                    Consultant  will  reasonably  determine  the  portion of the
                    insurance  premium to be allocated to the automobile used by
                    Consultant for Company Purposes.

              iv.   Benefit Plans.  Two employees of Consultant,  which shall be
                    designated by Consultant,  shall be entitled to participated
                    in and receive  benefits under any retirement  plan,  health
                    and dental plan,  disability plan and life insurance plan or
                    employee  benefit  plan or  arrangement  currently or in the
                    future made available by the Company to its employees and/or
                    consultants  ("Benefit  Plans") and to which  Consultant  is
                    eligible,  in  accordance  with the  terms,  conditions  and
                    overall  administration  of such  Benefit  Plans;  provided,
                    however,  that if under the terms of any Benefit  Plan,  the
                    Company shall provide the Consultant  with benefits that are
                    substantially  similar to the benefits  that would have been
                    provided  under such Benefit Plan. At the Company's  option,
                    and with at least 30 days notice,  in lieu of providing  the
                    benefits under any or all of the Benefit Plans,  the Company
                    may elect to pay to the Consultant a monthly amount equal to
                    the Company's cost of providing such benefits to Consultant.
                    Nothing in this Agreement shall limit the Company's  ability
                    to adopt,  terminate or amend any such  benefits at any time
                    provided the  Consultant  is provided with benefits that are
                    at least  substantially  similar  to the  benefits  provided
                    prior  to  such  adoption,  amendment  or  termination.  Any
                    Benefit  Plans  that  are  determined  according  to  annual
                    compensation  shall be calculated  assuming an annual salary
                    of  $250,000  for  each  of   Consultant's   two  designated
                    employees.

         b.   ADVANCE.  The Company  shall pay to the  Consultant  the following
              advance and  Warrants  (as defined  below).  The  Warrants and any
              unearned  portion of the advance  described in this section  shall
              not be refundable and shall be considered  earned by Consultant in
              the event the  Agreement is  terminated  by the  Company,  with or
              without cause.

              i.    The  Company  shall  transfer  or  cause  to be  transferred
                    1,000,000  shares of the Company's common stock (the "Common
                    Stock") as an advance  against future fees to be earned from
                    the acquisition,  sale or refinance of real property, or any
                    other fees due and  payable  hereunder.  Such  Common  Stock
                    shall not be freely tradable. The Company shall be obligated
                    to  prepare   and  file  a   registration   statement   (the
                    "Registration  Statement") and amendments thereto,  with the
                    Securities and Exchange  Commission (the  "Commission")  for
                    the  registration  of the Common Stock under the  Securities
                    and Exchange Act of 1933 (the "Act)") and shall be obligated
                    to  cause  such  registration   statement,   and  amendments
                    thereto,  to be declared  effective by the  Commission on or
                    prior to May 1, 1997.  The Company shall be obligated to the
                    Consultant  to  continually  maintain,  at the Company's own
                    expense, the currency and effectiveness of such registration
                    statement  of the Company,  including  the filing of any and
                    all applications and other  notifications,  filings and post
                    effective  amendments  and  supplements  (collectively,  the
                    "Current Registration  Statement"),  as may be necessary, so
                    as to  permit  the  resale  of the  Common  Stock  until the
                    earlier  of the time that all  shares of Common  Stock  have
                    been sold pursuant to the Current Registration  Statement or
                    two  years  from  the  date  of  the  effectiveness  of  the
                    Registration  Statement. In lieu of filing such Registration
                    Statement,  the Company may  exchange  the Common  Stock for
                    common  stock  of the  Company,  which  is  freely  tradable
                    pursuant to a registration  statement  filed on Form S-8. As
                    fees are  earned  pursuant  to  paragraph  5(d)  below,  the
                    advance will be  considered  earned at the rate equal to the
                    Bid Price on the date prior to the date of

                                       23

<PAGE>



                    this  Agreement.  For example,  if the Bid Price on the date
                    prior to the execution of this Agreement was $3.00, then the
                    advance will have been earned after the Consultant will have
                    become  entitled to $3,000,000 of fees pursuant to paragraph
                    5(d) below.

