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, 2002

                        Commission file number 001-12671
                                  ------------
                          THE HARTCOURT COMPANIES, INC.
             (Exact name of registrant as specified in its charter)

                                      UTAH
                            (State of incorporation)

                                   87-0400541
                      (I.R.S. Employer Identification No.)

       2500E. Colorado Blvd. Suite 301 Pasadena, CA 91107, (626) 844 2437
               (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
                                      None

                    Name of each exchange on which registered
                                      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: $ 1,137,011





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         State the aggregate market value of voting stock held by non-affiliates
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 Feb 6, 2003, $6,757,528.

         State the number of shares  outstanding of each of the issuer's classes
of common equity,  as of the latest  practicable  date: As of Feb 6, 2003, there
were 94,291,084 shares of common stock outstanding.

















































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                          THE HARTCOURT COMPANIES, INC.

                         2001 Form 10-KSB Annual Report
                                Table of Contents

                                                                        Page
                                                                        ----
                                     PART I

  Item 1.   Description of Business...........................................4

  Item 2.   Description of Property..........................................22

  Item 3.   Legal Proceedings................................................23

  Item 4.   Submission of Matters to a Vote of Security Holders..............24

                                     PART II

  Item 5.   Market for Common Equity and Related Stockholder Matters.........25

  Item 6.   Management's Discussion and Analysis or Plan of Operation........28

  Item 7.   Consolidated Financial Statements................................31

  Item 8.   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure..............................31

                                     PART III

  Item 9.   Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act................32

  Item 10.  Executive Compensation...........................................35

  Item 11.  Security Ownership of Certain Beneficial Owners
            and Management...................................................37

  Item 12.  Certain Relationships and Related Transactions...................39

                                     PART IV

  Item 13.  Exhibits and Reports on Form 8-K.................................41

            Signatures.......................................................45












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<PAGE>
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, Hartcourt Investments (USA) Inc.
("Hartcourt  Investments");  the Hartcourt Pen Factory,  Inc. ("Hartcourt Pen");
Pego Systems, Inc. ("Pego") and Electronic Components and Systems, Inc. ("ECS"),
which were spun-off on March 1, 1999; its 51% owned subsidiary Beijing UAC Stock
Exchange Online Co., Ltd. ("UAC  Exchange"),  which was disposed of on September
10, 2001; its 66.67% owned subsidiary Haike Caijin TV ("HCTV") has been disposed
of on August 28 2002;  its 51% owned  subsidiary  Elephant Talk Limited ("ET" or
"ETCI") has been  disposed of on October 30 2002;  its 58.53%  owned  subsidiary
Financial  Telecom  Limited  ("FTL");  its  wholly  owned  subsidiary  Hartcourt
Companies Ltd.; its wholly owned subsidiary  Hartcourt  Capital Inc.; its wholly
owned subsidiary  Ai-Asia Inc.; and its 85% owned  subsidiary  StreamingAsia.Com
Ltd ("StreamingAsia").  All share and per share information contained herein has
been adjusted to reflect a  five-for-seven  reverse split of Hartcourt's  common
stock  effected on October 6, 1995, a one for five reverse split of  Hartcourt's
common  stock  effected  on  August  1,  1996  and two for one  stock  split  of
Hartcourt's common stock effected on September 21, 2000.

                                     PART I

Item 1:  Description of Business.

Note 1:  Organization and Nature of Operations:

The Hartcourt  Companies,  Inc. (herein referred to as "Hartcourt" or "Company")
is a holding and  development  enterprise  that is  building a broad  network of
Internet,   media,  and   telecommunication   companies  in  Greater  China.  In
partnership  with  leading  Chinese   entrepreneurs   and   government-sponsored
entities,  Hartcourt is developing and investing in emerging  technologies while
building an  integrated  commercial  framework  for its  subsidiaries  and their
partners.  Hartcourt's  operative  business  strategy is  designed to  establish
market-leading  position and facilitate a series of venture divestitures via IPO
or public mergers in its four main business divisions to fully realize the value
of these assets for its  investors.  The four  business  divisions  are Sinobull
Financial Group,  Media Services Group,  E-learning Group and Hartcourt  Capital
Group.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified and profitable revenue base throughout its operations. The
company is aggressively identifying and pursuing the best business opportunities
available.  Through a continued  refinement  of  operational  efficiencies,  and
increasing   revenue  margins,   the  Company  is  providing  a  clear  path  to
profitability for its current and future businesses.

Hartcourt is developing  extensive business operations  throughout Greater China
to  position  itself to take full  advantage  of the  substantial  opportunities
presented by the emergence of the worlds largest consumer and business  markets,
and  China's  upcoming  entry  into  the  WTO.  Hartcourt's  ability  to  obtain
government  approved  licenses and its wide array of well  established  business
relationships  is  greatly  facilitating  these  goals and making  Hartcourt  an
attractive entry point for many corporations seeking access to these markets.


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<PAGE>
Sinobull  Financial  Group:  This group consists of Financial  Telecom  Limited,
Sinobull  Information  Company  Limited  (formerly  Shanghai  Guo Mao  Science &
Technology Co. Ltd.), and Sinobull Network  Technology Company Limited (formally
Beijing Net Technologies Center Company,  Ltd.). The Sinobull Financial Group is
a  leading  financial  content  provider,   develops   technologically  advanced
financial services platforms, and operates a financial Internet portal. Sinobull
provides mainland brokerages and financial  institutions the hardware,  software
and  Internet  platforms to enable their  customers'  access to a  comprehensive
suite of quality financial news,  real-time market data,  financial analysis and
professional  market  commentary.   Sinobull.com,  its  financial  services  and
information  portal,  is one of China's  most  popular  financial  portals.  The
company's  E-Finance  platform is an integration of the most advanced  Internet,
telecommunication and wireless access systems available on the market today. The
service  platform and collateral  content is offered via subscription to leading
securities  brokerages,  investment firms, banks, and media companies throughout
Greater China.  Media Services Group:  Under this group,  Hartcourt formed a new
holding and  development  entity AI-Asia Inc. to acquire assets and companies in
the multi-media  technology and services  sector.  Its objective is to identify,
develop,  and  maintain  first-mover  technologies,  products  and  services for
corporate  and  consumer  Internet  deployment.  AI-Asia  plans to  provide  its
clientele with a comprehensive range of Internet enabling  solutions,  preparing
them  to   participate   in  the  rapidly   emerging   streaming  and  broadband
communications  revolution.  The  operating  companies  in  this  group  include
StreamingAsia Limited, LogicSpace Limited, and Syndicate Asia Limited. The group
provides  comprehensive  real-time  audio and video delivery  (Streaming  Media)
solutions  along with Internet  consulting and web  application  development for
businesses, professionals,  organizations, web sites and content publishers. The
Streaming Media network infrastructure enables the streaming of superior-quality
multimedia  advertising,  live event  broadcasting and on-demand audio and video
content over the Internet to target audiences throughout Asia and globally.

E-learning  Group:  This  group  was  formed  in  a  partnership   agreement  in
cooperation  with Northern  Jiaotong  University and California State University
Fullerton to jointly develop  education  projects and introduce  American career
training courses and post-graduate  business programs in China. The project will
offer prestigious  American  education  programs in China,  utilizing one of the
first online education  licenses  awarded by China's Ministry of Education.  The
project is offering both  certificate and degree programs with courses  designed
for relevance in today's business world. Coursework will initially be offered in
the classroom and later expanded  online.  Hartcourt plans to extend its program
to other potential partners and institutions in the future.

Hartcourt  Capital  Group:  Hartcourt  recently  formed  under  this group a new
company  Hartcourt  Capital Inc., an  investment-banking  arm to act as a bridge
between high-growth Chinese companies and the U.S. capital markets.  The company
will provide a wide range of strategic and financial  advisory services covering
mergers and acquisitions,  fund raising, private placement,  restructuring,  and
public market  listings.  To supplement  this objective,  Hartcourt  published a
magazine  called  China  Report.  The  objective  of the  magazine is to provide
investors with updates and analysis on the fast-changing  investment environment
and opportunities in China.

History of the Company:

Stardust,  Inc.-  Production-recording-Promotion   ("Stardust"),  a  corporation
organized under the laws of the State of Utah in September 1983, acquired all of

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<PAGE>
the  outstanding  shares of Hartcourt  Investments,  a Nevada  corporation,  for
6,110,337  shares of Stardust  common stock (after taking into account a reverse
stock  split  and  stock  dividend)   pursuant  to  an  Agreement  and  Plan  of
Reorganization dated November 5, 1994. At the time of this acquisition, Stardust
was a "shell" entity with no assets,  business or operations.  Subsequent to the
acquisition of Hartcourt Investments, Stardust changed its name to The Hartcourt
Companies, Inc.

OPERATIONS BY BUSINESS DIVISIONS

SINOBULL FINANCIAL GROUP:

The Sinobull  Financial  Group  ("Group")  was formed in November  1999 with the
intention to consolidate  various related businesses  acquired or expected to be
acquired by Hartcourt or Sinobull.com Inc. ("Sinobull"),  the holding company of
the Group incorporated in British Virgin Islands. On May 16, 2002,  Sinobull.com
Inc.  changed its name to Hartcourt  Companies  Limited.  In the test hereafter,
Hartcourt  Capital  Limited  is  referred  to as  "Sinobull".  On April 2, 2001,
Sinobull's  one share  issued  and  outstanding  held by Mr.  Tang Wing On,  was
formally transferred to Hartcourt, and Sinobull became a wholly owned subsidiary
of  Hartcourt.  On October 2, 2001,  Hartcourt  announced its intent to publicly
divest the Sinobull Group in a merger with Global Telephone  Communications Inc.
(OTC Bulletin Board:  GTCI).  The reverse merger will allow Sinobull to actively
trade on the equity markets and unlock its value for Hartcourt  investors.  GTCI
shareholders have approved the merger.  However,  both parties agreed to rescind
the agreement due to complication involving outstanding creditors of GTCI.

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

On August 17, 1999,  Hartcourt entered into a stock purchase agreement with FTL,
a  Hong  Kong  corporation,  to  purchase  4,964,990  shares  of  common  stock,
representing  58.53% of the total common stock  outstanding.  The purchase price
was agreed to be HK $4.713 (US$ 0.604) per share for a total of HK$25,563,842 or
US$3,277,412,  payable 50% in cash and the remaining balance in Hartcourt common
shares.  The acquisition was completed on October 4, 1999.  Hartcourt made total
cash payments of $1,638,706 and issued  1,754,552  shares of its common stock to
FTL. As of 31 December 2002,  FTL sold all the shares of Hartcourt  common stock
to satisfy certain obligations.

On March 27, 2000, FTL entered into a Memorandum of Understanding with NiceVoice
Investment  Holdings  Limited  (NiceVoice)  to form a joint venture named Fintel



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<PAGE>
Wireless  Internet Limited (FWL) for the purpose of establishing and operating a
financial paging service network in Hong Kong on the FLEX transmission  protocol
on a PDA receiver device. FTL agreed to invest cash by phases, to the amount not
to exceed HK$4,000,000 (approximately US$512,800) in exchange for a total of 51%
ownership  interest in the joint  venture,  and Nice Voice agreed to  contribute
certain assets in FWL. After the completion of due diligence, the parties signed
the formal joint venture agreement on April 28, 2000 and FWL became a subsidiary
of FTL. Although NiceVoice has contributed certain assets in the FWL, due to the
method of funding these assets NiceVoice does not presently have legal ownership
title to such  assets  until the  final  dollar  payment  has been made on these
assets.  The accompanying  financial  statements as of December 31, 2002 reflect
FTL's  investment  of 51%  ownership  interest in FWL. FWL ceased  operations on
March 1, 2002 after all its customers were sold to a third party. As of December
31, 2002, FTL had advanced approximately  HK$4,216,162  (US$540,534) towards its
investment in FWL.  During the quarter ended 30 September 2002, FTL disposed off
its wholly owned subsidiary  Topomedia to Bowland, the other shareholder of FTL.
As  Topomedia  suffered  a big loss,  FTL made bad debt  provision  HK$8,704,514
(US$1,115,963) for the advance to Topomedia.

Sinobull Network Technology Company Limited (Sinobull  Network):  Formally known
as  Beijing  Shangdi  Net  Technologies  Center  Company,  Ltd.  ("Shangdi")  is
principally  engaged in the  business of data  broadcasting  in China.  Its main
activities include research,  development and sale of data broadcasting hardware
and software. Shangdi is a major shareholder of Hua Xia Info, the financial data
provider of Hua Xia  Securities,  the second  largest  stock  brokerage  firm in
China.  Hua Xia Info has its own financial  reporters for its  data-broadcasting
network via cable TV and  magazine.  Through this  relationship,  Sinobull  will
operate accounts through Hua Xia Securities Brokerages  nationwide.  Shangdi has
completed a software  program  for cable set top boxes,  which  enable  users to
trade stock online from their home television sets.

On December 18, 1999,  Sinobull  signed a Term Sheet  Agreement  with Shangdi to
form a new corporation in Beijing.  Sinobull shall have 40% interest and Shangdi
shall have 60%  interest in the new  corporation.  On April 12,  2000,  Sinobull
signed a Term  Sheet  Agreement  with  revising  the  terms  of the  Term  Sheet
Agreement signed on December 18, 1999. The terms of the revised agreement stated
Sinobull  and Tiandi  Hulian  Technologies  Limited  ("Tiandi"),  an  investment
holding company incorporated in the British Virgin Islands, holding the interest
of the shareholders of Shangdi,  acquired  through its  wholly-owned  subsidiary
Sinobull  Network  Technology  Company Limited  (Sinobull  Network"),  a company
registered in Beijing,  all of the operating assets and business of Shangdi.  To
finance this  acquisition,  Tiandi issued new shares to Sinobull equal to 40% of
the  expanded  capital of Tiandi.  The terms of the revised  agreement  required
Sinobull to pay Shangdi  US$670,000  as the  consideration  for all tangible and
intangible assets in relation to Shangdi's computer network information services
excluding  cash and debts;  invest  US$1,000,000  in  Sinobull  Network  for its
working capital needs;  issue 140,000  restricted  common shares of Hartcourt to
Shangdi and 60,000 restricted common shares of Hartcourt to Sinobull Network for
its working capital needs. In exchange,  Shangdi  transferred without any pledge
and debt,  all tangible and  intangible  assets in relation to computer  network
information  services to Sinobull  Network,  and transferred to Hartcourt 40% of
the ownership interest in Tiandi. On December 28, 2000, Sinobull, Tiandi, and Li
Chun Ying  (representative of the owners of Shangdi) signed a Share Subscription
and Sale and Purchase  Agreement  whereby,  Sinobull  owned 51% of Tiandi and Li



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Chun Ying owned 49% of Tiandi  after  payment of  consideration  to Shangdi  for
purchase of all tangible and intangible assets. Sinobull through an advance from
Hartcourt, had paid $1,000,000 in cash towards the purchase of its 51% ownership
interest  of which  $670,000  was  distributed  to the owners of Shangdi and the
remaining  $330,000  was deemed as capital  contribution  in  Sinobull  Network.
Tiandi and Sinobull Network ceased its operations as of May 16, 2001.

Shanghai Sinobull Information Company Limited (Sinobull  Information):  Formally
known as Shanghai Guo Mao Science & Technology  Co. Ltd.  ("Guo Mao").  Sinobull
Information  is a major  real-time  financial  data provider in Shanghai using a
satellite network to transmit data specializes in stock quotes, futures, indexes
and commodities data that compliments the financial  information database of Hua
Xia Info and the financial data delivery  systems of FTL.  Association  with Guo
Mao gives  Sinobull a distinct edge over any  competitive  financial  portals in
China. On December 1, 1999,  Sinobull signed a Term Sheet Agreement with Guo Mao
whereby Guo Mao agreed to issue new shares for a total  proceeds  of  $1,000,000
which will represent 50% of the expanded capital of Guo Mao.  Sinobull agreed to
subscribe  for all the new shares  issued by Guo Mao. On May 16, 2000,  Sinobull
and Hopeful Internet  Technologies Limited ("Hopeful") entered into an agreement
whereby  Hopeful,  an investment  holding  company  incorporated  in the British
Virgin  Islands,  will  acquire  through its  wholly-owned  subsidiary  Shanghai
Sinobull  Information  Company  Limited  ("Sinobull  Information"),  all  of the
operating assets and business of Guo Mao. To finance this  acquisition,  Hopeful
issued new shares to Sinobull  equal to 40% of the  expanded  capital of Hopeful
for a total  consideration  of $1,000,000.  The terms of payment by Sinobull for
the  purchase  of new  shares  will be:  $200,000  in cash upon  signing  of the
agreement; $150,000 in cash within 30 days of signing of the agreement; $150,000
in cash within 60 days of signing of the agreement;  and $500,000 within 30 days
after  signing of the  agreement  in shares of  Hartcourt  based on the  average
closing  price in the last 7  trading  days  before  payment,  or in  shares  of
Sinobull  based upon the  valuation to be agreed on by the parties.  On December
28, 2000,  Sinobull,  Hopeful,  Guo Mao and Lee Lu Ping  (representative  of the
owners of Guo Mao) signed a Share Subscription Agreement whereby,  Sinobull will
own 51%  ownership  in  Hopeful  and Lee Lu Ping  will own 49% of  ownership  in
Hopeful after payment of  consideration  to Guo Mao for purchase of all tangible
and  intangible  assets.  Sinobull  has  paid  $500,000  in cash  received  from
Hartcourt  towards  the  purchase  of new shares of Hopeful  and issued  805,802
shares of Hartcourt's common stock valued at $500,000 to Sinobull Information in
February  2001.  The 805,802  common shares issued to Sinobull  Information  are
reflected as treasury  shares in the  accompanying  financial  statements  since
Sinobull  Information  became a  subsidiary  of  Hartcourt.  Hopeful  is a shell
company with no operation.

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



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On September 7, 2000,  Hartcourt  signed a joint venture  agreement with Hopeman
Computer  Services  Corporation  Limited  (Hopeman")  to form a joint venture in
Shanghai and jointly develop and market a 24-hour financial  television  program
and/or provide  financial  data services to  existing/new  financial  television
programs for China  market.  The new joint  venture was named "Haike  Caijin TV"
means  Hartcourt  Financial  Television  (HCTV)  in  English.  HCTV  was  to  be
registered in Shanghai with a funding of $1.0 million. The agreement defined the
first phase joint venture investment terms for the period from September 2000 to
December  2000. In February  2001,  HCTV Joint Venture  Company was formed and a
temporary  license was  obtained to conduct  the  business of the joint  venture
pending  issuance  of a  new  license  upon  China's  entry  into  the  WTO  and
contribution  of $200,000 as the  subscribed  capital of the HCTV Joint  Venture
Company.  As of June 30,  2002,  Hopeman  has  invested  $50,000  for its  33.3%
investment  and  Hartcourt  has  invested  $100,000  towards  its  66.7%  equity
ownership in the HCTV joint venture. The temporary license issued by the Chinese
authorities  expired on February  14, 2002 pending  injection  of an  additional
$850,000  towards  the  capital  subscription.  Due  to the  complex  regulation
regarding foreign  investment in the TV industry sector and due to the fact that
Hartcourt  and  Hopeman  will not have the  financial  resources  to support the
initial investment capital required, on August 28, 2002, Hartcourt has agreed to
sell its entire interest in this joint venture back to Hopeman. According to the
agreement, Hartcourt will receive back all of its investment from Hopeman. As of
December 31, 2002 and March 10, 2003,  Hartcourt has received  US$20,000 and US$
30,000 respectively from Hopeman.

Beijing UAC Stock Trading  Online Co. Ltd. (UAC Trading):  UAC Trading  operates
one of the leading  nationwide online securities  trading network called UAC 162
Network,  connecting investors with their stock brokerage offices via China Pac.
China Pac is the  nationwide  packet  switched  network in China  owned by China
Telecom  since  1991.  In May 1999,  UAC  Trading  was  granted a license by the
Chinese  government  and signed a contract with China Telecom to start  building
the network.  On June 20, 1999  Hartcourt  entered  into an  agreement  with UAC
Trading to form a joint venture  company  Beijing UAC Stock Exchange  Online Co.
Ltd. ("UAC  Exchange").  Under the terms of the agreement,  Hartcourt  agreed to
invest in cash and stock  $2,868,000 for the purchase of 51% ownership  interest
in UAC Exchange.  In September 2000, the Chinese  government  allowed all online
transactions  to be conducted via  Internet.  It caused UAC Exchange to lose its
competitiveness  as the  efficiencies  of 162 Network was not  compatible to the
Internet.  Therefore, UAC Exchange started converting its operations to Internet
based operations.

On July 16,  2001,  Hartcourt  and UAC  Trading,  by mutual  consent,  agreed to
rescind the contractual joint venture  agreement named UAC Exchange.  As part of
the rescission,  Hartcourt  agreed to accept a promissory note for the amount of
its net  investment  in UAC Exchange as of the date of  rescission  amounting to
$2,858,286,  bearing  interest  at six per cent  (6%) per anum,  payable  over a
thirty-nine  months  period.  The  parties  mutually  agreed to forego all other
rights  and  benefits   provided   under  the   contractual   joint  venture  as
consideration  for the rescission of the contract.  On September 10, 2001,  Edda
Limited,  a  non-affiliated  company  incorporated  in Hong Kong,  purchased all
existing  tangible  and  intangible  assets of UAC  Exchange  for the  amount of
Hartcourt's net investment in UAC Exchange,  and signed a promissory note in the
amount of $2,858,286  bearing interest at six per cent (6%) per anum, payable in
quarterly  installments  of $50,000  commencing  November 1, 2001 with a balloon



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<PAGE>
payment of $2,715,772 due on December 1, 2006. The promissory note is secured by
a security agreement granting to Hartcourt all tangible and intangible  property
of Edda Limited. As of December 31, 2002, Edda paid five quarterly note payments
of  $50,000  each.  As of  December  31,  2002,  Hartcourt  corrected  the share
subscription  price of the  shares  issued to Edda,  which lead to  reducing  of
$652,274  towards the promissory  note due to Hartcourt.  In addition,  Edda has
paid $60,459 towards interest due on the promissory note due to Hartcourt.

Shanghai Wind Information Company, Limited ("WindInfo"):  WindInfo is China's #1
financial  research content  provider,  developing  original content through its
nationwide  network.  WindInfo's  flagship  product  is widely  used by  China's
investment  banking and  securities  brokerage  firms.  The  Shanghai  Municipal
Government awarded WindInfo "The High-Tech Model Company" in 1999.  WindInfo has
over 1,000 registered  corporate clients,  including all major investment banks,
securities brokerage firms, and media companies.

On September 18, 2000,  Hartcourt and WindInfo signed a Term Sheet Agreement and
agreed to form a  Joint-Venture  Company  (JVC) to  expand  the  financial  data
service  business in China.  WindInfo agreed to transfer its entire fixed assets
excluding cash and marketable securities held at July 31, 2000 and the insurance
advisory business and related assets,  and is entitled an ownership  interest of
sixty six point sixty seven  percent  (66.67%) in the JVC.  Hartcourt  agreed to
invest $3.0 million  that  represented  thirty three point thirty three  percent
(33.33%)  ownership in the JVC. Upon  successful  completion of due diligence by
Hartcourt,  WindInfo  will  transfer  all its  assets  except  cash,  marketable
securities  and  insurance  advisory  business  and  related  assets in the JVC.
WindInfo  will  be  responsible  to  obtain  all  relevant  approvals  from  all
governmental  authorities  and  agencies  required to  facilitate  the new share
structure and expanded capitalization.  WindInfo will be responsible to have the
JVC  listed  in the  public  stock  market  within  15  months  from the date of
establishment  of the JVC. It is mutually  agreed that if WindInfo fails to list
the JVC on or before  such a time  frame,  Hartcourt  shall have the  management
right for listing of the company in the public market.

The investment  from Hartcourt to WindInfo was agreed to be paid as follows:  a)
upon  completion of the Agreement of JVC by both parties within 15 days from the
date of the Term Sheet Agreement signed,  Hartcourt shall arrange a payment from
Guo Mao as a loan to WindInfo in the amount of $500,000;  b) pay  $1,500,000  in
the temporary JVC account within 15 days of the  establishment  of the temporary
JVC bank account; c) pay $1,500,000 into the JVC no later than three months from
the date of establishment of the JVC. Upon receipt of all committed capital from
Hartcourt, WindInfo agreed to immediately pay back the $500,000 loan to Guo Mao.
On September 18, 2000, Sinobull advanced $500,000 to Guo Mao who loaned the same
amount to WindInfo on behalf of Hartcourt.  Pursuant to the addendum to the Term
Sheet  Agreement,  on January 10, 2001,  Hartcourt and WindInfo  signed a direct
investment  agreement  whereby Hartcourt agreed to convert the loan from Guo Mao
of  $500,000  to a 5% equity  ownership  in the JVC to be formed.  Upon  further
negotiations  between the two  parties,  Hartcourt  and WindInfo  have  mutually
agreed to  terminate  the Term Sheet  Agreement of formation of JVC and WindInfo
agreed to return Hartcourt's  contribution of $500,000 towards its investment in
the JVC.  As of  December  31,  2002,  WindInfo  returned  $60,241  to  Sinobull
Information on behalf of Hartcourt.  The accompanying financial statements as of
December 31, 2002 reflect Hartcourt's loan of $439,759 to WindInfo. Both parties
are  negotiating  to an  acceptable  payment  plan for  Hartcourt to receive the
remainder of its loan during the year 2003.


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<PAGE>
Equis International  Inc.((R)),  a wholly owned subsidiary of Reuters Limited(R)
signed on June 1, 2001, an International  Distribution  Agreement with Hartcourt
including  Sinobull  Group in Shanghai,  Beijing and Hong Kong, a  non-exclusive
distributor  of licensed  products  within the People's  Republic of China (PRC)
except in Hong Kong and Taiwan,  and grants to Hartcourt a  non-exclusive  right
and license to market,  promote and distribute the licensed  products in the PRC
to  sub-distributors,  resellers and end users to localize Equis'  award-winning
family of MetaStock(R)  products and market them to over 10 million investors in
the Greater  China area.  The initial term of the  agreement is for three years.
Under the terms of the agreement Equis International also granted Sinobull Group
conditional  territory exclusivity for a period of twelve months for the Chinese
versions of MetaStock  products  within the Greater  China  market.  Hartcourt's
remuneration  for the sale of licensed  products will be the difference  between
the selling price to its customers and Hartcourt's  discounted purchase price as
agreed between  Hartcourt and Equis. As of December 31, 2002,  Hartcourt and its
affiliates  sold  30  copies  of  the  English  Equis's  licensed  products  for
HK$121,752 (US$15,609) and recorded data feed income of HK$27,420 (US$3,515) for
MetaStock products,  since the inception of this agreement. The beta testing for
the Chinese  language  program has been  completed and Hartcourt  will start its
marketing and sales in 2003.

YesMobile  Inc.  incorporated  in Hong  Kong,  is  currently  a leading  Chinese
Wireless Application Protocol (WAP) portal with open-standard and multi-platform
compatibility in Asia.  Sinobull.com HK Ltd.  (Sinobull HK) has signed a revenue
sharing  agreement  with  YesMobile  whereby,  Sinobull  HK  agreed  to  provide
financial  contents to YesMobile in China. The data will include real time stock
quotes,  commodities and currencies contracts,  economic news,  commentaries and
research reports. Pursuant to the terms of the agreement, Sinobull HK will share
70% of the  revenues  received  and  YesMobile  will  share  30% of the  revenue
received from the users of the Wireless  Application  Protocol  (WAP) portal and
the Short Message  Service (SMS) of YesMobile.  Users will access these contents
via their mobile phones, as well as PDAs and other wireless  devices.  YesMobile
is currently providing these services to over 105 million users of China Mobile.
As of March 10,  2003,  Sinobull  HK has not  received  any  revenues  under the
revenue sharing agreement.

MEDIA SERVICES GROUP:

The Media Services  Group  consists of  StreamingAsia  Holdings  Limited,  which
consists of the  operations of  StreamingAsia  Limited,  LogicSpace  Limited and
SyndicateAsia  Limited.  The  Media  Services  Group  provides  a  comprehensive
real-time  audio  and video  delivery  (Streaming  Media)  solution  along  with
Internet   consulting   and   web   application   development   to   businesses,
professionals,  organizations,  web sites and content publishers.  The Streaming
Media Group's network  infrastructure  enables the streaming of superior-quality
multimedia  advertising,  live event  broadcasting and on-demand audio and video
content over the Internet to target audiences throughout Asia and Globally.

AI-Asia Inc. ("AI-Asia"): On August 20, 2001, Hartcourt established a new wholly
owned  subsidiary  AI-Asia Inc. to hold and develop assets of the Media Services
Group.  AI-Asia's  objective is  identify,  develop,  and  maintain  first-mover
technologies,   products  and  services  for  corporate  and  consumer  Internet
deployment. AI-Asia plans to provide its clientele with a comprehensive range of
Internet  enabling  solutions,  preparing  them to  participate  in the  rapidly



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<PAGE>
emerging streaming and broadband communications revolution.  AI-Asia will create
synergy not only among its streaming  technology  companies but will  coordinate
with other Hartcourt Groups. To achieve this objective, in January 2002, AI-Asia
purchased  Logicspace  Asia  from  third  party  to  conduct  Internet  services
including web page design, system architecture and solution  implementation.  To
facilitate  the merge and  acquisition  work in China,  in August 2002,  AI-Asia
established  AI-Asia  (Shanghai)  Co.,  Ltd.,  its wholly  owned  subsidiary  in
Shanghai China.

StreamingAsia Holdings Limited  ("StreamingAsia  Group"):  StreamingAsia Limited
provides  Internet-related  software  development  service  with an expertise in
audio and video  delivery or  streaming  solutions  to a variety of business and
industry, including major financial institutions.

On April 14, 2000,  Hartcourt announced that Sinobull subscribed 1,200,000 newly
issued  and  outstanding   fully  paid  shares  of  StreamingAsia   Limited  for
HK$7,000,000   (approximately   US$897,500)   on  behalf  of   Hartcourt.   Upon
subscription  of such  shares,  Sinobull  acquired  50%  ownership  interest  in
StreamingAsia  Limited and contributed $897,500 towards its purchase.  Hartcourt
advanced  such funds to  Sinobull  for  StreamingAsia  Limited  acquisition.  In
addition,  both Sinobull and Hartcourt  agreed and confirmed that as part of the
financing  arrangements,  Sinobull held the subscribed  shares in  StreamingAsia
Limited on behalf of Hartcourt and those shares were transferred to Hartcourt on
December 29, 2000.  On December 30, 2000, as part of the  reorganization  of the
StreamingAsia   Holdings   Limited,   the  beneficial   ownership   interest  in
StreamingAsia  Limited was transferred to Asia Top Finance Limited ("Asia Top"),
a company organized under the laws of British Virgin Islands. As a result of the
above transfer,  Hartcourt owned 50% of the Asia Top and remaining 50% ownership
interest was held by the selling shareholders of StreamingAsia Limited.

LogicSpace  Limited  ("LogicSpace"):  LogicSpace,  a wholly-owned  subsidiary of
StreamingAsia Limited, is an Internet consulting and web application development
company  that  provides a wide range of  Internet  services  including  web page
design,  system  architecture  and solution  implementation.  LogicSpace  offers
cost-effective  and one-stop shop Internet  solutions  that enable  companies to
achieve  smooth  results in doing  business on the Internet.  Solutions  include
top-notch  eBusiness  & Internet  consultation,  B2B/B2C  Portal  Development  &
Implementation,   Web-Based  &  Wireless   application   design  and  "know-how"
implementation.  The  operating  results of  LogicSpace  are  consolidated  with
StreamingAsia  Limited in the accompanying  financial  statements as of December
31, 2002

SyndicateAsia Limited  ("SyndicateAsia"):  SyndicateAsia,  is pioneer in content
distribution,   providing  the   marketplace   for   exchanging,   managing  and
distributing   content  media  across  the  Asian  region.   The   revolutionary
SyndicateAsia  platform  offers  flexibility  to providers and content buyers to
transform formats (Web to WAP) and exchange content,  including text, graphical,
audio  and  video,   across  a  wide  range  of  sources  in  the  Asia  region.
SyndicateAsia's  mission is to serve as the bridge between the content providers
and end users by  providing  the foremost  syndication  solution for delivery of
multi-media  content on cross  devices and  platforms,  including the World Wide
Web,  wireless,  and streaming media. In December 2000, the StreamingAsia  Group
issued 50% of the enlarged  share  capital of  SyndicateAsia  to  Hartcourt.  On
December 30, 2000, as part of the reorganization of the StreamingAsia Group, the
entire   beneficial   ownership  in  the  share  capital  of  SyndicateAsia  was


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<PAGE>
transferred to China Top Worldwide Limited ("China Top"), a company incorporated
in the British Virgin Islands.  As a result of the transfer  Hartcourt owned 50%
of the ownership interest in China Top.

On May 16, 2001  Hartcourt  took control over the  management  and operations of
Asia Top and  China  Top,  and  signed a Term  Sheet  Agreement  to  acquire  an
additional 35% ownership  interest in Asia Top and China Top. On August 9, 2001,
Hartcourt  closed the escrow and completed the  acquisition of an additional 35%
ownership interest in Asia Top and China Top for a total purchase  consideration
of  HK$800,000  (US$102,564).  On April 1,  2002,  Asia Top and China Top ceased
operations  and  transferred  its 85%  ownership  in  StreamingAsia  Limited and
Syndicated  Asia  Limited  to  Hartcourt  Companies  Limited.  The  accompanying
financial  statements at December 31, 2002 reflect Hartcourt's  ownership of 85%
of the  StreamingAsia  Limited  and  Syndicate  Asia  Limited and its results of
operations  from  the  date of  acquisition  are  consolidated  with  Hartcourt.
StreamingAsia Limited, Logicspace Limited and SyndicateAsia Limited ceased their
operation as of June 30, 2002.

eMPACT Solutions,  Inc.  ("eMPACT") - eMPACT,  development stage enterprise,  an
e-commerce systems management and consulting  company,  specializes in providing
back-office   infrastructure  for  Internet  companies.   The  services  include
technology  selection,  system design and  management,  transaction  performance
monitoring,  resource utilization tracking and security monitoring. On April 30,
2000, Harcourt executed a Subscription  Agreement and Investment  Representation
and agreed to  subscribe  and  purchase  three  hundred  (300) shares of Class B
Convertible  Preferred Stock, par value $0.001 per share of eMPACT for $300,000.
Hartcourt has determined  that at this time to increase its investment in eMPACT
would not be  advantageous  to the  company or its  shareholders.  On January 7,
2002, eMPACT received $7,500,000 as the second round of funding from the venture
capital  partners  for  further  expansion  of the  company's  Internet  related
business.  The  accompanying  financial  statements at December 31, 2002 reflect
Hartcourt's investment in eMPACT of $300,000.

Beijing Total Solution System,  Ltd. ("TSS"):  On September 15, 2000,  Hartcourt
and TSS signed a Term Sheet  Agreement  to form a Joint  Venture  Company  (JVC)
called TSS Streaming,  Ltd to develop broadband enabling technology for internet
broadcasting  market and develop world leading  web-casting  solution and global
market.  Hartcourt agreed to contribute $2.4 million for 60% ownership  interest
in the JVC and TSS  agreed to  contribute  all of its  tangible  and  intangible
assets of its existing operations in China for its 40% ownership interest in the
JVC.  On  December  1,  2000,  Hartcourt  and TSS  signed a loan  agreement  and
Hartcourt  advanced  $70,000 as a loan to support  TSS's  2000  marketing  plan,
convertible into for the ownership of 5% shares of TSS. Upon contribution of the
remaining  $2,330,000,  Hartcourt could acquire the additional 55% shares of the
JVC.  Hartcourt  has not  converted  its loan into an  investment  of 5% in TSS.
Hartcourt has not exercised its right to subscribe for the additional 55% of the
ownership  interest in the JVC and such right has subsequently been lapsed.  The
accompanying  financial statements reflect Hartcourt's loan of $70,000 to TSS as
of  December  31,  2002.  Hartcourt  does not  intend to acquire  any  ownership
interest in TSS at this time

HARTCOURT CAPITAL GROUP:

On August 8, 2000, Hartcourt  established  Hartcourt Capital Inc, a wholly owned
subsidiary,  to act as a bridge between  high-growth  Chinese  companies and the


                                       13
<PAGE>
U.S.  capital markets.  On January 25, 2002,  Hartcourt  Capital Inc.  purchased
Sinobull.com  Limited from  Sinobull  Group as its wholly owned  subsidiary  and
changed  its name to  Hartcourt  Capital  Limited.  On July 1,  2002,  Hartcourt
Capital  Inc.  purchased  Fintel  International  Limited from third party as its
wholly owned subsidiary and changed its name to Hartcourt  Capital Asia Limited.
Hartcourt  Capital  Ltd. and  Hartcourt  Capital Asia Limited were aiming at the
Hong Kong venture  capital  market and Asian  capital  market  respectively.  To
cut-down costs and to get closer to our potential  acquisition  target,  in July
2002, Hartcourt established Hartcourt Investment Management (Shanghai) Co., Ltd,
a wholly  owned  subsidiary  of  Hartcourt  Capital Inc to act as its  executive
office.

E-LEARNING GROUP:

On June 18, 2001,  Hartcourt executed a Revenue Sharing Agreement in cooperation
with Northern Jiaotong University and California State  University-Fullerton  to
jointly  develop  education  projects and  introduce  American  career  training
courses  and  post-graduate  business  programs  in China.  The  project  offers
prestigious  American  education  programs in China,  utilizing one of the first
online education licenses awarded by China's Ministry of Education.  The project
offers both  certificate and degree programs with courses designed for relevance
in today's business world. Coursework will be offered initially in the classroom
and later  expanded  online.  Hartcourt  plans to extend  its  program  to other
potential  partners  and  institutions  in the future.  Hartcourt  has  advanced
$100,000  towards the working  capital for its  investment in this project as of
December 31, 2002. The accompanying financial statements as of December 31, 2002
reflect Hartcourt's  investment of $100,000 in the education project.  The total
financial  commitments  of  Hartcourt  and terms of payment on this  project are
currently being negotiated between the parties and expect to be finalized by May
30, 2003.

OTHER VENTURES:

Elephant Talk Limited ("ElephantTalk"): ElephantTalk (OTC:BB ETLK), is a leading
telecommunications  company  located and  operated in Hong Kong with  offices in
Cerritos,  California and switching facilities in China, Hong Kong, U.S., Taiwan
and Singapore. ElephantTalk operates international long distance service on both
sides of the Pacific to over 220 foreign cities. They enable  telecommunications
carriers and other service providers the ability to offer long distance,  voice,
data/fax,  calling card, and  voice-over-internet-phone  (VOIP) services through
advanced,  scaleable  networks.  ElephantTalk  is expanding its networks and has
international operating agreements with telecommunications  carriers,  including
AT&T Corp.,  Cignal Global Ltd., Frontier Telecom Ltd. and MCI Worldcom Inc. Its
customers include the largest first and second tier telecommunications  carriers
in the U.S. and Asia,  including two of the four fixed network operators in Hong
Kong;  New  T&T  and  New  World  Telephone.  On May  16,  2001,  Hartcourt  and
ElephantTalk  executed a Sale and Purchase  Agreement whereby Hartcourt acquired
51% of the  ownership  interest in  ElephantTalk  for a total  consideration  of
$4,194,000.

Pursuant to an Agreement of Merger and Plan of Reorganization,  effective August
27, 2001, and through the subsequent transaction that closed on January 4, 2002,
Staruni Corporation, a California corporation merged with Elephant Talk Limited.
Staruni was the surviving  corporation  and  continued  its corporate  existence
under the laws of California. On January 9, 2002, Staruni filed a Certificate of


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

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

Acquisitions and Partnerships Disclaimer:

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

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

Funding:

Swartz Private Equity,  LLC ("Swartz") - Swartz is an investment  entity focused
on equity  investments  in  Internet  and other high  technology  companies.  On
November 3, 1999, Hartcourt signed an Investment  Agreement with Swartz.  Swartz
agreed to purchase  from  Hartcourt,  from time to time,  shares of  Hartcourt's



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<PAGE>
common stock, as part of an offering of common stock by Hartcourt to Swartz, for
a maximum aggregate offering amount of $25,000,000.  These funds will be used to
satisfy  Hartcourt's working capital  requirements and complete  acquisitions of
Internet related operations.  On January 5, 2000, Hartcourt and Swartz agreed to
increase the equity line funding to $35,000,000 due to the planned  acquisitions
of Internet operations in China.