         c.   WARRANTS.  The  Company  shall issue  warrants to purchase  Common
              Stock (the "Warrants"),  which shall vest  immediately,  and which
              may be exercised by  Consultant at any time through the payment of
              cash or a promissory note bearing interest at six percent (6%) per
              annum, at Consultant's  option. The exercise price of the Warrants
              shall be based on the  closing  bid price of the  Common  Stock as
              quoted on the NASDAQ  Bulletin  Board,  or such  other U.S.  stock
              market as it shall be  quoted  on, on the day prior to the date of
              this Agreement (the "Bid Price").  The Company shall,  at its sole
              expense,  cause the Common  Stock  underlying  the  Warrants to be
              registered  with  the  Securities  and  Exchange  Commission  upon
              demand, or upon the first  registration of any of the Common Stock
              of the Company after the date of this Agreement.  In the event the
              Company   issues  or  sells  Common  Stock  or  any  other  equity
              securities of the Company after the date of this  agreement to any
              party other than  Consultant  for cash  consideration  or non-cash
              consideration  which has a fair value  below the closing bid price
              as of the date prior to such  issuance  or sale,  the terms of the
              Warrants  herein  shall be  adjusted  so as to protect  Consultant
              against  any   dilution  of  its  interest  in  the  Common  Stock
              underlying  the  Warrants.   Within  five  business  days  of  the
              execution of this Agreement, the Company shall issue the following
              Warrants to Consultant and/or its assignee:

              i.    400,000 Warrants at 20% of the Bid Brice
              ii.   400,000 Warrants at 40% of the Bid Price
              iii.  400,000 Warrants at the Bid Price
              iv.   400,000 Warrants at 120% of the Bid Price
              v.    400,000 Warrants at 140% of the Bid Price

         d.   ACQUISITION  AND  DISPOSITION  FEES.  The Company shall pay to the
              Consultant the following fees for the  acquisition or sale of real
              property in each year during the Consulting Period, which fees may
              be  paid  in  cash  or  Common   Stock  at  the  closing  of  each
              transaction:
              i.    Six percent (6%) of the first  100,000,000 of gross purchase
                    or sale price in each year;
              ii.   Five  percent  (5%)  of the  second  $100,000,000  of  gross
                    purchase or sale price in each year;
              iii.  Four  percent  (4%)  of  the  third  $100,000,000  of  gross
                    purchase or sale price in each year;
              iv.   Three  percent  (3%)  of  the  fourth  $1,000,000  of  gross
                    purchase or sale price in each year;
              v.    Two percent (2%) of the fifth  $1,000,000 of gross  purchase
                    or sale price in each year;
              vi.   1%of the aggregate  gross  purchase and sales prices in each
                    year during the Consulting  Period in excess of $600,000,000
                    on any one year.

         e.   PROPERTY  MANAGEMENT,  ASSET MANAGEMENT AND REFINANCING  FEES. The
              Company shall pay to Consultant the following fees for services to
              be provided:
                  
              i.    Management Fee: Six percent (6%) of all gross income or
                    receipts  from all  properties  owned or  controlled  by the
                    Company ("Company Properties"),  including,  but not limited
                    to,  rental fees,  storage  fees,  application  fees and any
                    other operating income.

                                       24

<PAGE>



              ii.   Asset  Management  Fee:  One  percent  (1%) per annum of the
                    gross  value  of  all  real  property  assets  owned  by the
                    Company,   including,   but  not  limited  to,  all  Company
                    Properties.
              iii.  Refinancing Fee: One percent (1%) of the gross amount of all
                    refinancings  that  take  place on any of the real  property
                    assets owned or controlled by the Company.
              iv.   All  fees  under  this  section  shall  be  payable  monthly
                    commencing  January 1, 1997.  In the event the Company shall
                    defer payment of such fees, for a maximum of six months from
                    January 1, 1997, the deferred fees shall accrue  interest at
                    1% per month.