PYR Management LLC ("PYR") - On January 26, 2000,  Hartcourt completed a private
placement of 227,445  Units,  each unit  consisting  of a Class I and a Class II
Warrant,  to  PYR  for  $3,000,000  pursuant  to  a  Regulation  D  Subscription
Agreement.  On January 27, 2000,  Hartcourt  received  $2,743,000 from PYR to be
used for  working  capital  requirements  of  Hartcourt.  On  February  4,  2000
Hartcourt filed a Form 8-K with the SEC. On February 21, 2001, Hartcourt and PYR
Management  entered into a Letter  Agreement  whereby the parties  agreed on the
maximum  number of Units PYR can  receive  under  the  reset  provisions  of the
Subscription Agreement.  Pursuant to the terms of the agreement, the quantity of
Units and the exercise  price of the warrants  will no longer  reset.  The final
amount of Units that can be issued shall be 4,000,000 shares of common stock and
4,000,000 Class I Warrants.  The cap amount shall be 8,000,000  shares of common
stock (on a "post-split" basis) including Class I warrants. As a result of reset
calculations, Hartcourt issued on March 6, 2001 an additional 930,784 shares and
on May 18, 2001 an  additional  1,035,308  shares of common stock for a total of
4,000,000  shares as December 31, 2002 and  4,000,000  warrants  exercisable  at
$0.69375 per share of common stock.  No warrants have been  exercised to convert
into common shares as of March 10, 2003.

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

However,  during the 2002 audit,  Hartcourt  found that the issued  share prices
should have been  calculated  differently  according  to the  agreement  and its
addendum.  Therefore, the correct price of 4,000,000 restricted shares issued on
December 26, 2000 and the 1,363,636 restricted shares issued on October 31, 2001
and 5,000,000  restricted shares issued on March 4, 2002 should have been $0.28,
$0.095 and $0.085 per share  respectively.  As a result,  Hartcourt has adjusted
the additional paid-in capital and subscription receivable respectively.


Enlight Corporation ("Enlight"):  On May 9, 2002, Hartcourt and Enlight signed a
Stock Purchase  Agreement whereby Hartcourt agreed to sell 5,000,000  restricted
shares of its common  stock as a block to  Enlight  at the price of eight  cents
($0.08) per share.  However,  as Hartcourt share price kept decreasing,  the two
sides have agreed to revise the  agreement on 10 October  2002.  Pursuant to the
terms of the new  agreement,  Enlight will purchase  $1,000,000  worth of common


                                       16
<PAGE>
shares of Hartcourt,  restricted  under Rule 144 and/or Reg S  regulation,  at a
discount to current  market  price.  As of December  31st,  2002,  Hartcourt has
received  $899,400 from Enlight and agreed to issue 2,417,520  restricted shares
to Enlight each month starting January 2003.

Hartcourt's future business,  including  expansion of its current operations and
acquisition plans requires  additional  equity and/or debt financing,  which may
not be  available  in a  timely  manner  or on  commercially  reasonable  terms.
Currently,  Hartcourt's  primary objective is to acquire  established  operating
companies with histories of growth and profitability,  in order to diversify and
create a multi-dimensional Internet service related company.

Risks Relating to the Greater China and Asian Internet Industry

Our industry is intensely competitive

The Greater China and Asian Internet  market is  characterized  by an increasing
number of entrants  because the  start-up  costs are fairly  low.  The  Internet
industry is relatively new and subject to continuing definition and as a result,
our competitors  may better position  themselves to compete in this market as it
matures.  Many  of our  competitors,  as  well  as a  number  of  potential  new
competitors,  have longer operating  histories in the Internet  market,  greater
name recognition,  larger customer bases and databases and significantly greater
financial,  technical  and  marketing  resources  than us. Any of our present or
future  competitors may provide  products and services that provide  significant
performance,  price,  creative or other  advantages over those offered by us. We
can provide no assurance  that we will be able to compete  successfully  against
our current or future competitors.

Portal  competition - Our competition with respect to user traffic,  ease of use
and functionality include:

   o   Chinese  language based Web search and retrieval companies such as Yahoo!
       China,   Sina.com.   Netease,   Sohu,   Shanghai Online,   ChinaByte  and
       Netvigator;
   o   English  Language  based  Web  search  and  retrieval  companies  such as
       Infoseek, Lycos, Yahoo! and Microsoft Network (MSN); and
   o   Retreival services and products offered by AltaVista,  HotWired Venture's
       and Open Text.

In the future,  we may encounter  competition  from ISPs, Web site operators and
providers of Web browser software that incorporate search and retrieval features
into their  offerings.  Our  competitors  may develop  Web search and  retrieval
services  that are equal or superior to those we offer our users and may achieve
greater market acceptance than our offerings in the area of performance, ease of
use and functionality.

Web Solutions Competition - Our competition with respect to strategic expertise,
technical knowledge and problem solving skills include:

     Computer   hardware   and   service   vendors   such  as  IBM,  Compaq  and
     Hewlett-Packard;
     Internet integrators and Web site design and development  companies such as
     iXL, Modern Media Poppe Tyson and Proxicom;  Large  information  technology
     consulting  service  providers  such  as  Accenture,  Cambridge  Technology
     Partners and EDS; and Telecommunications  companies such as AT&T, Hutchison
     and Hong Kong Telecom.
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<PAGE>
The Greater China and Asian Internet industry is a developing market and has not
been proven as an effective commercial medium

The market for  Internet  services in Greater  China and Asia has only  recently
begun to  develop.  Since the  Internet  is an  unproven  medium for  commercial
services, our future operating results from portal competition and web solutions
services  will depend  substantially  upon the increased use of the Internet for
information,  publication,  distribution and commerce in Greater China and Asia.
Critical  issues  concerning the commercial use of the Internet in Greater China
and Asia such as security, reliability, cost, ease of deployment, administration
and quality of service may affect the adoption of the Internet to solve business
needs. For example,  the cost of access may prevent many potential users in Asia
from using the Internet. Moreover, the use of credit cards in sales and purchase
transactions is not a common practice in parts of Asia.  Until the use of credit
cards, or another  alternative  viable means of electronic  payment becomes more
prevalent,  the  development  of e-commerce  through our portal  network will be
seriously  impeded.  In  addition,  even when credit  cards or another  means of
electronics payment becomes prevalent throughout Asia, consumers will have to be
confident that adequate security  measures protect  electronic sale transactions
conducted over the Internet and prevent fraud.

Our entry into the Chinese  Internet market depends on the  establishment  of an
adequate telecommunications infrastructure in China by the Chinese government

Unlike  Taiwan and Hong Kong,  where the  telecommunications  infrastructure  is
comparable to U.S.  standards and where private  companies  compete as ISPs, the
telecommunications  infrastructure in China is not well developed.  In addition,
access to the Internet is  accomplished  primarily by means of the  government's
backbone of separate  national  interconnecting  networks  that connect with the
international  gateway  to the  Internet,  which is owned  and  operated  by the
Chinese  government and is the only channel  through which the domestic  Chinese
Internet network can connect to the  international  Internet  network.  Although
private  sectors  ISPs exist in the China,  almost all access to the Internet is
accomplished through ChinaNet,  the Chinese primary commercial network, which is
owned and operated by the Chinese government. We rely on this backbone and China
Telecom  to  provide  data  communications   capacity  primarily  through  local
telecommunications lines. As a result, we will continue to depend on the Chinese
government to establish and maintain a reliable Internet infrastructure to reach
a broader  base of  Internet  users in China.  We will have no means of  getting
access to alternative networks and services, on a timely basis or at all, in the
event of any disruption or failure.  There can be no assurance that the Internet
infrastructure  in Greater  China  will  support  the  demands  associated  with
continued  growth.  If the  necessary  infrastructure  standards or protocols or
complementary products,  services or facilities are not developed by the Chinese
government, our business could be materially and adversely affected.

Our computer network is vulnerable to hacking, viruses and other disruptions

Inappropriate  use of our Internet  services  could  jeopardize  the security of
confidential  information stored in our computer system,  which may cause losses
to  us.   Inappropriate  use  of  the  Internet  includes   attempting  to  gain
unauthorized  access to information or systems - commonly known as "cracking" or
"hacking".  Although  we intend to  implement  security  measures to protect our
facilities, such measures could be circumvented.  Alleviating problems caused by
computer viruses or other  inappropriate  uses or security  breaches may require
interruptions, delays or cessation in our services.

                                       18
<PAGE>
There are  political,  economic  and  regulatory  risks  associated  with  doing
business in China and Asia

China's economy has experienced  significant growth in the past decade, but such
growth has been uneven across  geographic and economic  sectors and has recently
been  slowing.  There can be no assurance  that such growth will not continue to
decrease or that any slow down will not have a negative  effect on our business.
The Chinese  economy is also  experiencing  deflation  which may continue in the
future.  The current economic  situation may adversely affect our  profitability
over time as  expenditures  may decrease due to the results of slowing  domestic
demand and  deflation.  A significant  part of our facilities and operations are
currently  located in Hong Kong.  Hong Kong is a Special  Administrative  Region
("SAR") of China with its own  government  and  legislature.  Hong Kong enjoys a
high degree of autonomy  from China under the  principle  of "one  country,  two
systems".  We can give no  assurance  that  Hong  Kong  will  continue  to enjoy
autonomy from China. The Hong Kong dollar has remained  relatively  constant due
to the U.S. dollar peg and currency board system that has been in effect in Hong
Kong  since  1983.   Since  1998,   interest  rates  in  Hong  Kong  have  risen
significantly,  real  estate and retail  sales have  declined  and Hong Kong has
slipped into a recession. In recent months, Hong Kong has suffered deflation and
the currency has been subject to currency speculation and the SAR government has
substantially  supported the market for the Hong Kong dollar,  both directly and
indirectly  through the  large-scale  purchase of securities  listed on the Hong
Kong Stock  Exchange.  We can give no assurance  that the Hong Kong economy will
not worsen or that the  historical  currency  peg of the Hong Kong dollar to the
U.S. dollar will be maintained.  Continued recession in Hong Kong,  deflation or
the  discontinuation  of the historical  currency peg could adversely affect our
business.

Regulation  of the  information  industry  in China  may  adversely  affect  our
business

China has enacted regulations  governing Internet access and the distribution of
news and other information. We cannot predict the effect of further developments
in the Chinese legal system, particularly with regard to the Internet, including
promulgation of the new laws, changes to the existing laws or the interpretation
or enforcement thereof, or the preemption of local regulations by national laws.

A change in currency  exchange  rates could  increase our costs  relative to our
revenues

In future, substantial amount of our revenues,  expenses and liabilities will be
denominated  in Hong Kong  dollars and  Chinese  Renminbi.  As a result,  we are
subject to the  effects of exchange  rate  fluctuations  with  respect to any of
these  currencies.  We have not entered into  agreements  or purchase  financial
instruments  to hedge  our  exchange  rate  risks  although  we may do so in the
future.

Restrictions  on currency  exchange may limit our ability to utilize our revenue
effectively

Although Chinese governmental  policies were introduced in 1996 to allow greater
convertibility  of the  Renminbi,  significant  restrictions  still  remain.  We
provide no assurance  that the Chinese  regulatory  authorities  will not impose
greater   restrictions  on  the  convertibility  of  the  Renminbi.   Because  a
significant  amount of our future  revenues may be in the form of Renminbi,  any

                                       19
<PAGE>
future  restrictions  on  currency  exchanges  may limit our  ability to utilize
revenue generated in Renminbi to fund our business activities outside China,

Doing business in China

Hartcourt's operations in China involve 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
resulting changes in the Chinese economy could  significantly  adversely affect,
limit or  eliminate  opportunities  for foreign  investment,  the  prospects  of
private  sector  enterprises  operating  in China and the  value of  Hartcourt's
investments in China.

Environmental Regulation

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

Terrorism

Terrorist attacks, such as the attacks that occurred in New York and Washington,
D.C. on  September  11,  2001,  and other acts of violence or war may affect the
markets on which our securities trade, the markets in which we and our customers
operate, our operations and our profitability.  Terrorist attacks may negatively
affect our operations and your investment.  There can be no assurance that there
will not be further terrorist attacks against the United States or United States
businesses.  These attacks or armed  conflicts may directly  impact our physical
facilities or those of our suppliers or  customers.  Furthermore,  these attacks
may make travel and the  transportation  more  difficult and more  expensive and
ultimately  affect the sales of our products  and services in the United  States
and overseas.  Also as a result of  terrorism,  the United States may enter into
armed  conflicts  which  could  have  a  further  impact  on  our  domestic  and
international sales, our supply chain, our production capability and our ability
to deliver our products and services to our  customers.  Political  and economic
instability  in some  regions of the world may also result and could  negatively
impact our  business.  The  consequences  of any of these  armed  conflicts  are
unpredictable,  and we may not be able to  foresee  events  that  could  have an
adverse effect on our business or your investment.

Severe acute respiratory syndrome epidemic

The severe acute respiratory  syndrome,  or SARS, now shows 111 deaths and 2,781
cases  worldwide  according  to the latest  World  Health  Organization  ("WHO")
figures  from April 10 2003.  The  sickness is  believed to have  started in the
southern  Chinese province of Guangdong last November and has spread fast to the
whole world especially in Mainland China and Hongkong. Although it is said to be


                                       20
<PAGE>
under of control, it has caused recession for Asian tourism. Numerous trips have
been  postponed,  hotel  bookings  have  been  cancelled  and  events  are being
rescheduled.  Tourism is feeling the consequences of the conflict in Iraq but it
is more by fears of a deadly form of pneumonia,  originated  in southern  China,
that people change their plans.  This disease may affect the  communication  and
travel much, which may result negative impact in our business.  As how soon will
this epidemic be thoroughly  resolved is  un-predictable,  and how sever will it
affect to the  economic,  we are unable to  forecast  the degree of the  adverse
effect on our business and operation.

Patents, Trademarks and Licenses

Hartcourt  does  not  have  any  patents,  trademarks,   licenses,   franchises,
concessions or royalty agreement.

Employees

Hartcourt  currently  employs  nine (9)  full-time  employees  at its  principal
executive  offices  located in Shanghai,  China.  The executive  offices provide
corporate  administrative and advisory services to other Hartcourt  subsidiaries
and affiliates. FTL and its subsidiaries employs at its one site located in Hong
Kong  four  (4)  full-time  employees,   comprising  of  one  (1)  engineer  and
technicians and three (3) office/administrative  personnel. Sinobull Information
employs  thirty-eight  (38)  full-time  employees  at all four of its  locations
consisting  of  fourteen  (14)  engineers,   programmers  and  technicians,  and
twenty-four (24) sales, office and administrative personnel.

Research and Development

Hartcourt has spent many months doing  research and  development  of our current
business  strategy,  the cost of which has been borne  through  the  issuance of
securities in the acquisitions.  Because of the continuing technological changes
that characterize the Internet,  Web design and  telecommunications and computer
industries,  Hartcourt's success will depend, to a considerable extent, upon its
ability to continue to acquire  companies  that are ahead of the  competition in
our industry and develop  competitive  technologies  internally through research
and development.  Management does not anticipate incurring any significant costs
for  such  research  and  development  in  the  near  term  other  than  through
acquisitions.

Subsequent Events

On February 14, 2003, Hartcourt signed a definitive agreement to purchase of 45%
of all of the interest of HuaQing  Corporation  Development Co. Ltd. and HuaQing
Economics  Development  Co.  Ltd.  ("HuaQing"),  for a  total  consideration  of
$2,202,545. The purchase price will be paid by issuance of 15,960,474 restricted
common shares of the Registrant.  HuaQing,  founded in 1992 in Shanghai,  China,
specializes in the niche DIY (do-it-yourself) PC marketing and distribution. The
company owns and operates 9 DIY stores in Shanghai area, helping customers build
their own PCs with  components,  technology and after sales support  provided by
HuaQing.  Huaqing  was  officially  promoted  as  one  of the  top  100  Hi-Tech
enterprises by the Shanghai  Government's  Science and Technology  Commission in
2001 and 2002. It was recently  voted by IDG's  Computer World (China) as one of
the Top 100 Computer Marketing Companies in China.



                                       21
<PAGE>
Hartcourt  Capital,  Inc.,  wholly-owned  subsidiary  of  Hartcourt  launched  a
bi-monthly  magazine called China Report on March 4th, 2003. The first issue has
a  circulation  of  20,000  copies,  distributing  directly  to  the  investment
community including investment banking firms, fund managers, venture capitalists
and brokerage houses  throughout the US, Europe and Asia. The magazine will also
be available via website,  www.china-report.net,  and through  weekly E-mails to
registered  readers  starting  May 2003.  The  objective  of the  magazine is to
provide  investors  with  updates and analysis on the  fast-changing  investment
environment and opportunities in China.

As of March 31 2002,  Hartcourt has received the remaining  fund from Enlight to
satisfy the totaling funding requirement $1,000,000.

No assurance can be given that Term Sheet and Heads of Agreements will result in
actual  agreements or that the terms of the agreements will not be significantly
changed,  or that  any of the  financing  needs  to  consummate  the  agreements
discussed  below will be  successfully  completed.  Hartcourt's  partners in the
above  mentioned  joint  ventures  are  expecting  Hartcourt  to provide two key
elements in these joint ventures:  technology and investment capital.  Hartcourt
management,  which has recently hired individuals with extensive  experience and
expertise in relevant industry sectors,  intends to provide Internet  technology
by merging with or acquiring  companies already active in these  businesses.  On
the financial side,  Hartcourt has raised and continues to raise the substantial
funds  necessary  to carry out the plans of its venture  partners by selling its
own common shares to selected  investors/partners and bringing in partners whose
contributions   to  each  joint   venture  will  include  the   necessary   cash
contributions.  If Hartcourt is not able to raise the necessary  funds indicated
in the agreements, the agreements will need to be modified or cancelled.

Item 2.  Description of Property

Hartcourt's  principal  executive  offices  are  located  at Suite  1310,  China
VentureTech Plaza 819 Nanjing Xi Road,  Shanghai,  China,  200041.  The premises
consist of approximately 116 square meter of office space with a reception room,
two office rooms and a file room.  Hartcourt is leasing  these  premises from an
unaffiliated party and occupied these premises since October 20, 2002. The lease
term is for 1 year  commencing  on October 20, 2002 and the monthly rent amounts
to $1,566 with no escalation of monthly rent during the lease term.

As of April 1, 2003, FTL leases a net total of 1,289 square feet. at the monthly
rental of HK$23,500  with tenancy  expires on July 31, 2004.  After  sub-leasing
further 250 square feet to third parties, total area in use is 1,039 square feet
with net rental of HK$18,200(US$2,333) per month.

Sinobull  Information leases its four office premises in various cities in China
consisting  of  approximately  370.4 square meters.  Lease terms range for up to
two years period  commencing  from May 20, 2001 to December 14, 2004 at the rate
of RMB20,515 (US$2,483) per month.

Hartcourt  believes that its facilities  currently  under lease are adequate for
its  present  activities,  and  that  additional  facilities  are  available  on
competitive  market terms to provide for such future  expansion  of  Hartcourt's
operations as may be warranted.




                                       22
<PAGE>
Investment Policies

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


Item 3.  Legal Proceedings.

Comerica Bank of California v. Pego Systems,  Inc., et al. ("Pego"), Los Angeles
Superior Court Case No. NC 027 075:

This litigation concerns  Hartcourt's alleged obligation as an alleged guarantor
of Pego's  alleged  obligation  on a  promissory  note that is asserted to be in
non-financial default. The complaint alleges that Hartcourt executed a guarantee
of obligation of Pego which obligation went into non-financial default. Comerica
entered the stipulation for entry of judgment to enforce a settlement agreement,
which stipulation calls for certain payments and transfers of funds by Pego, and
a  judgment  of   approximately   $635,000   exists  of  which  Hartcourt  is  a
co-guarantor.   The  assets  of  Pego  including  accounts  receivable  will  be
liquidated  to pay down the debt.  The case is ongoing  and the  Company has not
accrued  any of  the  guaranteed  payments  in its  financial  statements  as of
December 31, 2002.

Charles Hogue v. The Hartcourt  Companies,  Orange Court Circuit Court,  Florida
Case No. CIO 00-2190, filed on or about March 22, 2000:

Charles  Hogue  filed a  complaint  to  claim  a  finder's  fee for  introducing
Hartcourt to a potential  acquisition target.  Hartcourt sent the payment to Mr.
Hogue via check in the amount of $40,500 for such  finder's  fee,  but Mr. Hogue
demanded  that he be paid in shares of  Hartcourt  with the  amount of shares in
dispute.  Hartcourt's  counsel in Florida failed to timely file an Answer to the
complaint,  and default  judgment in the amount of $2,901,752 was entered in the
trial court on January 31, 2001  without a trial and despite  serious  questions
raised by Hartcourt as to the propriety of the exercise of jurisdiction  over it
by a Florida court.  Hartcourt brought a motion to set aside the default,  which
was  denied.  Hartcourt  appealed  the  judgment  entered by the trial  court on
multiple grounds. On June 7, 2002, the Florida Appellate Court ruled in favor of
Hartcourt and reversed the judgment in its  entirety,  finding that Florida does
not have jurisdiction over Hartcourt. The case is no longer active.

In Apollo Financial Network, LLC v. The Hartcourt  Companies,  Inc., Los Angeles
Superior Court Case No. BC 245398, filed on February 21, 2001,

Apollo Financial Network filed an action for breach of contract arising out of a
consulting agreement, which was canceled in January 1999. The matter was settled
when the Company  stipulated  to entry of  judgment  against it in the amount of
$11,500.00,  which  represented  an  amount  less  than the  projected  costs of
defense. Judgment in such amount was entered against the Company on November 20,
2002.  The case is ongoing and the Company has not accrued any of the guaranteed
payments in its financial statements as of December 31, 2002.




                                       23
<PAGE>
The Company is party to various claims and legal proceedings  arising out of the
normal  course  of its  business.  These  claims  and legal  proceedings  relate
primarily to contractual rights and obligations,  and employment matters.  While
there can be no  assurance  that an adverse  determination  of any such  matters
could not have a material  adverse impact in any future period,  management does
not believe,  based upon  information  known to it, that the final resolution of
any of these  matters  will have a material  adverse  effect upon the  Company's
consolidated financial position and annual results of operations and cash flows.


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

None












































                                       24
<PAGE>
                                     PART II

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 market  price for the common  stock during the three most recent
years calendar quarters ended December 31, 2002, 2001 and 2000:

--------------------------------- -------------- --------------
                                    High            Low
--------------------------------- -------------- --------------
Quarter ended March 31, 2000        9.56            5.62
--------------------------------- -------------- --------------
Quarter ended June 30, 2000         6.47            2.28
--------------------------------- -------------- --------------
Quarter ended September 30, 2000    4.31            2.53
--------------------------------- -------------- --------------
Quarter ended December 29, 2000     2.86            0.47
--------------------------------- -------------- --------------
Quarter ended March 31, 2001        2.12            0.53
--------------------------------- -------------- --------------
Quarter ended June 29, 2001         0.74            0.31
--------------------------------- -------------- --------------
Quarter ended September 28, 2001    0.51            0.18
--------------------------------- -------------- --------------
Quarter ended December 29, 2001     0.63            0.17
--------------------------------- -------------- --------------
Quarter ended March 31, 2002        0.41            0.16
--------------------------------- -------------- --------------
Quarter ended June 30, 2002         0.25            0.05
--------------------------------- -------------- --------------
Quarter ended September 30, 2002    0.10            0.05
--------------------------------- -------------- --------------
Quarter ended December 31, 2002     0.10            0.05
--------------------------------- -------------- --------------

The above prices were obtained from the Yahoo.com. 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, 2002, there were broker-dealers publishing quotes for the common stock.

Holders

At February 6, 2003,  Hartcourt had  approximately  700 holders of record of its
common stock.

All of the Hartcourt's  issued stock has been issued pursuant to Rule 144 of the
Securities  Act and could  come into any  market  that  exists  under  Rule 144.
Approximately  18,179,377  and  2,999,905  outstanding  Rule 144 shares  held by
principal and directors exist at December 31, 2002 and 2001, respectively.

Dividends

Each shareholder of record on March 31, 1999 received one (1) share of Enova for
every four (4) shares of Hartcourt common stock.

                                       25
<PAGE>
Each  shareholder  of record on October 21, 2002  received one (1) share of ETLK
for every seventeen point twelve (17.12) shares of Hartcourt common stock.

Warrants

At March 10,  2003,  there  were  4,413,530  outstanding  warrants  to  purchase
4,413,530 shares of common stock at $.001 par value, ranging from $0.69 - $15.52
per share. During 2001, no warrants were converted into shares of common stock.

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.

All the transaction hereunder were between Hartcourt and accredited investors as
defined in Section 4(2) of the Securities Act of 1933 or sophisticated investors
that  possessed  sufficient  knowledge and  experience in financial and business
matters to be able to evaluate  the merits and risks of the  investment  and who
were allowed access to the books and records of Hartcourt.

On January 18, 2000,  Hartcourt issued 254,552 additional shares of common stock
to FTL in  settlement  of the post closing  adjustment  pursuant to the terms of
stock purchase agreement.

On January 19, 2000,  Hartcourt  entered into Stock Sale  agreement with Chateau
O'Doly under Regulation S and sold 300,000 restricted common shares at $4.00 per
share.  Hartcourt raised  $1,200,000 that it used towards the acquisition of UAC
and FTL.

On January 26, 2000, Hartcourt completed a private placement with PYR Management
LLC  ("PYR")  of  227,445  Units and a Class II  Warrant  to PYR for  $3,000,000
pursuant to a Regulation D  Subscription  Agreement.  Each Unit consisted of one
share of Hartcourt common stock and a Class I Warrant to purchase one additional
share of  Hartcourt  common stock at the Unit Price,  subject to the  adjustment
upon certain events.  The Class II Warrants entitled PYR to purchase  additional
shares of  Hartcourt  common stock at par value  solely upon the  occurrence  of
certain events. On January 27, 2000,  Hartcourt received  $2,743,000 from PYR to
be used for  working  capital  requirements  of  Hartcourt.  As a result  of the
occurrence  of  certain  events,  on  March 6,  2001,  Hartcourt  issued  to PYR
2,509,792  additional  common shares,  2,509,802  Class I Warrants and 1,035,308
Class II Warrants,  both Class I and Class II at the exercise price of $0.69375,
in accordance with terms of the Subscription Agreement.

During  2000,  Hartcourt  issued  49,161  shares of its common  stock  valued at
$144,000 to directors  for services  performed  during the year.  On January 31,
2000 and May 11, 2000  Hartcourt  issued  1,551,720  and 48,560 shares of common
stock to Dr. Alan Phan in lieu of his 1999  compensation of $225,000.  Hartcourt
issued 42,105 shares of common stock valued at $107,333 to the directors in lieu
of their compensation for the year 2000.

During 2000,  Hartcourt issued 122,754 shares of common stock valued at $180,435
to various consultants for their professional and legal services.



                                       26
<PAGE>
On May 4, 2000 and July 7,  2000,  Tang Wai Leong and  Michael  Rouge  exercised
their stock  options and  converted  into  500,000 and 200,000  shares of common
stock at the exercise price of $5.50 and $1.25 per share. As a result, Hartcourt
raised $3,000,000 and used it for its working capital requirements.

As of December 31, 2000,  Hartcourt  has received  $807,905  against the sale of
stock to Edda and additional remittances equal to $364,915 as of March 26, 2001.
Hartcourt  has not  issued  any  shares to Edda  under  this  Agreement  and has
received $364,915 in additional remittances subsequent to December 31, 2000.

During  2001,  Hartcourt  issued  1,136,054  shares  of common  stock  valued at
$374,173 to various  consultants and advisors for providing  consulting services
to the Company during the year.

In February  2001,  Hartcourt  issued  805,802  shares of common stock valued at
$500,000  in  connection  with the  acquisition  of  Shanghai  Guo Mao Science &
Technology  Co.  Ltd.  as  part of the  total  consideration.  On May 21,  2001,
Hartcourt  issued  4,756,058  shares of common  stock  valued at  $2,944,000  in
connection  with the  acquisition  of 51%  ownership  interest in Elephant  Talk
Limited.

On February  20, 2001,  American  Equities  exercised  their  cashless  right to
convert 400,000 warrants into 400,000 shares of common stock.

During 2001,  Hartcourt issued 806,970 shares of common stock valued at $339,840
to officers and directors in lieu of compensation and services.

On March 6, 2001 and May 18, 2001, Hartcourt issued an additional 930,784 shares
and  1,035,308  shares of  common  stock to PYR  Management  LLC  pursuant  to a
Regulation  D  Subscription  Agreement  due to the reset  provision of the share
price. As a result of reset calculations,  Hartcourt has issued 4,000,000 shares
of common stock and  4,000,000  Class I Warrants.  The Warrants can be converted
into common shares at an exercise price of $0.69375 per warrant.

On August 27, 2001, Hartcourt sold to investors 475,000 restricted shares of its
common  stock  under a private  placement  to raise  $95,000  for the  Company's
working capital needs.

On October 31, 2001 and  November  11,  2001,  Hartcourt  issued  1,363,636  and
4,000,000 restricted shares of common stock to Edda Limited valued at $1,249,545
for raising working capital.

On December  31,  2001,  Hartcourt  cancelled  4,000,000  shares of common stock
issued to Thomas Kwok valued at  $11,000,000.  The shares were  cancelled due to
non-receipt of $11,000,000 previously recorded as subscriptions  receivable from
Thomas Kwok.

During  2002,  Hartcourt  issued  3,357,000  shares  of common  stock  valued at
$354,810 to various consultants for their professional and legal services.

During  2002,  Hartcourt  issued  3,774,513  shares  of common  stock  valued at
$534,400  to  officers  and  directors  in lieu of  compensation  and  services,
included in which,  1,245,793 shares issued to Dr. Alan Phan in lieu of his 2001
compensation of $250,000.



                                       27
<PAGE>
On 23 April 2002,  Hartcourt issued 5,000,000  restricted shares of common stock
to Edda Limited valued at $425,000 for raising working capital.

Item 6.  Management's Discussion and Analysis or Plan of Operation

General

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

Plan of Operation

The Hartcourt  Companies,  Inc. is a holding and development  enterprise that is
building a broad network of Internet, media, and telecommunication  companies in
Greater  China.   In  partnership   with  leading  Chinese   entrepreneurs   and
government-sponsored entities, Hartcourt is developing and investing in emerging
technologies  while  building  an  integrated   commercial   framework  for  its
subsidiaries  and their partners.  Hartcourt's  operative  business  strategy is
designed to establish market-leading position and facilitate a series of venture
divestitures  via IPO or public  mergers in its five main business  divisions to
fully  realize the value of these assets for its  investors.  The four  business
divisions are Sinobull Financial Group,  Media Services Group,  E-learning Group
and Hartcourt Capital.

Hartcourt,  through a combination  of expertly  managed  internal  expansion and
accretive strategic  acquisitions,  is executing plans to provide a sustainable,
growing,  diversified and profitable revenue base throughout its operations. The
company is aggressively identifying and pursuing the best business opportunities
available.  Through a continued  refinement  of  operational  efficiencies,  and
increasing   revenue  margins,   the  Company  is  providing  a  clear  path  to
profitability for its current and future businesses."

Results of Operations

Comparison of the fiscal years ended December 31, 2002 and December 31, 2001.

During 2002,  Hartcourt  continued its  previously  implemented  plan to acquire
profitable  companies  that were in  established  industries  with a history  of
growth.  Since mid-1999,  Hartcourt has been focusing on assembling a collection
of  companies  and  services  that  will  provide  citizens  of China  with next
generation  communication services,  including China-focused Internet access and
financial  portals,  online  share  trading  services,  data  broadcasting,  and
financial services.  The Company signed underwriting  agreements for the initial
public offerings of shares of its two most developed investments,  both of which
were planned in the year 2001.  On January 4, 2002,  pursuant to an Agreement of
Merger and Plan of Reorganization,  Hartcourt's subsidiary Elephant Talk Limited


                                       28
<PAGE>
merged with Staruni Corporation,  a California corporation,  organized under the
laws of  California  and  listed on the over the  counter on  bulletin  board of
NASDAQ  exchange.  Prior to the  conclusion  of the merger,  Hartcourt  acquired
additional  equity in Elephant  Talk Limited and  retained a 51.7%  ownership in
ETCI upon conclusion of the merger.  Hartcourt plans to eventually  build all of
its current operations into stand-alone  entities that will also be taken public
on US and/or Asian Financial markets.

The  operations of Hartcourt for 2002  primarily  consisted of operations of FTL
(58.53% ownership interest),  StreamingAsia (85% ownership  interest),  Sinobull
(wholly-owned  subsidiary),  AI-Asia  (wholly-owned  subsidiary)  and  Hartcourt
Capital,  Inc.  (wholly-owned  subsidiary)  and its  investments and advances to
entities in China, Hong Kong and US.  ElephantTalk (51% ownership  interest) and
HCTV (66.7% ownership  interest) were  disposed-off as of September 30, 2002 and
June 30 2002  respectively.  The  operations  of  Hartcourt  for 2001  primarily
consisted of operations of FTL (58.53% ownership  interest),  StreamingAsia (85%
ownership   interest),   ElephantTalk   (51%   ownership   interest),   Sinobull
(wholly-owned   subsidiary),    HCTV   (66.7%   ownership   interest),   AI-Asia
(wholly-owned  subsidiary) and Hartcourt Capital, Inc. (wholly-owned subsidiary)
and its investments and advances to entities in China, Hong Kong and US.

Net sales and cost of sales.  The Company  recorded net sales of  $1,137,011  in
year 2002,  compared to $10,621,205 in 2001.  Net sales  primarily  consisted of
sales of wireless  pagers,  rental of  equipment,  and the related  Internet and
telephone services provided by FTL;  real-time  financial data services provided
by Sinobull  Financial  Information  using a satellite  network to transmit data
specializes in stock quotes,  futures,  indexes and commodities to its customers
in China;  and  StreamingAsia  providing  web hosting and  software  development
services in audio and video  delivery or streaming  solutions.  The  significant
drop in sales of 2002  when  compared  to 2001 is  mainly  due to the fact  that
Hartcourt  has  disposed  ETLK of in October  2002.  The sales of Elephant  Talk
covered 72% more of the total sales in 2001. Moreover,  the financial sector has
been affected badly by the stock market  downturn.  As a result,  most banks and
brokerage  houses  have  reduced  their  spending  on  data  services,   causing
additional  price-cutting  among  competitors.  Cost of sales  included  cost of
capacity associated with the sales recognized from providing  telecommunications
services,  costs  associated  with in acquiring  data-feed  from Honk Kong Stock
Exchange  and  various  commodities  exchanges  in  China  via TV  channels  and
satellite transmissions,  equipment rental in providing event real-time Internet
broadcasting and on-demand  multimedia content delivery and total web solutions.
The increase in operating margin is mainly due to the higher margin in financial
sector,  compared to lower  margin in  tele-communication  services  rendered by
Elephant Talk only included in 2001.

Selling,   general  and  administrative  expenses.  SG&A  expenses  amounted  to
$2,774,011 for 2002 compared to $7,379,192.  Apart from dispose off subsidiaries
in  2002,  the  decrease  in  SG&A  is  primarily  attributed  to  reduction  in
consulting,  legal and administrative costs incurred in 2002 as compared to that
in 2001.  Hartcourt  completed the  acquisition  of Elephant Talk Limited in May
2001, which required  significant legal and  administrative  expense to complete
the  acquisition.   Hartcourt  has  taken  drastic  cost  cutting  measures  and
deliberately  slowed  down the  development  process  of all  projects  on hand.
Included in the SG&A  expenses  in 2002,  the  Company  made bad debt  provision
amounted to $1,115,963 against these doubtful accounts for prudent purpose.  The
Company  recorded an impairment of $1,563,040  during 2002 to write down certain
intangible assets and its investments in Sinobull Group, FTL Group and Streaming

                                       29
<PAGE>
Asia Group.  Such  expense was not included in the SG&A for the year ended 2002.
Hartcourt  continued to eliminate less productive units,  reduced consulting and
legal costs associated due to  restructuring  of the Company's  business in Hong
Kong and China.

Impairments.  Impairments  in year  2002  amounted  to  $1,563,040  compared  to
$1,785,262 in the year 2001. As of 31 December 2002,  except for Sinobull Group,
Hartcourt wrote-off all the goodwill on acquisition of subsidiaries.

Gain on disposal of  discontinued  operations.  Gain on disposal of discontinued
operation  in 2002 consist of the realized  gain of  $1,284,048  for disposal of
ETCI,  and the gain of $659,653  for disposal of HCTV and  Topomedia.  Hartcourt
disposed of the  operations  of UAC  Exchange in 2001 and  recognized  a gain of
$1,060,371.

Loss from discontinued operations. Hartcourt discontinued the operation of ETLK,
HCTV  and  Topomedia  during  2002  and  incurred   $1,020,252  in  losses  from
discontinued   operations.   The  loss  in  2001   represents  the  losses  from
discontinued operation of UAC exchange.

Gain on extinguishment of debt: During 2001, the Chairman of the Company donated
5,000,000 shares of Hartcourt to the Company.  Hartcourt  settled a loan payable
of $1,862,630 in exchange of 5,000,000 shares of common stock of Hartcourt.  The
accompanying  financial  statements at December 31, 2001 reflect the donation of
5,000,000  shares  recorded  as  treasury  shares  and  satisfaction  of loan of
$1,862,630.

Liquidity and Capital Resources

Hartcourt's  principal  capital  requirements  during  2002  were  to  fund  the
acquisitions of growth oriented  Internet related  operating  companies in China
and Asia. Hartcourt raised substantial funds necessary to carry out its plans of
acquisitions by selling its own restricted common shares to accredited investors
and bringing in business  partners  whose  contributions  included the necessary
cash.

As shown in the accompanying financial statements, Hartcourt incurred net losses
of $2,550,002  and  $5,329,408  for the years ended  December 31, 2002 and 2001,
respectively. In addition,  Hartcourt's working capital deficit of $2,155,058 is
not adequate to meet its minimum  monthly  expenses.  These factors,  as well as
negative cash flows from current operations of $1,852,669, Hartcourt's inability
to meet debt  obligations,  and the need to raise additional funds to accomplish
its objectives,  create substantial doubt about Hartcourt's  ability to continue
as a going concern.

Hartcourt  has taken  certain  restructuring  steps,  which in the  management's
opinion will provide the  necessary  capital to continue its  operations.  These
steps included: 1) the settlement of certain matters of litigation and disputes;
and 2) signed stock sale agreements with accredited investors to raise in excess
of $1,000,000. The Company plans to actively seek funding sources once Hartcourt
is able to discontinue and dispose-off all  non-profitable  assets by selling or
spinning-off or restructuring to minimize loss or liability.

Operating activities. The net cash used by operating activities in 2002 amounted
to  $1,852,669  compared to  $1,462,551  in 2001.  The net increase in operating
activities  resulted  primarily due to more payments on settle of liabilities in

                                       30
<PAGE>
2002 compared to 2001. It resulted also due to the increase of minority interest
offset by increase in depreciation and  amortization,  increase in shares issued
in lieu of compensation and services and other changes in operating  activities.
In  addition,  the  increase of the cash used in  discontinued  operations  also
contributed much to the operational cash flow.