         f.   THIRD PARTY COMMISSIONS. Consultant and/or its Affiliates shall be
              entitled  to  share in any fees or  commissions  payable  by third
              parties on any transaction contemplated herein, including, but not
              limited to, real estate or mortgage brokerage  commissions payable
              by third party sellers or purchasers  arising from any acquisition
              or sale of real  property  by the  Company (a  "Commission").  The
              Company  hereby waives any conflict of interest that may arise due
              to any transaction  wherein Consultant receives such a Commission,
              including,  but not limited to, any conflict of interest which may
              arise as a result of the dual  representation by Consultant of the
              seller or  purchaser  of real  property  on the one hand,  and the
              Company on the other. The Company  acknowledges that, from time to
              time,  the  Consultant  may  present to the  Company as a possible
              acquisition  real  property  owned or  controlled  by  Consultant.
              Consultant  shall  fully  disclose  to the  Company  the nature of
              Consultant's  interest in such real property  prior to the Company
              entering  into any agreement to purchase  said real  property.  In
              cases in which Consultant owns or controls all or any part of real
              property  which has been  presented  to the  Company as a possible
              acquisition,  the Company is encouraged,  and shall have the right
              to retain an  unaffiliated  consultant  to assist  the  Company in
              evaluating that property only.


6.       OFFICE  AND  STAFF.  The  Company  shall  provide   Consultant  with  a
         reasonable  office  and  staff,  along  with the  necessary  costs  and
         expenses to carry out the  objectives  of the Company.  Such office and
         staff  shall be  commensurate  with the  offices  and staff  reasonably
         required  by other  companies  with  similar  real  estate  assets  and
         operations.  It is  acknowledged  that  until  such time as  additional
         office  space and  personnel  are  needed to  service  the real  estate
         operations  of, and  properties  acquired by, the Company,  the Company
         will provide an executive  suite to  Consultant in the West Los Angeles
         area at an  approximate  cost  of  $2,000  per  month,  plus  operating
         expenses including, but not limited to, telephone (including cellular),
         utility,  facsimile and copy machine charges as well as required office
         staff.


7.       TERMINATION.  Subject  to the cure  provisions  contained  herein,  the
         Company may terminate  the  Consulting  Period upon written  notice for
         Cause at any time. Cause shall mean that during the Consulting  Period,
         the  Consultant  engaged  in  gross  and  willful  misconduct  that  is
         materially  and  significantly  injurious  to the Company,  and,  after
         written  notice of such  conduct,  Consultant  has failed to cease such
         conduct within not less than 30 days. Any termination  pursuant to this
         section   shall  be   communicated   by  written   Notice  of  Intended
         Termination.  For  purposes  of this  Agreement,  a "Notice of Intended
         Termination" shall mean a notice which shall clearly state the specific
         termination provision in this Agreement relied upon and shall set forth
         in reasonable and specific detail the facts and  circumstances  claimed
         to provide a basis for termination of the Consulting  Period. No Notice
         of  Intended  Termination  shall be valid  unless  it is  signed by the
         entire board of directors of the Company (the "Board").


         a.   Not less than 15 days  after  receipt  of the  Notice of  Intended
              Termination,  Consultant  shall  have the  opportunity  to a full,
              complete and fair hearing in the presence of the entire Board. The

                                       25

<PAGE>



              Board shall present to Consultant its reasons for the termination,
              including  the  specific  actions,  inactions,  omissions or other
              facts  relied upon by the Board in making its  determination  that
              Consultant  has engaged in gross and willful  misconduct  and that
              the Company has the right to terminate  this  Agreement for Cause.
              Consultant   shall  have  the  right  to  rebut  any  evidence  or
              allegations   of  wrongdoing  and  shall  have  the  right  to  be
              represented  by counsel of  Consultant's  choice at such  hearing.
              After such hearing, should the Board determine that this Agreement
              shall be  terminated  for Cause,  it shall  issue a written  Final
              Notice of Termination to Consultant,  signed by all members of the
              Board, setting forth in detail the specific facts, conclusions and
              findings  of the Board in  determining  that Cause  exists for the
              termination  of this  Agreement.  The Final Notice of  Termination
              shall  contain an  effective  termination  date,  which  effective
              termination  date shall be no less than  thirty (30) days from the
              date of the Final Notice of Termination.