Investing  activities.  Net cash  obtained in investing  activities  amounted to
$2,538,962  during 2002 compared to net cash used of $338,950  during 2001.  Net
cash  flow in  during  2002  primarily  resulted  from  the  proceeds  on  notes
receivable  of  $1,039,389  and the  proceeds  from  disposal of  investment  of
$1,597,450.  Net cash used in investing  activities in 2001 is mainly due to the
payment of $823,585 in notes  receivable,  purchase of property and equipment of
$51,721,  offset by cash of $690,202  acquired in acquisitions of  ElephantTalk,
Sinobull Group and StreamingAsia.

Financing activities. Net cash used by financing activities amounted to $878,554
in 2002  compared to net cash  provided by financing  activities  of  $1,984,912
during 2001.  Hartcourt paid $7,986 for the loans due to related  parties,  paid
$265,691 in net from  issuance  of common  stock and  adjustment  of share price
during 2002, proceeds from shareholders' loan $139,865,  made payments on factor
$198,205,  made  payments on long-term  debt of $433,299,  and made  payments on
capital  lease of  $113,238.  During  2001,  Hartcourt  raised  $1,988,501  from
issuance  of  common  stock,  made  payments  on loans  due to  related  parties
amounting to $865,048,  made  payments of  shareholders  loans of $999,436,  and
proceeds of long tern debt of $1,619,807.

The ability of  Hartcourt to continue as a going  concern is still  dependent on
its  success  in  obtaining  additional  financing  and  fulfilling  its plan of
restructuring as outlined above.

Item 7.  Consolidated Financial Statements

Financial  Statements  are  referred  to in Item  13(a),  listed in the Index to
Financial  Statements and filed and included  elsewhere herein as a part of this
Annual Report on Form 10-KSB.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

On August 15, 2002,  Hartcourt engaged Loral  International  ("Loral") Certified
Public Accountants,  as the Hartcourt's independent accountants to report on the
Company's  consolidated  balance sheet as of December 31, 2002,  and the related
consolidated  statements of income,  stockholders' equity and cash flows for the
year then ended.  The decision to appoint Loral was approved by the Registrant's
Board of Directors.  During the two most recent fiscal years,  Hartcourt had not
consulted  with  Loral  regarding  either  (1)  the  application  of  accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Hartcourt's financial statements, and
either a written  report was  provided to  Hartcourt or oral advice was provided
that Loral concluded was an important factor considered by Hartcourt in reaching
a decision as to the accounting,  auditing or financial  reporting issue; or (2)
any  matter  that was  either the  subject  of a  disagreement,  as that term is
defined in Item 304 (a) (1) (iv) of Regulation S-K and the related  instructions
in Item 304 of Regulation S-K, or a reportable event, as that term is defined in
Item 304 (a) (1) (iv) or Regulation S-K.


                                       31
<PAGE>
                                    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 Hartcourt.

Name                  Age   Position                         Dates Held

Dr. Alan V. Phan      57    Chairman of the Board            Since November 1993

Mr. David Y. Chen     34    Director,                        Since August 2002
                            Acting Chief Executive Officer and
                            Principal Accounting Officer

Mr. Stephen Tang      56    Director                         Since July 2001

Dr. Billy Y N Wang    38    Director                         Since October 2002

Mr. Anthony W J Qiao  33    Director                         Since October 2002

Dr.  Alan V.  Phan is the  founder  of  Hartcourt  and has been  Chairman  since
November  1993.  Dr. Phan held the  positions of President  and Chief  Executive
Officer of Hartcourt at various times until December 2001.He is also the founder
of Hartcourt  Investments and Hartcourt Pen. From 1986 to 1993, Dr. Phan was the
owner of Hartcourt Consulting, an engineering, equipment and technology exporter
to Asia and South America.  From 1981 to 1986, Dr. Phan served as Executive Vice
President of EM Kay Group,  which is an international  aircraft leasing company,
as well as owner of Village Bank of New Jersey and Magic Marker Industries. From
1975 to 1981,  Dr. Phan was the owner of Alpha  Development,  a California  real
estate  development  company;  and UBI Business Brokers of Orange County, a real
estate and  business  brokerage  office.  From 1970 to 1975,  Dr.  Phan was Area
Manager for Eisenberg Group, an Israeli conglomerate, specialized in trading and
manufacturing  of  industrial  and  consumer  products.  Dr. Phan  received  his
academic  training and degrees in Environmental  Engineering  from  Pennsylvania
State University in 1967, and Sussex College of Technology in 1975.

On August 21 2002,  Hartcourt  announced that its Board of Director has accepted
the  resignation  of Dr.  Wallace  Ching as its DEC, and has appointed Mr. David
Chen, its President,  to be Acting CEO. On March 27, 2002, Board of Director has
appointed Mr. David Chen to be the  Company's  new  President & Chief  Executive
Officer.  David Y Chen joined  Hartcourt in 2001 as President of Sinobull  Media
Group and Executive  Vice-President  Hartcourt  Capital  Limited,  and currently
serves as acting Chief Executive Officer and Principal Accounting Officer of the
company. Mr. Chen has over 10 years experiences in TV broadcasting,  publishing,
Internet  and  technology.  From  2000 to 2001,  Mr.  Chen  served  as the Chief
Executive  Officer and  Executive  Director of V2  Technology  Inc.  for Greater
China.  From 1999 to 2000, Mr. Chen served as the Managing  Director for Greater
China, Vice President of Marketing at HelloAsia Corporation (acquired by Brience
Inc). Prior to his technology experience, he was the Regional Marketing Director
at CNN  International  and Sales Director for Greater China and Country  Manager
for Taiwan for Turner  Broadcasting  Systems - subsidiaries  of AOL-Time  Warner
from 1995 to 1999.  Mr. Chen  received  his  Bachelor of  Economics  degree from
Monash University, Australia in 1991.


                                       32
<PAGE>
Mr. Stephen Tang is the founder of Financial  Telecom Limited (FTL) and has been
involved in the development and implementation of consumer technologies for over
20 years.  From 1985 to present,  Mr. Tang held the position of Chief  Executive
Officer  of  FTL.  Mr.  Tang's  contributions  include  development  of new  and
innovative products and creation of strategic alliances in China,  Taiwan, Korea
and USA.  Mr.  Tang  holds a degree in  Business  Administration  from  AIM-Asia
Institute of Management in Manila.

Dr. Billy Y N Wang is currently  President of NCH Corp China,  a  multi-national
chemical  company with  subsidiaries in over 10 cities in China and more than 70
countries.  From 1994 to 1997,  Dr. Wang was the President of Xibic  Enterprises
Ltd  and  Senior  Consultant  at  WCE  specializing  in  international  business
development and technology  transfer.  From 1991 to 1997, Dr. Wang served as the
Advisor for Office of  International  Trade of Washington  DC. Dr. Wang obtained
his Masters and Doctorate  degrees in Chemical  Engineering  from  University of
Virginia in 1990, and Bachelors degree from University of Massachusetts in 1986.

Mr. Anthony W J Qiao has over 12 years of legal experiences and is currently the
Managing  Partner  at  ZhongLun  Law  Firm's  Shanghai  office,  one of the most
established  commercial  law firm in China.  From 1990 to 1994,  Mr. Qiao served
with Shanghai Superior People's Court, and various Government  departments.  Mr.
Qiao's area of practice includes banking, finance, mergers & acquisitions,  real
estate, and foreign direct investment.  Mr Qiao obtained his Bachelors degree in
Law from East China University of Politics & Law in 1987, and Master's degree in
Law from Fudan  University Law School in 1999. Mr. Qiao was visiting  scholar at
Wisconsin  University Law School and New York  University Law School in 1999 and
2000. Mr. Qiao passed China Bar qualification exam in 1992.

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 on the
Board. For attending Board meetings, Hartcourt compensated its directors $12,000
each quarter  through the issuance of  restricted  shares of common stock at the
closing  market price of the common  shares  valued on first day of the calendar
quarter.

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 Hartcourt.

Rights and Preferences of Preferred Stock

Original Preferred Stock
------------------------
As the sole holder of the 1,000 outstanding shares of Company Original Preferred
Stock, Dr. Phan is entitled to elect 3/5 of the number of members of Hartcourt's
Board of  Directors,  whereas  the holders of the  outstanding  shares of common
stock are entitled to elect 2/5 of that number.

Class A Preferred Stock

The 10,000,000  shares of authorized and unissued Class A Preferred Stock may be
split  with  such  designations,   powers,  preferences  and  other  rights  and
qualifications,  limitations and restrictions  thereof as the Company's Board of
Directors  elects for a given series.  No Class A preferred stock was issued and
outstanding as of December 31, 2002 and 2001, respectively.


                                       33
<PAGE>
Series A 9% Convertible Preferred Stock
---------------------------------------
Non-voting  convertible  preferred stock,  4,000 shares authorized with a stated
value of $1,000  per  share.  Holders  of shares  shall be  entitled  to receive
cumulative  dividends  at a rate  equal to 9% per  annum.  Series A  convertible
preferred  stock  is  subject  to  redemption  at any  time,  at the  option  of
Hartcourt,  at a  redemption  price  equal to $1,000 per share plus  accrued and
unpaid  dividends to the date of redemption.  No Series A convertible  preferred
stock was issued and outstanding at December 31, 2002 and 2001, respectively.

Series B 9% Convertible Preferred Stock
---------------------------------------
Non-voting  convertible  preferred stock,  2,000 shares authorized with a stated
value of $1,000  per  share.  Holder  of shares  shall be  entitled  to  receive
cumulative  dividends  at a rate  equal to 9% per  annum.  Series B  convertible
preferred  stock  is  subject  to  redemption  at any  time,  at the  option  of
Hartcourt,  at a  redemption  price equal to $1,000 per share,  plus accrued and
unpaid  dividends to the date of redemption.  No Series B convertible  preferred
stock was issued and outstanding at December 31, 2002 and 2001, respectively.

Series AB 9% Convertible Preferred Stock
----------------------------------------
Non-voting  convertible  preferred stock, 25,000 shares authorized with a stated
value of $1,000  per  share.  Holder  of shares  shall be  entitled  to  receive
cumulative  dividends  at a rate  equal to 9% per annum.  Series AB  convertible
preferred  stock  is  subject  to  redemption  at any  time,  at the  option  of
Hartcourt,  at a  redemption  price equal to $1,000 per share,  plus accrued and
unpaid  dividends to the date of  redemption.  Holders of Series AB  convertible
preferred stock may convert their shares into fully paid  non-assessable  common
stock of  Hartcourt.  No Series AB  convertible  preferred  stock was issued and
outstanding at December 31, 2002 and 2001, respectively.

Series C Redeemable Preferred Stock
-----------------------------------
Non-voting, non-participating redeemable preferred stock, 1,500 authorized, with
a par value of  $1,000  per  share.  Series C  preferred  stock is junior to the
original  preferred  stock and any other class or series of capital stock of the
Company which are  specifically  ranked  senior  (senior  securities).  Series C
preferred stock is redeemable at any time, at the discretion of the Company,  at
a redemption  price of $1,000 per share. No Series C redeemable  preferred stock
was issued and outstanding at December 31, 2002 and 2001, respectively.

Series D Convertible Preferred Stock
------------------------------------
Voting convertible preferred stock, 10,000 shares authorized with a stated value
of $1,000 per share.  Holders of Series D Convertible  Preferred  Stock shall be
entitled to receive, when declared by the Board of Directors, dividends at a par
with  holders  of  Hartcourt's  common  stock,  as if the  Series D  Convertible
Preferred  Stock had been  converted  in common stock on the record date for the
payment of dividend.  Each outstanding  share of Series D Convertible  Preferred
Stock shall be  convertible,  at the option of its holder,  at any time,  into a
number of shares of common  stock of  Hartcourt  at a  conversion  rate equal to
$1,000  divided by the market price of  Hartcourt's  common stock.  The Series D
Preferred  Stock was retired in March 1999, in connection with the sale of a 30%
interest in ECS to Mr. James Pruzin. No Series D convertible preferred stock was
issued and outstanding at December 31, 2002 and 2001, respectively.

                                       34
<PAGE>
By virtue of the activities in founding and organizing Hartcourt, as well as his
beneficial  ownership of its voting  securities,  Dr. Phan may be deemed to be a
"promoter" of Hartcourt.

Item 10.  Executive Compensation.

The  following  summary   compensation  table  sets  forth  certain  information
regarding compensation,  required to be paid pursuant to an employment agreement
during each of the three years ended  December  31,  2002,  2001 and 2000 to the
person serving as Hartcourt's Chief Executive Officer:

Name and Principal Position                        Fiscal Year    Annual Salary
---------------------------                        -----------    -------------
Mr. David Y. Chen, Acting Chief Executive Officer    2002            $120,000

Dr. Alan V. Phan, Chief Executive Officer            2001            $250,000
                                                     2000            $      1

On June 1, 2002,  Hartcourt  entered into an employment  agreement with David Y.
Chen,  Acting  Executive  Officer,  regarding the terms of his employment.  This
agreement has a one-year term ending May 31, 2003. The agreement provides for an
annual  salary  of  $120,000  plus an  option to  purchase  2 million  shares of
Hartcourt  common stock at a price of 10 cents a share being applicable for a 12
months  period from the date of  issuance.  Fifty  percent  (50%) of Mr.  Chen's
annual  salary is payable in cash and the balance is payable in shares of common
stock of Hartcourt.  The conversion  price is the average 20-day market price on
the first day of each  month for the  salary  owed that  month.  During the year
2002,  Mr. David Chen received  450,000  shares valued at $31,500 and $10,000 in
cash for his compensation.

Hartcourt  was  obligated  under the  employment  contract with Dr. Alan Phan to
provide salary,  bonuses,  and other fringe benefits  through December 31, 2001.
Dr.  Phan's  employment  agreement  expired  on  December  31,  2001 and was not
renewed.  Annual base salary payable to Dr. Phan under the contract was $250,000
per annum for  fiscal  years  2000 and 2001.  Payments  were to be made in equal
monthly  installments.  In the event Hartcourt did not have sufficient cash flow
to pay  compensation  in cash,  Dr.  Phan had the  option to accept  Hartcourt's
restricted common shares for the same amount of compensation. Share price was to
be calculated at 50% of the market  trading bid price on January 1st of the year
of employment.  During the year 2001, Dr. Phan agreed to receive compensation of
1,245,793 shares of common stock valued at $250,000 as salary for the year ended
December  31,  2001.  During the year  2000,  Dr.  Phan  agreed to receive $1 in
compensation  as his salary.  On  September  10,  2002,  Hartcourt  entered into
consulting  agreement with Dr. Alan Phan,  regarding the terms of his consulting
service.  This  agreement  has  three-year  term starting on January 1, 2002 and
ending on December 31 2004. This agreement  provides cash compensation of $1 for
each year of services and plus an option to purchase 3 million  common shares of
the Company at the closing price of the first day of each year.

On February  19,  2000,  Hartcourt  entered into an  employment  agreement  with
Frederic Cohn, Executive Vice President,  regarding the terms of his employment.
This  agreement  has a two-year  term ending  December 31, 2000.  The  agreement
provides for an annual  salary of $120,000 in the first year and $130,000 in the
second year.  Fifty percent (50%) of Mr. Cohn's annual salary is payable in cash
and the  balance  is  payable  in  shares  of  common  stock of  Hartcourt.  The


                                       35
<PAGE>
conversion  price is the closing market price on the first day of each month for
the salary owed that month.  Mr. Cohn resigned from his position in May 2001 due
to a mutual agreement.  During the year 2001 and 2000, Mr. Cohn received $17,000
and $60,000 of his salary in cash and Hartcourt  issued 69,833 and 20,558 shares
of restricted common stock valued at $ 50,000 and $60,000, respectively.

On April 12, 2000,  Hartcourt  entered  into an  employment  agreement  with Dr.
Charlie Yang, Chief Executive  Officer,  for a term of three years of employment
starting May 1, 2000. During the first year ending April 30, 2001, the agreement
provides  for an annual  salary of  $168,000  in cash plus an option to purchase
50,000  shares of  Hartcourt  common  stock at the  market  price of May 1, 2000
exercisable within twenty-four (24) months of its grant. In the second and third
year,  the annual  salary  increases to $180,000 and $200,000 plus the option to
purchase  shares  increases  to 100,000  and 150,000  shares of common  stock of
Hartcourt  as of May 1, 2001 and May 1,  2002,  exercisable  within  twenty-four
months of its grant.  On June 1, 2001,  Dr. Yang  resigned  from his position of
Chief Executive Officer at Hartcourt.  During 2001, Mr. Yang received $70,000 in
salary and did not exercise his options to purchase  50,000  shares of Hartcourt
common stock as of March 10, 2003.

In April 1995, the Company adopted a stock option plan (the Plan) to attract and
retain  qualified  persons  for  positions  of  substantial   responsibility  as
officers,  directors,   consultants,  legal  counsel,  and  other  positions  of
significance to the Company.  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 Hartcourt. Vested options lapse one year
after the death or disability of an option holder. In order to attract employees
and  consultants  to render  high-quality  services  under this  stagnate  stock
market,  the Board  decided to remove the  limitation on the number of shares of
the option. As of March 10, 2003, options to purchase 5,320,000 shares of common
stock were  outstanding  under the plan at exercise prices ranging from $0.10 to
$5.75 per share.





















                                       36
<PAGE>
Item 11.  Security Ownership of Certain Beneficial Owners and Management
The following table sets forth  information as of December 31, 2002 with respect
to persons known to Hartcourt 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 Hartcourt  and by all  directors  and executive
officers of Hartcourt as a group.

---------------- --------------------- ---------------------- -----------
Title of Class   Name & Address of     Amount and Nature of   Percent
                 Beneficial Owner      Beneficial Ownership
                                       (1)
---------------- --------------------- ---------------------- -----------
---------------- --------------------- ---------------------- -----------
Common stock     Dr. Alan V. Phan      2,361,679 (2)          2.7%
                 Room 902, No. 120,
                 Lane 100,
                 Zhongtan Road
                 Shanghai, China
                 200061
---------------- --------------------- ---------------------- -----------
Original                               1,000 (2)              100%
Preferred stock
---------------- --------------------- ---------------------- -----------
---------------- --------------------- ---------------------- -----------
Common stock     CEDE & Co.            66,380,599 (3)         74.9%
                 55 Water Street 2SL
                 New York, NY 10041
---------------- --------------------- ---------------------- -----------
---------------- --------------------- ---------------------- -----------
                 All Officers and      320,091                0.4%
                 Directors as a
                 group  (exclusive
                 of Dr. Alan V. Phan)
---------------- --------------------- ---------------------- -----------

(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) Includes (i) an aggregate of 1,000,000  shares of common stock issuable upon
conversion of 1,000 shares of Original  Preferred  Stock.  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 Hartcourt's Board of Directors.

(3) CEDE & Co. is a deposit trust corporation (stock brokerage company).

Stock Option Plan

In April 1995, the Company adopted a stock option plan (the Plan) to attract and
retain  qualified  persons  for  positions  of  substantial   responsibility  as
officers,  directors,   consultants,  legal  counsel,  and  other  positions  of
significance  to the  Company.  The  Plan  provides  for  the  issuance  of both
Incentive  Stock Options and  Non-Qualified  Stock Options.  The Plan,  which is
administered  by the Board of Directors,  provides for the issuance of a maximum


                                       37
<PAGE>
of  2,000,000  options to purchase  shares of common  stock at the market  price
thereof on the date of grant.  Such options are generally  exercisable over a 10
year  period  from the date of  grant.  Each  option  lapses  90 days  after the
optionee has terminated his continuous activity with the Company, except that if
his continuous activity with the Company terminates by reason of his death, such
option of the deceased optionee may be exercised within one year after the death
of such  optionee.  Options  granted under the Plan are restricted as to sale or
transfer.  All options  were  granted at not less than fair value at the date of
grant and have terms of 10 years. In order to attract  employees and consultants
to render  high-quality  services  under this stagnate  stock market,  the Board
decided to remove the limitation on the number of shares of the option.

The following table summarizes the activity in the plan:

                                                                 Weighted
                                              Number of          Average
                                                                 Exercise
                                               Shares             Price
                                           ----------------  ---------------
Shares under option at December 31, 2000            470,000      $      1.86
    Granted                                               -               -
    Exercised                                             -               -
    Canceled                                       (150,000)           (3.05)
                                           ----------------  ---------------
Shares under option at December 31, 2001            320,000      $      1.30
    Granted                                       5,000,000             0.27
    Exercised                                             -               -
    Canceled                                              -               -

Shares under option at December 31, 2002          5,320,000      $      0.33
                                           ================  ===============

All stock options  issued to employees  have an exercise price not less than the
fair market value of the  Company's  common  stock on the date of grant,  and in
accordance  with the accounting for such options  utilizing the intrinsic  value
method  there is no  related  compensation  expense  recorded  in the  Company's
financial  statements.  Had compensation cost for stock-based  compensation been
determined  based on the fair value at the grant  dates in  accordance  with the
method  delineated in Statement of  Accounting  standards No. 123, the Company's
net loss and loss per share for the year ended December 31, 2002 and 2001, would
not have been increased.

In connection with providing  consulting  services,  on July 21, 2000, Hartcourt
granted to Anarjay Concepts, Inc. options to purchase 20,000 shares of Hartcourt
stock at a price of $5.75 per share. The options  originally expired on July 20,
2001 and were later  extended to July 20,  2003.  The options were issued at the
fair  market  value on the date of  issuance  and,  therefore,  no  expense  was
recorded.

In connection with providing consulting services,  on January 1, 2002, Hartcourt
granted to Alan Phan, options to purchase 3,000,000 shares of Hartcourt stock at
a price of $0.38 per share.  The  options  expired on  December  31,  2004.  The
options  were  issued  at the fair  market  value on the date of  issuance  and,
therefore, no expense was recorded.



                                       38
<PAGE>
To attract and stimulate  qualified  persons as  substantial  responsibility  of
officers,  on June 1, 2002,  Hartcourt  granted to Mr. David Chen,  Acting Chief
Executive Officer,  options to purchase 2,000,000 shares of Hartcourt stock at a
price of $0.10 per share.  The options expired on May 31, 2003. The options were
issued over the fair market  value on the date of issuance  and,  therefore,  no
expense was recorded.

Additional  information relating to stock options outstanding and exercisable at
December 31, 2002 summarized by exercise price are as follows:

                                   Outstanding               Exercisable
                          --------------------------- -------------------------
    Exercise                    Weighted Average               Weighted Average
      Price                     ----------------               ----------------
    Per Share    Shares   Life (Years) Exercise Price  Shares   Exercise Price
 -------------- --------- ------------ -------------- --------- --------------
 $1.00 to $5.75 5,320,000  0.5 to 5.5      $0.33      5,320,000      $0.33

Warrants

In connection with facilitating equity line and credit for Hartcourt, on January
26, 2000,  Hartcourt issued to Dunwoode  Brokerage Services warrants to purchase
13,530 shares at $15.52 per share that expire on January 25, 2004.  The warrants
were issued at the fair market value and therefore, no expense was recorded.

In connection  with completion of a private  placement of Hartcourt  shares with
PYR Management  LLC, on March 6, 2001,  Hartcourt  issued in total  2,509,802 of
Class I warrants and 1,035,308 of Class II warrants  exercisable at $0.69375 per
share of common stock and expire on January 26, 2005.

In connection  with signing an investment  agreement with Swartz Private Equity,
LLC,  on January  26,  2000,  Hartcourt  issued to Swartz  warrants  to purchase
400,000 shares at $13.10 per share that expire on January 25, 2004. The warrants
were issued at the fair market value and therefore, no expense was recorded.

During 2001,  400,000  warrants  were  converted  into 400,000  common shares of
Hartcourt due to the cashless  exercise of the  warrant-holders  rights.  During
2000,  the  warrant-holders  converted  warrants to purchase  407,000  shares of
common stock at prices ranging from $2.50 to $2.80 for a total  consideration of
$101,870.

Stock Split

On  September  14,  2000,  the  Board  of  Directors  of  Hartcourt  approved  a
two-for-one split of the company's common stock,  payable on October 23, 2000 to
the shareholders of record at the close of business on October 16, 2000.

Item 12: Certain Relationships and Related Transactions

Effective February 1, 1999,  pursuant to a Share Purchase  Agreement,  Hartcourt
acquired one (1) share of common stock of Enova,  representing 100% of the total
issued and  outstanding  capital  stock of Enova,  making  Enova a  wholly-owned
subsidiary.  Effective  March 1, 1999,  Hartcourt and Enova executed an Exchange
Agreement  (the  "Enova  Agreement")  whereby  Hartcourt  exchanged  all  of its
ownership  in  two  wholly-owned  subsidiaries,  Pego  and  ECS,  for  5,213,594


                                       39
<PAGE>
additional shares of common stock of Enova. On March 24, 1999, Hartcourt entered
into a Distribution  Agreement  pursuant to which Hartcourt agreed to distribute
to all  shareholders of record on March 31, 1999, all of the 5,213,595 shares of
common stock of Enova.  As a result of the Share Purchase  Agreement,  the Enova
Agreement  and  the  Distribution  Agreement,  each  shareholder  of  record  of
Hartcourt  on March 31, 1999  received one (1) share of Enova for every four (4)
shares owned of Hartcourt.  The Board of Directors of Enova  includes  directors
from Hartcourt.

On August 17, 1999,  Hartcourt entered into a stock purchase  agreement with FTL
to purchase 4,964,990 shares of common stock,  representing  58.53% of the total
common stock  outstanding.  In connection  with the purchase,  Hartcourt  issued
1,500,000  shares of its  common  stock and  recorded  an amount  payable to FTL
$840,676 at December 31, 1999.  On January 18, 2000,  Hartcourt  issued  254,552
additional shares of its common stock to FTL for revision in purchase price as a
result of post closing adjustment.

On May 16, 2001,  Hartcourt and  ElephantTalk  (ET) executed a Sale and Purchase
Agreement  whereby Hartcourt  acquired 51% ownership  interest in ET for a total
consideration  of $4,194,000.  Hartcourt issued 3,756,058 shares of common stock
valued at $2,325,000 to the private owners of ET,  executed a Promissory Note of
$1,250,000, and issued 1,000,000 shares to ET for the 51% ownership interest. On
October 23 2002,  Hartcourt has decided to  distribute 5 million  shares of ETCI
that it still retained as dividends to all of its shareholders.  Furthermore, on
October  23,  2002,  Hartcourt  and ETCI has  completed  an  agreement  in which
Hartcourt  agreed to return to ETCI 12,895,579  shares of ETCI in exchange for 2
promissory  notes of $1,250,000 and $140,595 plus 4,756,058  shares of HRCT held
by ETCI and its shareholders.  As a result, as of October 23, 2002, Hartcourt no
longer has any interest in ETCI.

On August 16, 2001,  Hartcourt  acquired an additional 35% ownership interest in
Asia Top and China Top for a total consideration of HK$800,000 (US$102,564). The
accompanying  financial  statements reflect Hartcourt's  ownership of 85% in the
StreamingAsia  Group and its results of operations  from the date of acquisition
are consolidated with Hartcourt at December 31, 2001.

During  2002,  Hartcourt  issued  3,774,513  shares  of common  stock  valued at
$534,400  to  officers  and  directors  in lieu of  compensation  and  services,
included in which,  1,245,793 shares issued to Dr. Alan Phan in lieu of his 2001
compensation of $250,000.

As at December 31, 2002,  Hartcourt  has a $400,000 note  receivable  from Pego,
non-interest  bearing,  payable  upon  demand and  unsecured.  As the Company is
facing  financial  problem,  Hartcourt  made  100%  bad debt  provision  in this
regards.












                                       40
<PAGE>
                                    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,  Hartcourt Investments (USA) Inc.
("Hartcourt USA") and the shareholders of Hartcourt USA. (1)

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

2.03  Agreement between The Hartcourt Companies, Inc.  and  the  shareholder  of
Pego Systems, Inc., "Stock Purchase Agreement", dated June 29, 1997 (4)

2.04  Agreement and Plan of Reorganization,  dated October 28, 1997, between The
Hartcourt Companies,  Inc.,  Electronic Component and Systems,  Inc., and Pruzin
Technologies, Inc. (5)

3.01  Articles of Incorporation of Hartcourt, as amended. (1)

3.02  Bylaws of Hartcourt. (1)

3.03  Amendment to the Bylaws of Hartcourt. (1)

3.04  Amendment to the Articles of Incorporation of Hartcourt.

4.01  Articles of Amendment to Articles of Incorporation of Hartcourt  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)

4.02  Articles of Amendment of the Articles of  Incorporation  of The  Hartcourt
Companies, Inc., Designating Series A 9% Preferred Stock.

4.03  Articles  of  Amendment  of  Articles of  Incorporation  of The  Hartcourt
Companies, Inc. Designating Series B 9% Preferred Stock.

4.04  Certificate of Amendment of the Articles of Incorporation of The Hartcourt
Companies, Inc. Designating Series C Preferred Stock.

4.05  Articles of Amendment of the Articles of  Incorporation  of The  Hartcourt
Companies, Inc. Designating Series D Preferred Stock.

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

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


                                       41
<PAGE>
10.03 Stock  Exchange  Agreement  between  Hartcourt USA and Eastern  Rochester,
dated August 8, 1994. (1)

10.04  1995 Stock Option Plan. (1)

10.05 Purchase  Contract between The Hartcourt  Companies,  Inc. and Exceptional
Specialty Products, Inc., dated March 21, 1996. (1)

10.06 Purchase and Sale Agreement,  dated August 8, 1996,  between The Hartcourt
Companies,  Inc. and NuOasis  International,  Inc., and Addendum to Purchase and
Sale Contract. (1)

10.07 Convertible  Secured  Promissory Note, dated August 8, 1996, in connection
with  Purchase and Sale  Agreement,  dated August 8, 1996 between The  Hartcourt
Companies, Inc. and NuOasis International, Inc.(1)

10.08 Convertible  Secured  Promissory Note, dated August 8, 1996, in connection
with  Purchase and Sale  Agreement,  dated August 8, 1996 between The  Hartcourt
Companies, Inc. and NuOasis International, Inc., as amended. (1)

10.09  Sales  Agreement,   dated  September  17,  1996,  between  The  Hartcourt
Companies, Inc. and Promed International, Ltd. (1)

10.10  Sales  Agreement,   dated  September  17,  1996,  between  The  Hartcourt
Companies, Inc. and Mandarin Overseas Investment Co., Ltd. (1)

10.11  Purchase  and Sale  Agreement,  dated  September  27,  1996,  between The
Hartcourt Companies, Inc. and CKES Acquisitions, Inc. (1)

10.12 Secured  Promissory  Note,  dated  September 27, 1996, in connection  with
Purchase  and Sale  Agreement  between The  Hartcourt  Companies,  Inc. and CKES
Acquisitions, Inc. (1)

10.13  Consulting  Agreement,  dated  December 30, 1996,  between The  Hartcourt
Companies,  Inc.  and American  Equities  LLC, a  California  limited  liability
company. (3)

10.14  Investment  Banking  Agreement,  dated March 1998,  between The Hartcourt
Companies, Inc. and DanAllen Investment Group. (2)

10.16  Marketable  Securities  Agreement,  dated  July  31,  1997,  between  The
Hartcourt Companies, Inc. and Capital Commerce, Ltd. (2)

10.17 Lease  Termination  Agreement,  dated March 24,  1998,  between  Hartcourt
Investment (USA) Corporation and Scripto-Tokai Corporation. (2)

10.18 Share Purchase  Agreement  with Enova  Holdings,  Inc.,  dated February 1,
1999,  Exchange  Agreement , dated March 23, 1999, and  Distribution  Agreement,
dated March 24, 1999, File # 99579493.

10.19  1999 Agreement with Beijing UAC Stock Trading Online Co. Ltd.

10.19 A Financial  Statements of Beijing UAC Stock Exchange  Online Co. Ltd. for
the period from October 18, 1999 (date of inception) to December 31, 1999.

10.20  Agreement with GoCall.com

                                       42
<PAGE>
10.21  FTL Stock Purchase Agreement

10.22  Advisory  Agreement  and 1999 Stock Plan with NuVen  Advisors,  Inc.  and
Hartcourt dated March 18, 1999, File No. 333-74933.

10.23  Consulting  Agreement  with Fred G. Luke,  dba NuVen  Advisors,  File No.
99768860

10.24  Consulting Agreement with Archer & Weed, File No. 99768860

10.25 On December 8, 1999,  Hartcourt filed a report on Form 8-K to disclose the
resignations  of Fred Luke and Jon L. Lawver  Directors and  Officers,  File No.
99770546.

10.26 February 4, 2000, Hartcourt completed a private placement of 227,445 Units
and a class II  Warrants  to PYR  Management  LLC for  $3,000,000  pursuant to a
regulation D Subscription  Agreement,  File No. 524390.  Incorporated  herein by
reference.

16.01 Resignation by Harlan & Boettger LLP, Certified Public Accountants,  dated
October 18,  1999,  File No.  99731003.  Amendment  to  resignation  of Harlan &
Boettger,  LLP, Certified Public  Accountants,  dated December 6, 1999, File No.
99769229

16.02  Appointment of BDO  International,  Certified Public  Accountants,  dated
February 8, 2000, File No. 530104

16.03 On September 28, 2000,  resignation  of BDO  International  as Hartcourt's
independent Certified Public Accountants, File No. 731300.

16.04 On September  29, 2000,  appointment  of KPMG as  Hartcourt's  independent
Certified Public Accountants, File No. 732487.

16.05 On December  11,  2000,  resignation  of KPMG as  Hartcourt's  independent
Certified Public Accountants, File No. 786290.

16.06  On  February  9,  2001,  appointment  of  Weinberg  &  Company,  P.A.  as
Hartcourt's independent Certified Public Accountants, File No. 1529253.

23.01 Consent of Independent Certified Public Accountants. (BDO International)

23.02 Consent of Independent  Certified Public Accountants.  (Harlan & Boettger,
LLP)

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

(1) Previously  filed as an exhibit to Hartcourt's  Form 10SB, File No. 97636406
and incorporated herein by reference.

(2) Previously filed as an exhibit to Hartcourt's 10-KSB,  dated April 13, 1998,
File No. 98592254 and incorporated herein by reference.

(3) Previously filed as an exhibit to Hartcourt's 10-KSB,  dated April 15, 1997,
File No. 97581142 and as amended by Hartcourt's Form  10-KSB40/A,  dated July 3,
1997, File No. 97636294. Incorporate herein by reference.

                                       43
<PAGE>
(4) Previously  filed as an exhibit to  Hartcourt's  Form 8-K, dated October 21,
1997, file No. 97698732 and as amended by Hartcourt's Form 8-K/A,  dated October
27, 1997, File No. 97701302. Incorporated herein by reference.

(5)  Previously  filed as exhibit to  Hartcourt's  Form 8-K,  dated November 12,
1997, File No. 97715149. Incorporated herein by reference.

Reports on Form 8-K:

   o     On May 22, 2001, acquisition of Elephant Talk Limited, File No. 500026.
         Incorporated by reference.


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.



































                                       44
<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 12, 2003                             By: /s/ Alan V. Phan
                                                  ----------------------
                                                  Alan V. Phan, Chairman




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/ David Y. Chen          President &                           April 12, 2003
-----------------          Acting Chief Executive Officer
David Y. Chen              Principal Accounting Officer, Director

/s/ Stephen Tang           Chief Operating Officer               April 12, 2003
-----------------          & Director
Stephen Tang

























                                       45
<PAGE>
                       Report on the Financial Statements

                                       Of

                          The Hartcourt Companies, Inc.
                                And Subsidiaries








                               LORAL INTERNATIONAL
                              CPA & Advisor, L.L.C.
                   Member of the American SEC Practice Section

Main Address            : 234 Hudson Ave., #2882 Albany, New York 12210
                          Telephone: (518) 472-1789   Fax: (518) 472-1544
Hong Kong Address       : Suite # 908, Wing On Center,
                          111 Connaught Road, Central, Hong Kong
                           Telephone: (852) 2882-5699 Fax: (852) 2504-5336



































                                        i
<PAGE>

                          The Hartcourt Companies, Inc.
                                And Subsidiaries



                    Audited Consolidated Financial Statements

                      For the Years Ended December 31, 2002



Contents                                                              Pages
--------                                                              -----
Auditor's Report.................................................         1

Balance Sheet....................................................       2-3

Statement of Operations..........................................       4-5

Changes in Stockholders' Equity..................................       6-9

Statement of Cash Flows..........................................     10-11

Notes to Financial Statements....................................     12-37
































                                       ii
<PAGE>
                    LORAL INTERNATIONAL CPA & ADVOSOR, L.L.C.

                   Member of the American SEC Practice Section
--------------------------------------------------------------------------------
Main Address            : 234 Hudson Ave., #2882 Albany, New York 12210
                          Telephone: (518) 472-1789   Fax: (518) 472-1544
Hong Kong Address       : Suite# 908, Wing On Center,
                          111 Connaught Road, Central, Hong Kong
                          Telephone: (852) 2882-5699 Fax: (852) 2504-5336
--------------------------------------------------------------------------------
                          Independent Auditor's Report

To  The Board of Directors of
       The Hartcourt Companies, Inc.
       19222 Pioneer Blvd., Suite 100
       Cerritos, California 90703

We have audited the  accompanying  consolidated  balance sheets of The Hartcourt
Companies,  Inc.  and  Subsidiaries  as of  December  31,  2002 and the  related
consolidated statements of loss and retained earnings,  changes in stockholders'
equity  and cash flows for the year then  ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements  based  on our  audit.  The  financial  statements  of The  Hartcourt
Companies, Inc. and Subsidiaries as of December 31, 2001 were audited by another
firm whose report dated April 12, 2002 expressed a qualified opinion (See Note #
2b).

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements. An audit also includes assessing the accounting principles used, and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the  consolidated  financial  statements refer to above present
fairly  in all  material  respects,  the  financial  position  of The  Hartcourt
Companies,  Inc.  and  Subsidiaries  as of December  31, 2002 and the results of
their  operations  and  their  cash  flows  for the year  then  ended in 2002 in
conformity with generally accepted accounting  principles  generally accepted in
the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  As  discussed  in Note # 2q to the
financial  statements,  the Company has suffered  recurring  losses and negative
cash flow from the operations that raise  substantial doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in Note # 2q.  The  financial  statements  do not  include  any
adjustment that might result from the outcome of this uncertainty.