         b.   For a term of one (1) year,  in the event the  Company  terminates
              this  Agreement,  then the  Company  shall pay to  Consultant,  as
              liquidated damages,  87,500 shares of freely tradable Common Stock
              for each month or fraction thereof commencing with January 1, 1997
              through the effective date of such termination, up to a maximum of
              1,000,000 shares. All compensation paid to Consultant  pursuant to
              Section  5  hereof  shall be  deemed  earned,  including,  but not
              limited to, the Warrants;  provided,  however,  that after Company
              has  delivered  the   liquidated   damages  as  described   above,
              Consultant  shall  return to Company the  unearned  portion of the
              1,000,000 shares advanced to Consultant pursuant to Section 5(a).

8.       NOTICE. Any notice required,  permitted or desired to be given pursuant
         to any of the provisions of this Agreement shall be deemed to have been
         sufficiently given or served for all purposes if delivered in person or
         sent by certified  mail,  return  receipt  requested,  postage and fees
         prepaid,  or by  national  overnight  delivery  prepaid  service to the
         parties  at their  addresses  set forth  above.  Copies of  notices  to
         Consultant shall be sent to the attention of Reid Breitman, Esq. at the
         address below.  Notice to Consultant shall be sent to Consultant at the
         address  below.  Any party hereto may at any time and from time to time
         hereafter change the address to which notice shall be sent hereunder by
         notice to the other party given under this  paragraph.  The date of the
         giving of any  notice  sent by mail shall be the day two days after the
         posting of the mail,  except that notice of an address  change shall be
         deemed  given  when  received.  The  addresses  of the  parties  are as
         follows:

         TO CONSULTANT:                     With a Copy to:
         AMERICAN EQUITIES, LLC             Reid Breitman, Esq.
         1860 N. Fuller Avenue, #401        Kaye, Scholer, Fierman, 
         Los Angeles, California 90046      Hays & Handler LLP 
         Telephone: (213) 850-1478          1999 Avenue of the Stars, 17th Floor
                                            Los Angeles, California 90067
                                            Telephone: (310) 788-1077


         TO THE COMPANY:
         Dr. Alan V. Phan, President
         Hartcourt Companies, Inc.
         19104 S. Norwalk Blvd.
         Artesia, California 90701
         Telephone: (310) 403-1126
         Facsimile: (310) 403-1130


                                       26

<PAGE>



9.       WAIVER.  No course of dealing nor any delay on the part of either party
         in  exercising  any rights  hereunder  will  operate as a waiver of any
         rights  of such  party.  No  waiver  of any  default  or breach of this
         Agreement or  application  of any term,  covenant or  provision  hereof
         shall be deemed a continuing  waiver or a waiver of any other breach or
         default or the waiver of any other application of any term, covenant or
         provision.

10.      DEFINITION  OF  "REASONABLE  AND  BEST  EFFORTS".  Reasonable  and best
         efforts   shall  not  include  the  payment  of  any   non-reimbursable
         out-of-pocket  costs or other payments by Consultant.  Consultant shall
         not guarantee, make any representation concerning (which representation
         would  survive  the  closing  of any  escrow or other  transaction)  or
         warrant (1) the condition,  performance, value, or profitability of any
         real property purchased,  sold by, or otherwise considered for purchase
         by the Company; (2) the validity,  marketability or insurability of any
         title to any real property purchased,  sold by, or otherwise considered
         for purchase by the Company; (3) the validity,  enforceability or value
         of any leases of or  pertaining to all or any part of any real property
         purchased,  sold  by,  or  otherwise  considered  for  purchase  by the
         Company; (4) the market value of any real property purchased,  sold by,
         or otherwise considered for purchase by the Company; (5) the ability to
         finance,  refinance or otherwise mortgage or encumber any real property
         purchased,  sold  by,  or  otherwise  considered  for  purchase  by the
         Company;  or (6) that Consultant will find or present any real property
         which the Company will consider,  approve or ultimately  purchase or be
         able to purchase.