Loral International CPA & Advisor, LLC.
New York, New York
April 14, 2003
                                        1
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001

ASSET
                                                    2002            2001
                                               -------------   -------------
CURRENT ASSETS
Cash and cash equivalents                      $      79,845   $     281,563
Accounts receivable, net of allowance                260,306       1,443,673
Inventory                                             16,464          15,882
Notes receivable                                     709,759         896,874
Prepaid expenses and other assets                     49,449         734,598
Due from related companies                              -          1,494,730
                                               -------------   -------------
TOTAL CURRENT ASSETS                               1,115,823       4,867,320
                                               -------------   -------------
PROPERTY & EQUIPMENT - NET                           474,521       2,445,432
                                               -------------   -------------
INVESTMENTS                                          430,000         400,000
                                               -------------   -------------
OTHER ASSETS
Goodwill, net                                        624,689       5,257,649
Intangibles, net                                     340,767       1,191,959
Investment in ETNS Singapore Pte., Ltd.                 -            209,490
Notes receivable                                    1,756,012      2,608,286
                                               -------------   -------------
TOTAL OTHER ASSETS                                 2,721,468       9,267,384
                                               -------------   -------------
                                               -------------   -------------
TOTAL ASSETS                                   $   4,741,812   $  16,980,136
                                               =============   =============
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Cash overdraft                                 $        -      $      82,030
Accounts payable                                   1,342,284       4,607,238
Deferred revenue                                     209,333         616,254
Notes payable - current portion                       18,988       1,339,517
Capital lease liability                                 -             84,642
Due to factor                                           -            198,205
Due to related parties                             1,343,011       1,350,997
Accrued expenses and other current liabilities       357,265         478,216
                                               -------------   -------------
TOTAL CURRENT LIABILITIES                          3,270,881       8,757,099
                                               -------------   -------------
LONG-TERM LIABILITIES
Notes payable                                           -            433,299
Capital lease liability                                 -             28,596
                                               -------------   -------------
TOTAL LONG-TERM LIABILITIES                             -            461,895
                                               -------------   -------------
                                               -------------   -------------
TOTAL LIABILITIES                              $   3,270,881   $   9,218,994
                                               -------------   -------------
                  The accompanying notes form an integral part
                   of the consolidated financial statements.
                                       2
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001
                                                    2002            2001
                                               -------------   -------------
COMMITMENTS AND CONTINGENCIE                   $       -       $        -

MINORITY INTERESTS                                  561,720       2,280,199
                                               -------------   -------------
SHAREHOLDERS' EQUITY
Preferred Stock:

Original preferred stock, $0.01
 par value, 1,000 shares authorized,
 issued  and outstanding                                 10               10
Class A, 10,000,000 shares authorized,
 none issued and outstanding at
 December 31, 2002 and 2001, respectively               -               -
Series A, $1,000 stated value, 4,000 shares
 authorized, none issued and outstanding
 at December 31, 2002 and 2001, respectively            -               -
Series B, $1,000 stated value, 2,000 shares
 authorized, none issued and outstanding at
 December 31, 2002 and 2001, respectively               -               -
Series C, $1,000 stated value, 1,500 shares
 authorized, none issued and outstanding at
 December 31, 2002 and 2001, respectively               -               -
Series D, $1,000 stated value, 10,000 shares
 authorized, none issued and outstanding at
 December 31, 2002 and 2001, respectively               -               -
Series AB, $100 stated value, 25,000 shares
 authorized, none issued and outstanding at
 December 31, 2002 and 2001, respectively               -               -
                                               -------------   -------------
Total Preferred Stock                                    10               10

Common stock, $0.001 par value, 100,000,000
 shares authorized, 88,518,023 and 73,885,656
 shares issued and outstanding, respectively         88,518           73,886
Stock subscription receivable                          -            (139,865)
Additional paid in capital                       55,669,100       55,774,225
Treasury stock, at cost 5,610,588 and
 2,418,367  shares at December 31, 2002 and
 2001, respectively                              (3,723,928)      (1,662,233)
Other comprehensive loss                            (71,094)         (61,687)
Accumulated deficit                             (51,053,395)     (48,503,393)
                                               -------------   -------------
TOTAL SHAREHOLDERS' EQUITY                          909,211        5,480,943
                                               -------------   -------------
TOTAL LIABILITIES AND SAREHOLDERS' EQUITY      $  4,741,812    $  16,980,136
                                               =============   =============


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


                                       3
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           DECEMBER 31, 2002 AND 2001

                                                     2002            2001
                                                -------------   -------------
NET SALES                                       $  1,137,011    $ 10,621,205

COST OF SALES                                        362,382       7,757,779
                                                ------------    ------------
GROSS PROFIT (LOSS)                                  774,629       2,863,426
                                                ------------    ------------
OPERATING EXPENSES
 Selling, general and administrative               2,774,011       7,379,192
 Depreciation and amortization                       371,779       1,478,313
 Impairments                                       1,563,040       1,785,262
                                                ------------    ------------
TOTAL OPERATING EXPENSES                           4,708,830      10,642,767
                                                ------------    ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
  OTHER INCOME (EXPENSE)                          (3,934,201)     (7,779,341)
                                                ------------    ------------

OTHER INCOME (EXPENSES)
 Equity in earnings (loss) of affiliate                 -           (281,886)
 Interest expense                                    (50,197)       (196,168)
 Interest income                                      94,299         122,201
 Loss on disposal of property and equipment         (295,564)        (64,601)
 Provision for uncollectable note receivable            -           (329,171)
 Other income                                         26,961          12,590
                                                ------------    ------------
TOTAL OTHER INCOME (EXPENSES)                       (224,501)       (737,035)
                                                ------------    ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
 MINORITY INTEREST                                (4,158,702)     (8,516,376)

 Less: Loss in subsidiaries attributed to
  minority interests                                 685,251         641,919
                                                ------------    ------------
LOSS BEFORE DISCONTINUED OPERATIONS             $ (3,473,451)   $ (7,874,457)

 Continuing to next page










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



                                        4
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           DECEMBER 31, 2002 AND 2001

                                  - Continued -

                                                      2002            2001
                                                 -------------   -------------
DISCONTINUED OPERATIONS:
 Loss from discontinued operations               $(1,020,252)    $  (377,952)
 Gain on disposal of discontinued operations       1,943,701       1,060,371
                                                 -----------     -----------
LOSS BEFORE EXTRAORDINARY ITEM                    (2,550,002)     (7,192,038)

 Extraordinary item - gain on extinguishment of debt    -          1,862,630
                                                 -----------     -----------
NET LOSS                                          (2,550,002)     (5,329,408)

OTHER COMPREHENSIVE LOSS
 Foreign currency translation loss                    (9,407)        (61,687)
                                                 -----------     -----------
COMPREHENSIVE LOSS                               $(2,559,409)    $(5,391,095)
                                                 ===========     ===========

BASIC AND DILUTED LOSS PER COMMON SHARE
 Loss from continuing operations                 $     (0.05)    $     (0.12)
 Income (Loss) from discontinued operations             0.01            0.01
 Income from extraordinary item                         0.00            0.03
                                                 -----------     -----------
 Loss per share                                  $     (0.04)    $     (0.08)
                                                 ===========     ===========
 Weighted average number of common shares
  outstanding - basic and diluted                 80,415,882      68,879,666
                                                 ===========     ===========















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






                                        5
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

                                                                     Common
                                                                     Stock
                                 Preferred           Common      Subscriptions
      Description             Shares  Amount    Shares    Amount  Receivable
-------------------------------------------------------------------------------
Balance -
January 1, 2000               1,000      10   66,176,044  66,176  (12,192,094)

Shares issued for cash
                                  -       -    1,838,636   1,839     (139,865)
                                                                            -
Cash received from share
subscriptions                     -       -            -       -    1,192,094
                                                                            -
Issuance of shares to
directors for services            -       -      295,206     295            -

Shares issued for stock
reset price                       -       -    1,966,092   1,966            -

Shares issued upon
exercise of cashless
stock option warrants             -       -      400,000     400            -

Stock subscription
cancelled                         -       -   (4,000,000) (4,000)  11,000,000

Shares issued in lieu
of compensation                   -       -      511,764     512            -

Shares issued to consultants      -       -    1,136,054   1,136            -

Shares issued in connection
with acquisition of Elephant
Talk Limited                      -       -    4,756,058   4,756            -

Sale of treasury stock            -       -            -       -            -

Shares issued in connection
with acquisition of Sinobull      -       -      805,802     806            -

Other comprehensive loss         -       -            -       -            -

Net loss, 2001                    -       -            -       -            -
                              -------------------------------------------------
Total comprehensive loss          -       -            -       -            -

Balance, December 31, 2001    1,000      10   73,885,656  73,886     (139,865)
                              =================================================

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

                                        6
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<S>                          <C>         <C>         <C>             <C>       <C>             <C>
                              Additional                           Other                        Total
                               Paid In      Treasury Stock      Comprehensive  Accumulated   Shareholders
      Description              Capital    Shares       Amount       Loss         Deficit        Equity
------------------------------------------------------------------------------- --------------------------
Balance -
January 1, 2000              62,464,649   3,557,832  (1,918,634)           -   (43,173,985)     5,246,122

Shares issued for cash
                                393,161           -           -            -             -        255,135
                                                                                                        -
Cash received from share
subscriptions                         -           -           -            -             -      1,192,094
                                                                                                        -
Issuance of shares to
directors for services          117,945           -           -            -             -        118,240

Shares issued for stock
reset price                      (1,966)          -           -            -             -              -

Shares issued upon
exercise of cashless
stock option warrants              (400)          -           -            -             -              -

Stock subscription
cancelled                   (10,996,000)          -           -            -             -              -

Shares issued in lieu
of compensation                 221,088           -           -            -             -        221,600

Shares issued to consultants    373,037           -           -            -             -        374,173

Shares issued in connection
with acquisition of Elephant
Talk Limited                  2,939,244   1,000,000    (619,000)           -             -      2,325,000

Sale of treasury stock         (235,727) (2,945,267)  1,375,401            -             -      1,139,674

Shares issued in connection
with acquisition of Sinobull    499,194     805,802    (500,000)           -             -              -

Other comprehensive lostt             -                       -      (61,687)            -        (61,687)

Net loss, 2001                        -                       -            -    (5,329,408)    (5,329,408)
                            -----------------------------------------------------------------------------
Total comprehensive loss              -                       -            -             -     (5,391,095)

Balance, December 31, 2001   55,774,225   2,418,367  (1,662,233)     (61,687)  (48,503,393)     5,480,943
                            =============================================================================
</TABLE>
                  The accompanying notes form an integral part
                   of the consolidated financial statements.

                                        7
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<S>                       <C>      <C>   <C>         <C>        <C>         <C>
                                                                 Common
                                                                 Stock      Additional
                            Preferred            Common      Subscriptions   Paid In
     Description         Shares  Amount    Shares     Amount   Receivable    Capital
---------------------------------------------------------------------------------------
Balance -
December 31, 2001         1,000    10    73,885,656   73,886     (139,865)   55,774,225

Shares issued for
consulting services           -     -     3,440,334    3,440            -       356,370

Stock subscriptions
received                      -     -             -        -      613,046             -

Shares issued to
directors in lieu of          -     -     3,774,513    3,774            -       530,626
compensation & services

Sale of treasury stock        -     -             -        -            -      (180,082)

Shares return in
connection with disposal
of ETCI                       -     -             -        -            -             -


Share price adjusted          -     -             -        -            -    (1,225,455)

Dividend                      -     -             -        -            -      (250,000)

Shares issued for
subscription receivable       -     -     7,417,520    7,418     (473,181)      663,416

Other comprehensive gain      -     -             -        -            -             -

Net Loss                      -     -             -        -            -             -
                         ----------------------------------------------------------------
Balance - Dec 31, 2002    1,000    10    88,518,023   88,518            -    55,669,100
                         ================================================================

</TABLE>









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






                                        8
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<S>                            <C>          <C>             <C>        <C>            <C>
                                                            Other                        Total
                                    Treasury Stock      Comprehensive   Accumulated   Shareholders
     Description                 Shares        Amount       Loss          Deficit        Equity
--------------------------------------------------------------------------------------------------
Balance -
December 31, 2001              2,418,367    (1,662,233)     (61,687)   (48,503,393)    5,480,943

Shares issued for
consulting services                    -             -            -              -       359,810

Stock subscriptions
received                               -             -            -              -       613,046

Shares issued to
directors in lieu of                   -             -            -              -       534,400
compensation & services

Sale of treasury stock          (563,837)      263,305            -              -        83,223

Shares return in
connection with disposal
of ETCI                        3,756,058    (2,325,000)           -              -    (2,325,000)


Share price adjusted                   -             -            -              -    (1,225,455)

Dividend                               -             -            -              -      (250,000)

Shares issued for
subscription receivable                -             -            -              -       197,653

Other comprehensive gain               -             -       (9,407)             -        (9,407)

Net Loss                               -             -            -     (2,550,002)   (2,550,002)
                           ---------------------------------------------------------------------
Balance - Dec 31, 2002         5,610,588    (3,723,928)     (71,094)   (51,053,395)       909211
                           =====================================================================

</TABLE>










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






                                        9
<PAGE>
                 THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           DECEMBER 31, 2002 AND 2001

                                                       2002            2001
                                                  -------------   -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                          $ (2,550,002)   $ (5,329,408)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
 Loss on disposal of property and equipment            295,564          64,601
 Provision for uncollectable note receivable                 -         329,171
 Gain on extinguishment of debt                              -      (1,862,630)
 Depreciation                                          342,147         671,282
 Amortization                                           29,632         807,031
 Allowance for doubtful accounts                     1,115,963          78,691
 Impairments - goodwill and intangible software      1,563,040       1,785,262
 Minority interest in loss of subsidiaries and
  equity in earnings of affiliate, net                (685,251)       (360,033)
  Stock issued for services                            889,211         714,013
Changes in operating assets and liabilities:
 Accounts receivable                                 1,183,367        (143,278)
 Inventory                                                (582)        136,575
 Prepaid expenses and other                          2,179,879         543,846
 Cash overdraft                                        (82,030)       (329,577)
 Accounts payable and accrued expenses              (4,706,434)      1,811,444
 Deferred revenue                                     (406,921)         98,786
                                                  ------------    ------------
Net cash used in continuing operations                (832,417)       (984,224)
Net cash used in discontinued operations            (1,020,252)       (478,327)
                                                  ------------    ------------
NET CASH USED IN OPERATING ACTIVITIES               (1,852,669)     (1,462,551)
                                                  ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                     (97,877)        (51,721)
Cash acquired in acquisition                                 -         690,202
Payments on notes receivable, net                    1,039,389        (823,585)
Investments                                          1,597,450        (153,846)
                                                  ------------    ------------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES  2,538,962        (338,950)
                                                  ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments due to related parties                         (7,986)       (865,048)
Proceeds from issuance of common stock                (265,691)      1,988,501
Shareholder loans                                      139,865        (999,436)
Due to factor                                         (198,205)        198,205
Proceeds (Payments) on long-term debt                 (433,299)      1,619,807
Payments on capital lease                             (113,238)         42,833
                                                  ------------    ------------


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



                                       10

<PAGE>
                                  - continued -

NET CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES   (878,554)      1,984,912
                                                  ------------    ------------
FOREIGN CURRENCY TRANSLATION                            (9,407)         (9,595)
                                                  ------------    ------------
NET (DECREASE)/INCREASE IN CASH                       (201,668)        173,766

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR          281,513         107,747
                                                  ------------    ------------
CASH AND CASH EQUIVALENTS - END OF YEAR           $     79,845    $    281,563
                                                  ============    ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for the interest        $     50,197    $    196,168
                                                  ============    ============














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


























                                       11
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------

1)    GENERAL

The Hartcourt Companies,  Inc. ("Hartcourt" or "the Company") is incorporated in
the State of Utah in September 1983. It was originally  known as Stardust,  Inc.
("Stardust").  Stardust  acquired  all of the  outstanding  shares of  Hartcourt
Investments, a Nevada corporation, for 6,110,337 shares of Stardust common stock
in a reverse merger incurred on November 5, 1994. Subsequent to the acquisition,
Stardust  changed its name to The Company.  As of December 31, 2002, the Company
owns 100% of three (3) BVI companies (i.e.  Hartcourt Companies Ltd.,  Hartcourt
Capital Inc. and AI-Asia Inc.) and a 58.53% equity of Financial  Telecom Limited
("FTL"), a Hong Kong incorporated company.

Hartcourt  Companies Ltd. (formerly know as Sino Bull.Com Inc.) is the Company's
first-tier subsidiary.  Hartcourt Companies Ltd. owns 4 subsidiaries  companies.
It owns a) an 85% equity of StreamingAsia  Ltd ("SA"), a Hong Kong  incorporated
company. SA owns a 100% of Logicspace Ltd ("LS"), a Hong Kong company, b) an 85%
equity of  SyndicateAsia  Ltd ("SY"),  a Hong Kong  company,  c) a 51% equity of
Tiandi Hulian Technologies Ltd ("TH"), a BVI sub-holding company. TH owns a 100%
of SinoBull  Network Co. Ltd.,  China ("SN"),  and d) a 51% of Hopeful  Internet
Technologies  Ltd.  ("HIT"),  a  BVI  company.  HIT  owns  a  100%  of  Sinobull
Information Co. Ltd of China ("SI"). The operations of SA, LS, SY were ceased in
June and SN was ceased in May during the current  year.  In addition,  there are
little or no operations for TH and HIT in 2002.

Hartcourt   Capital  Inc.,  the  second   first-tier   subsidiary,   owns  three
subsidiaries.  It owns a 100% of  Hartcourt  Capital Ltd.  ("HCL"),  a Hong Kong
company,  100% of Hartcourt  Investment  Management  (Shanghai) Co., Inc.("HIM")
located in shanghai of China,  and a 70% equity of Hartcourt  Capital Asia Ltd.,
("HCA"),  formerly known as Fintel  International  Ltd, which is located in Hong
Kong. There are no or little operational activities of these companies in 2002.

AI-Asia,  Inc. (AA), the third holding  company,  owns a 100% of Logicspace Asia
Ltd.  ("LA") located in Hong Kong and formerly  known as Asia United  Technology
Ltd,  and a 100% equity of AI-Asia  (Shanghai)  Information  Technology,  Inc of
China ("AI"). The operations of these companies were ceased in 2002.

Financial Telecom Ltd. ("FTL"),  the fourth holding company,  owns 51% of Fintel
Wireless  Internet  Ltd., Hong Kong ("FWL").  The operations for FWL were ceased
during the year of 2002.  During the current  year the company  divested its 51%
equity  interest  in  Elephant  Talk  Communications  Inc  (ETCI),  a Hong  Kong
incorporated  company.  The Company also  disposed of two other  entities in the
current year. (see Note #9, Discontinued Operations).

As of December 31, 2002, the Company's principal  activities are performed under
the two (2)  operating  companies:  Sinobull  Information  Co.  Ltd.  ("SI") and
Financial Telecom Ltd ("FTL"), as other Company's subsidiaries have little or no
business volume during the current year. SI is operated in China.  Its principal
activities are to provide and transmit  real-time stock quotes,  futures indexes


                                       12
<PAGE>
and other  financial data (from Shanghai city,  China) to security and commodity
brokers,   banks,  and  corporations,   using  a  satellite  network.   FTL  was
incorporated  in Hong Kong in 1983. Its principal  activities are as a financial
data provider,  providing  real-time  stock quotes and financial  information of
Hong Kong and other  international  stock exchanges to institutional  and retail
investors.  FTL is also  acting as the  marketing  agent for  Standard  & Poor's
Comstock in Hong Kong.

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary  of the  Company's  significant  accounting  policies  applied  in the
preparation  of  the  accompanying  consolidated  financial  statements  are  as
follows:

                a)    Calendar year ending December 31
                The Company  adopts an  accounting  calendar  year which ends on
                December 31 of the same year.

                b)    Audit Scope and Basis of Consolidation

                We were  engaged  by the  Company  to  conduct  an  audit of the
                financial  statements for the year ended on December 31 of 2002.
                We did not audit the financial statements of the Company for the
                year ended on December 31, 2001,  which was conducted by another
                firm.  The  Company's  2001  financial   statements  are  public
                information,  and are  available  in the  filing  system  of the
                Securities and Exchange Commission, under the Company name.

                For a comparative purpose,  the report of two-year  consolidated
                financial statements,  for the years ended December 31, 2002 and
                2001 was included. The 2001 information, not verified by us, was
                obtained from the Securities and Exchange Commission filing.

                The  accompanying   consolidated  financial  statements  of  the
                Company for the current year of 2002 mainly include the accounts
                of The Hartcourt  Companies,  Inc., its 58.53% owned  subsidiary
                Financial  Telecom  Limited  (FTL),  its 100%  owned  subsidiary
                Hartcourt    Companies   Ltd.,   its   85%   owned    subsidiary
                StreamingAsia,   Ltd.,  its  100%  owned  subsidiary   Hartcourt
                Capital,  Inc. and its 100% owned subsidiary  AI-Asia,  Inc. For
                purposes  of  these   consolidated   financial   statements  the
                Hartcourt  Companies,  Inc. and its Subsidiaries are referred to
                collectively as the "Company" or "Hartcourt".

                The accompanying 2001 consolidated  financial  statements of the
                Company included the accounts of The Hartcourt  Companies,  Inc.
                and its 58.53% owned subsidiary  Financial Telecom Limited,  its
                100% owned  subsidiary  Hartcourt  Companies Ltd., its 85% owned
                subsidiary Asia Top Finance,  Ltd., its 66.67% owned  subsidiary
                HCTV  Financial  TV  Channel,  Ltd.,  its 100% owned  subsidiary
                Hartcourt Capital, Inc., its 51% owned subsidiary Elephant Talk,
                Ltd. and its 100% owned subsidiary AI-Asia, Inc.

                In 2002,  the divestures of three  subsidiaries  were noted (See
                Note #9,  Discounted  Operations).  All  material  inter-company
                balances and transactions have been eliminated in consolidation.