11.      SUCCESSORS;  BINDING  AGREEMENTS.  Prior  to the  effectiveness  of any
         succession   (whether   direct  or  indirect,   by   purchase,   merger
         consolidation or otherwise) to all or substantially all of the business
         and/or assets of the Company, the Company will require the successor to
         expressly  assume  and agree to perform  it if no such  succession  had
         occurred.  As used in this Agreement,  "Company" shall mean the Company
         as defined above and any successor to its business  and/or assets which
         executes and delivers the Agreement  provided for in this Section 10 or
         which  otherwise  becomes bound by all the terms and provisions of this
         agreement by operation of law.

12.      SURVIVAL OF TERMS.  Notwithstanding  the  termination of this Agreement
         for  whatever  reason,   the  provisions   hereof  shall  survive  such
         termination, unless the context requires otherwise.

13.      COUNTERPARTS.   This   Agreement   may  be  executed  in  two  or  more
         counterparts,  each of which shall be deemed to be an original, but all
         of which together shall  constitute  one and the same  instrument.  Any
         signature  by  facsimile  shall be valid and  binding as if an original
         signature were delivered.

14.      CAPTIONS. The caption headings in this Agreement are for convenience of
         reference  only and are not  intended  and  shall not be  construed  as
         having any substantive effect.

15.      GOVERNING  LAW.  This  Agreement  shall be  governed,  interpreted  and
         construed  in  accordance  with  the laws of the  state  of  California
         applicable  to  agreements  entered into and to be  performed  entirely
         therein.  Any suit, action or proceeding with respect to this Agreement
         shall be  brought  exclusively  in the  state  courts  of the  State of
         California  or in the  federal  courts of the United  States  which are
         located in Los Angeles,  California. The parties hereto hereby agree to
         submit to the  jurisdiction  and venue of such courts for the  purposes
         hereof.  Each party  agrees that,  to the extent  permitted by law, the
         losing party in a suit,  action or proceeding  in  connection  herewith
         shall pay the prevailing party its reasonable  attorneys' fees incurred
         in connection therewith.

16.      ENTIRE  AGREEMENT/MODIFICATIONS.  This Agreement constitutes the entire
         agreement  between the parties and supersedes all prior  understandings
         and agreements, whether oral or written regarding Consultant's

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<PAGE>



         retention  by the  Company,  including,  but not  limited  to, the Term
         Sheet.  This  Agreement  shall not be  altered  or  modified  except in
         writing, duly executed by the parties hereto.

17.      WARRANTY. The Company and Consultant each hereby warrant and agree that
         each is free to enter into this  Agreement,  that the  parties  signing
         below are duly authorized and directed to execute this  agreement,  and
         that this  Agreement is a valid,  binding and  enforceable  against the
         parties hereto.

18.      SEVERABILITY.  If any term, covenant or provision, or any part thereof,
         is found by any court of competent jurisdiction to be invalid,  illegal
         or  unenforceable  in any  respect,  the  same  shall  not  affect  the
         remainder  of such  term,  covenant  or  provision,  any  other  terms,
         covenants or provisions  or any  subsequent  application  of such term,
         covenant or provision  which shall be given the maximum effect possible
         without regard to the invalid,  illegal or unenforceable term, covenant
         or  provision,  the parties  hereto intend that there shall be added as
         part of this  Agreement  a term,  covenant or  provision  as similar in
         terms to such  invalid,  illegal or  unenforceable  term,  covenant  of
         provision,  or part thereof, as may be possible and be valid, legal and
         enforceable.

         IN WITNESS HEREOF,  the parties hereto have duly executed and delivered
this Agreement as of the day and year first written above.


AMERICAN EQUITIES LLC                         HARTCOURT COMPANIES, INC.



By: /s/ Reid Breitman                         By: /s/ Alan V. Phan
-----------------------                       --------------------------
Reid Breitman, President                      Dr. Alan V. Phan, President


                                       28

<PAGE>



                        ADDENDUM TO CONSULTING AGREEMENT


         This Addendum to  Consulting  Agreement is entered into on December 30,
1996,  by and between  Hartcourt  Companies,  Inc., a Utah  corporation  and its
subsidiaries  or  affiliates  (the  "Company"),  and  American  Equities  LLC, a
California limited liability company ("Consultant").

         The parties hereby  acknowledge that the "Bid Price," as defined in the
Consulting Agreement, is One Dollar and Fifty Cents ($1.50).

         IN WITNESS HEREOF,  the parties hereto have duly executed and delivered
this Addendum as of the day and year first above written.


AMERICAN EQUITIES LLC                                HARTCOURT COMPANIES, INC.


By: /s/ Reid Breitman                                By: /s/ Alan V. Phan
---------------------                                --------------------
Reid Breitman, President                             Dr. Alan V. Phan, President

                                       29

<PAGE>







December 20, 1996


Dr. Alan Phan
Hartcourt Investments, Inc.
19104 S. Norwalk Blvd.
Artesia, California 90701

         Re:      American Equities LLC Consulting Agreement

Dear Dr. Phan:

         This letter shall  clarify  certain  issues raised by you in connection
with the consulting  agreement (the  "Consulting  Agreement")  between  American
Equities LLC ("American Equities") and Hartcourt Investments, Inc. ("Hartcourt")
and  shall be  incorporated  as part of such  Consulting  Agreement  reached  on
December 20, 1996. Hartcourt and American Equities agree to the following:

         1. Exclusivity.  All real estate  purchases shall be for Harcourt only.
Not to go forward with said  property,  Consultant  agrees not to purchase  said
property.

         2. Minimum Performance  Objective.  Consultant shall have increased the
assets and/or market  capitalization  of Harcourt by a minimum of $50,000,000 by
December  31,  1997.  In the  event  Consultant  shall  not  meet  this  minimum
performance  objective,  Consultant  shall return that portion of the  1,000,000
shares of Common Stock advanced to Consultant,  valued at $.50 per share,  which
has not been earned pursuant to the terms set forth in the Consultant Agreement,
or shall  pay to  Hartcourt  the sum  equal to the  number  of  shares  unearned
multiplied  by $0.50.  For purposes of the minimum  performance  objective,  the
assets of Hartcourt  shall be defined as all assets that  Hartcourt  acquires of
any kind, including real estate,  other operating companies,  all other tangible
and  intangible  assets,  and  any  increase  in the  market  capitalization  of
Hartcourt.  The market  capitalization  as of December  17, 1996 is agreed to be
$18,569,432.  Therefore,  if the  market  capitalization  of  Hartcourt  exceeds
$68,569,432  at  any  time,  or  if  the  total  assets  of  Hartcourt   exceeds
approximately $82,000,000 at any time, or, if in the aggregate, the total assets
plus market  capitalization of Hartcourt shall exceed  $100,500,000 at any time,
this minimum performance  objective will have been satisfied.  To the extent any
assets are sold or removed from Hartcourt's balance sheet, this calculation will
be adjusted  to the extent of the dollar  value of such sale or removal so as to
reduce the minimum performance objective.

         3. Expense Cap.  Hartcourt  shall sell to Consultant  300,000 shares of
restricted  Common  Stock  at  $0.50  per  share.  Hartcourt  shall  advance  to
Consultant  $50,000 to be used for the opening and  operating of an office.  The
initial budget to open said office shall not exceed  $10,000.  The parties agree
that Hartcourt shall pay the monthly operating  expenses of this office pursuant
to the Consulting  Agreement.  Hartcourt shall advance twelve  thousand  dollars
($12,000) per month towards the agreed upon budget. Consultant shall advance any
portion in excess of $12,000 per month which shall be  reimbursed  by  Hartcourt
upon approval of such expenses.  Any travel  expenses,  except for local travel,
must be approved in advance by Hartcourt  and will be  reimbursed  by Hartcourt.
Hartcourt agrees to set aside an additional  $100,000 in a segregated account to
pay for the operating expenses of the consultant.


                                       30

<PAGE>


         IN WITNESS  WHEREOF,  the parties hereby agree to this  modification of
the Consulting Agreement.  All other terms remain the same and are in full force
and effect.


AMERICAN EQUITIES LLC                             HARTCOURT INVESTMENTS, INC.


By: /s/ Reid Breitman                             By: /s/ Alan V. Phan
---------------------                             --------------------
Reid Breitman, President                          Dr. Alan V. Phan, President

                                       31