                                       13
<PAGE>
                c)    Use of Estimates

                The  preparation  of the  consolidated  financial  statements in
                conformity  with  generally   accepted   accounting   principles
                requires  management  to make  estimates  and  assumptions  that
                affect  the  reported  amounts  of assets  and  liabilities  and
                disclosures of contingent  assets and liabilities at the date of
                the consolidated financial statements,  and the reported amounts
                of revenues and expenses  during the  reporting  period.  Actual
                results could differ from those estimates.

                d)    Cash and Cash Equivalents

                The Company considers all short-term  highly liquid  investments
                that are readily  convertible  to known amounts of cash and have
                original   maturities  of  three  months  or  less  to  be  cash
                equivalents.

                e)    Accounts Receivable

                The Company,  may from time to time, extends unsecured credit to
                customers.  Credit is  extended  based on an  evaluation  of the
                customer's  financial  conditions.  The  allowance  for doubtful
                accounts  is based on  management's  evaluation  of  outstanding
                accounts  receivable  at the end of the  reporting  period.  The
                total accounts receivable of the Company amounted to $260,306 as
                of December  31,  2002,  while the  accounts  receivable  of the
                Company amounted to $1,443,673 as of December 31, 2001.

                f)    Inventory

                Inventory  is stated at the lower of cost or market,  cost being
                determined on the first-in,  first-out (FIFO) method. Due to the
                scope of limitation, the physical inventory count as of December
                31, 2002, and 2001 were not performed.

                g)    Property and Equipment

                The  Company's  property  and  equipment  are  stated at cost or
                estimated  fair  market  value  on  the  date  of   acquisition.
                Depreciation is provided over the estimated  useful lives of the
                respective assets on the straight-line  basis from five to forty
                years.  The Company's  policy is to evaluate the remaining lives
                and  recoverability  in light of current  conditions.  Leasehold
                improvements  are amortized  over the term of the lease.  Due to
                the  scope  of  limitation,  the  physical  inventory  count  of
                Property and  Equipment  as of December 31, 2002,  and 2001 were
                not performed.

                h)    Intangibles

                Per  Statement of  Financial  Accounting  Standard  (SFAS) #142,
                goodwill and other intangible assets with indefinite useful life
                will  not be  amortized,  but  rather  will be  tested  at least
                annually  for  impairment.  Intangible  assets  that have finite


                                       14
<PAGE>
                useful  lives will  continue to be  amortized  over their useful
                lives, but without the constraint of an arbitrary ceiling.  (See
                Note# 8, Intangibles)

                i)    Accounting for Business Combinations

                Per Statement of Financial  Accounting Standard (SFAS) #141, all
                business  combinations  will be  accounted  for by the  purchase
                method.  Acquisitions  were  recorded as purchases in accordance
                with  Accounting  Principles  Board  Opinion  No. 16 (APB  #16),
                "Business Combinations",  and the purchase prices were allocated
                to the assets acquired, and liabilities assumed based upon their
                estimated fair value at the purchase  date. The excess  purchase
                price over the net asset value has been recorded as goodwill and
                is included in  intangibles in the  accompanying  balance sheet.
                The operating  results of the acquired  entities are included in
                the Company's  consolidated  financial statements from the dates
                of acquisition.

                j)    Impairment of Long-Lived Assets

                Per SFAS #144,  long-lived  assets will be analyzed annually for
                indications  of impairment.  Impairment of long-lived  assets is
                assessed by the Company whenever there is an indication that the
                carrying   amount   of  the   asset   may   not  be   recovered.
                Recoverability  of these assets is  determined  by comparing the
                forecasted  undiscounted cash flows generated by those assets to
                the assets' net carrying value.  The amount of impairment  loss,
                if any, is measured as the difference between the net book value
                of the  assets  and the  estimated  fair  value  of the  related
                assets.

                The company evaluates the recoverability of long-lived assets by
                measuring  the  carrying   amount  of  the  assets  against  the
                estimated  undiscounted  future cash flows associated with them.
                At the time such  flows of  certain  long-lived  assets  are not
                sufficient  to recover the carrying  value of such  assets,  the
                assets are adjusted to their fair values. Accordingly,  based on
                these evaluations, management has adjusted the carrying value of
                investments and goodwill in 2001 and 2000.

                k)    Revenue Recognition

                Revenues  from  product  sales  are  recognized  upon  delivery.
                Revenue  from  service  is  recognized  when  the  services  are
                provided.  The Company recognizes sales from  telecommunications
                services as services are provided.  Payments received before all
                of the relevant criteria for revenue  recognition are satisfied,
                are recorded as deferred revenue.

                l)    Income Taxes

                The Company provides for income taxes based on the provisions of
                Statement  of  Financial   Accounting   Standards  (SFAS)  #109,



                                       15
<PAGE>
                "Accounting  for  Income  Taxes",   which  among  other  things,
                requires that  recognition of deferred  income taxes be measured
                by the  provisions  of enacted tax laws in effect at the date of
                financial  statements.  A  deferred  tax asset or  liability  is
                recorded for all temporary differences between financial and tax
                reporting.  Deferred tax expense  (benefit) results from the net
                change during the year of deferred tax assets and liabilities.

                Deferred tax assets are reduced by a valuation  allowance  when,
                in the  opinion of  management,  it is more likely than not that
                some  portion  or all of the  deferred  tax  assets  will not be
                realized.  Deferred tax assets and  liabilities are adjusted for
                the  effects  of  changes  in tax laws and  rates on the date of
                enactment.

                m)    Stock-Based Compensation

                The Company has adopted a method of accounting  for  stock-based
                compensation  plans as  required  by SFAS #123  "Accounting  for
                Stock-Based  Compensation".  SFAS #123 allows for two methods of
                valuing  stock-based  compensation.  The first method allows for
                the continuing application of Accounting Principle Board Opinion
                No.25 (APB No.25) in measuring stock-based  compensation,  while
                complying  with the  disclosure  requirements  of SFAS #123. The
                second  method  uses an  option  pricing  model to  value  stock
                compensation   and  record  as  such  within  the   consolidated
                financial statements. Under both methods,  compensation cost for
                stock  options is measured  as the  excess,  if any, of the fair
                market  price of the  Company's  stock at the date of grant over
                the amount an employee must pay to acquire the stock.  Such cost
                is charged to operations. The Company will continue to apply APB
                No.25, while complying with SFAS #123 disclosure requirements.

                n)    Foreign Currencies Translation

                Assets and  liabilities  denominated  in foreign  currencies are
                translated  into  U.S.  dollars  at the  rates in  effect at the
                balance  sheet date.  Revenues and expenses  are  translated  at
                average  exchange  rates  for  the  year.  Related   translation
                adjustments   are   reported   as  a   separate   component   of
                shareholders' equity,  whereas,  gains and losses resulting from
                foreign  currency  transactions  are  included  in the result of
                operations.  As the  Hong  Kong  dollars  are  pegged  to the US
                dollars, there were no material foreign currency gains or losses
                in the year  ended  December  31,  2002 and  2001.  The  foreign
                currency  losses  were  $9,407  and  $9,595  for  2002  and 2001
                respectively.

                o)    Fair Value of Financial Instruments

                SFAS  #  107,   "Disclosures   about  Fair  Value  of  Financial
                Instruments", requires disclosures of information about the fair
                value  of  certain   financial   instruments  for  which  it  is




                                       16
<PAGE>
                practicable  to  estimate  that  value.  For  purposes  of` this
                disclosure,  the fair  value of a  financial  instrument  is the
                amount at which the  instrument  could be exchanged in a current
                transaction between willing parties, other than in a forced sale
                or liquidation.

                The Company's financial  instruments consists primarily of cash,
                accounts receivable,  notes and other receivables,  investments,
                advances,  accounts payable and accrued expenses,  capital lease
                obligation,  notes payable and loans payable,  and other current
                liabilities  which   approximates  fair  value  because  of  the
                relatively short maturity of those instruments.

                p)    Loss Per Common Share

                Per SFAS# 128,  "Earnings Per Share", the company is required to
                provide  the  calculation  of Basic  and  Diluted  earnings  per
                shares.  Basic  earnings  per share  includes no dilution and is
                computed  by  dividing   income   (loss)   available  to  common
                shareholders  by the weighted  average  number of common  shares
                outstanding for the period.  Diluted  earnings per share reflect
                the  potential  dilution of  securities  that could share in the
                earnings of the entity.  Since the  Company  incurred  losses in
                2002 and 2001,  basic and diluted per share  amounts are treated
                as the same. If the  outstanding  stock options and warrants are
                included, the effect would be anti-dilutive.

                q)    Going Concern

                As shown in the accompanying  consolidated financial statements,
                the  Company  incurred  a net loss from  current  operations  of
                $3,934,201  and $7,779,341 for the years ended on December 31 of
                2002 and  2001,  negative  cash  flows  from the  operations  of
                $832,417 and $984,224 as well as working  capital  deficiency of
                $2,155,058 and $3,889,779 are noted as of December 31, 2002, and
                2001. These matters raise  substantial doubt about the Company's
                ability to continue as a going concern.

                The Company has taken certain  restructuring steps, which in the
                management's  opinion  will  provide  the  necessary  capital to
                continue its operations.  These steps included:  1) disposals of
                unprofitable  operations,  2) acquire profitable  operations via
                stock exchanges, 3) signed stock sale agreements with accredited
                investors,  such as  Enlight  Corporation,  to raise  additional
                capital and 4) the  settlement of certain  matters of litigation
                or/and  disputes.  The Company  plans to actively  seek  funding
                sources  once  Hartcourt is able to  discontinue  non-profitable
                assets or restructuring them to minimize losses or liabilities.

                The ability of the  Company to  continue  as a going  concern is
                dependent on its success in fulfilling  its plan and its ability
                to attain profitable operations. Should the Company be unable to
                continue,  it may be unable to realize the carrying value of its
                assets and to meet its liabilities as they become due.



                                       17
<PAGE>
NOTE 3          INVESTMENTS AND ACQUISITIONS

                a)    Purchase of Financial Telecom Limited

                On August 17,  1999,  Hartcourt  entered  into a stock  purchase
                agreement  with  Financial  Telecom  Limited  (FTL), a Hong Kong
                corporation,  to  purchase  4,964,990  shares of  common  stock,
                representing  58.53% of the total common stock outstanding.  The
                purchase  price was agreed to be HK $4.713 (US$ 0.604) per share
                for a total of  HK$25,563,842  or  US$3,277,412,  payable 50% in
                cash and the remaining  balance in Hartcourt common shares.  The
                acquisition  was  completed on October 4, 1999.  Hartcourt  made
                total cash payments of $1,638,706 and issued 1,754,552 shares of
                its common  stock to FTL. As of 31 December  2002,  FTL sold all
                the  shares  of  Hartcourt   common  stock  to  satisfy  certain
                obligations.

                b)    Investment in Streaming Asia Ltd

                On April 14, 2000,  Hartcourt  Companies Ltd., formerly known as
                Sinobull.com Inc., ("HCL") subscribed 1,200,000 newly issued and
                outstanding  fully  paid  shares  (50%  ownership  interest)  of
                StreamingAsia    Limited   for    HK$7,000,000    (approximately
                US$897,500)  on behalf of  Hartcourt.  Hartcourt  advanced  such
                funds to HCL for StreamingAsia Limited acquisition. In addition,
                both HCL and Hartcourt  agreed and confirmed that as part of the
                financing  arrangements,  HCL  held  the  subscribed  shares  in
                StreamingAsia  Limited on behalf of  Hartcourt  and those shares
                were  transferred  to Hartcourt on December 29, 2000. On May 16,
                2001 Hartcourt  acquire an additional 35% ownership  interest in
                StreamingAsia  Limited  for a total  purchase  consideration  of
                HK$800,000 (approximately US$102,564).  The accounts of this 85%
                owned   StreamingAsia   Limited   are   consolidated   into  the
                accompanying financial statements.

                c)    Investment in eMPACT Solutions, Inc.

                On April 30, 2000,  Harcourt  executed a Subscription  Agreement
                and  Investment  Representation  and  agreed  to  subscribe  and
                purchase  three  hundred  (300)  shares  of Class B  Convertible
                Preferred  Stock,  par value  $0.001  per  share of  eMPACT  for
                $300,000.  The accompanying financial statements at December 31,
                2002 reflect Hartcourt's  investment in eMPACT of $300,000 under
                the cost method of accounting.

                d)    Investment in Haike Caijin

                On September 7, 2000, Hartcourt signed a joint venture agreement
                with Hopeman Computer Services Corporation Limited (Hopeman") to
                form a joint venture in Shanghai and jointly  develop and market
                a 24-hour financial  television program and/or provide financial
                data services to existing/new  financial television programs for
                the China market.  The new joint venture was named "Haike Caijin
                TV" (HCTV).  In February  2001,  HCTV was formed and a temporary
                license  was  obtained  to  conduct  the  business  of the joint


                                       18
<PAGE>
                venture.  As  of  December  31,  2001,  Hartcourt  has  invested
                $100,000  towards its 66.7%  equity  ownership in the HCTV joint
                venture.  Due  to  the  complex  regulations  regarding  foreign
                investment in the Chinese TV industry sector and due to the fact
                that Hartcourt will not have the sufficient resources to support
                the investment capital required,  on August 28, 2002,  Hartcourt
                has agreed to sell its entire  interest in this joint venture to
                Jiang Tai.  According to an  agreement,  Hartcourt  will receive
                back all of its investment  from Jiang Tai within 90 days of the
                agreement.  As of  December  31,  2002  Hartcourt  has  received
                US$70,000. (See Note #19)

                The  Company  has  accounted  for  the   investment   under  the
                consolidated   method  of  accounting  from  inception   through
                December 31, 2001.  While the HCTV investment was recorded under
                the cost method of accounting on December 31, 2002.

                e)    Investment in Elephant Talk Communications Inc. (ETCI)

                In May of 2001,  Hartcourt and Elephant Talk Communications Inc.
                ("ETCI"),  formerly  known as Elephant Talk Limited)  executed a
                Sale  and  Purchase   Agreement,   whereby  Hartcourt   acquired
                approximate  51% of the  ownership  interest  in  Elephant  Talk
                Communications  Inc.  for a  total  consideration  of  4,756,058
                shares  of  Hartcourt's  common  stock  with  a  fair  value  of
                $2,944,000,  and a note  payable  of  $1,250,000.  On January 2,
                2002,  Hartcourt purchased  additional  7,500,000 shares of ETCI
                from a  shareholder  for a note  payable of $140,595  bearing an
                annual   interest   rate  of  8%.  At  the   conclusion  of  the
                transactions, ETCI become a subsidiary of Hartcourt.

                In September of 2002,  Hartcourt  decided to divest/spin off its
                ETCI investment and terminate its relationship with ETCI. During
                the spin off process, ETCI delivered five (5) million restricted
                common stock to the Company, the Company in turn distributed the
                shares as dividends to all Hartcourt shareholders. In October of
                2002,  Hartcourt and ETCI  completed a divesture  agreement,  in
                which Hartcourt  agreed to return to ETCI  12,895,579  shares of
                ETCI in  exchange  for 2  promissory  notes  of  $1,250,000  and
                $140,595,  plus  4,756,058  shares of Hartcourt held by ETCI and
                its shareholders. A legal opinion was issued by an attorney, who
                also  served as the escrow  agent of the  complicated  divesture
                procedure.  It states that the final  exchange of documents  and
                escrow  activities were  consummated on October 30, 2002. It was
                noted that the Stock  Transfer  Agent's  record was not  updated
                until in January of 2003. As a result,  no ETCI  investment  was
                recorded in the consolidated financial statements of the Company
                as of December 31, 2002. (See Note #9, Discontinued Operations).

                f)    Investment in Hopeful Internet Technologies Ltd

                On May 16,  2000,  Hartcourt  Companies  Ltd.  (HCL) and Hopeful
                Internet  Technologies  Limited  ("HIT",  see Note #1,  General)
                entered  into an  agreement  whereby  HIT  acquired  through its
                wholly-owned  subsidiary  Sinobull  Information  Company Limited


                                       19
<PAGE>
                ("Sinobull  Information"),  all  of  the  operating  assets  and
                business  of Guo Mao Science &  Technology  Co. Ltd. On December
                28,  2000,  HCL has paid  $500,000  in cash  (received  from the
                Company) and issued 805,802 shares of the Company's common stock
                valued at $500,000 to Sinobull  Information  in February 2001 as
                the  consideration  paid  for  the  purchase  of  51%  ownership
                interest of HIT.  Since HIT became a subsidiary  of the Company,
                the 805,802 common shares issued to Sinobull Information Company
                Limited are  reflected  as treasury  shares in the  accompanying
                financial statements

                g)    Investments in Education Project

                On June 18, 2001, Hartcourt executed a Revenue Sharing Agreement
                to share 15% of tuition  income,  in  cooperation  with Northern
                Jiaotong    University   of   China   and    California    State
                University-Fullerton,  to jointly develop education programs and
                to introduce  American training courses in China.  Hartcourt has
                advanced $100,000 towards the working capital for its investment
                in this  Project  as of  December  31,  2002,  and  there was no
                revenue   generated  in  the  year  of  2002.  The  accompanying
                financial  statements  as  of  December  31,  2002  reflect  the
                Company's investment of $100,000 in the Education Project. .

                h)  Investments

                The following is a summary of investments  under the cost method
                as of December 31:

                                                             2002         2001
                                                           --------     --------

                Investment in Education Program (see 3g)   $100,000     $100,000
                Investment in Haike Caijin                   30,000            0
                eMPACT                                      300,000      300,000
                                                           --------     --------
                Total                                      $430,000     $400,000
                                                           ========     ========

NOTE 4          ACCOUNTS RECEIVABLE

                Accounts  receivable as of December 31, 2002 and 2001  consisted
                of the following:


                                                          2002          2001
                                                     -----------    -----------
                Accounts receivable                  $ 1,376,269    $ 1,522,364
                Less: allowance for doubtful accounts (1,115,963)       (78,691)
                                                     -----------    -----------
                                                     $   260,306    $ 1,443,673
                                                     ===========    ===========





                                       20
<PAGE>
NOTE 5          NOTES RECEIVABLE

                Notes  receivable as of December 31, 2002 and 2001  consisted of
                the following:

                                                         2002          2001
                                                        ------        ------

                Note receivable from Edda
                Ltd., interest at 6% per
                annum, quarterly payments of
                50,000 plus interest with a
                balloon payment of $2,715,772
                due December 1, 2006, secured
                by the tangible and
                intangible assets of Edda,
                Ltd.                                  $1,956,012    $2,808,286

                Note receivable from Shanghai
                Wind Information Co., Ltd.,
                bearing interest at 5%,
                non-secured due on demand                439,759       442,968

                Note receivable from UAC
                Exchange Online, Ltd.,
                non-interest bearing,
                non-secured due on demand                      0       183,906

                Loan receivable from Beijing
                Total Solutions System, Ltd.,
                non-interest bearing, due on
                demand, convertible by the
                company into 5% of the
                outstanding common stock,
                unsecured                                 70,000        70,000
                                                      ----------    ----------
                Total                                 $2,465,771    $3,505,160
                                                      ==========    ==========

               Summary of Note Receivable:

               Current portion                        $  709,759    $  896,874
               Non-current portion                     1,756,012     2,608,286
                                                      ----------    ----------
               Total                                  $2,465,771    $3,505,160
                                                      ==========    ==========

               For the  years  ended  December  31,2002  and 2001,  the  Company
               recorded a provision  for  doubtful  accounts of $0 and  $329,171
               respectively.







                                            21
<PAGE>
NOTE 6          RELATED PARTY TRANSACTIONS

                a) Related party loans  receivable as of December 31,  consisted
                of the following:

                                                     2002                2001
                                                    ------              ------

                Loans     receivable     from
                unconsolidated    affiliates,
                non-interest bearing, payable
                upon demand, unsecured.                $0               $3,316

                Loan    receivable   from   a
                company related to a director
                of a subsidiary, non-interest
                bearing, payable upon demand,
                unsecured.                              0               12,095

                Loan    receivable   from   a
                company related to a director
                of a subsidiary, non-interest
                bearing, payable upon demand,
                unsecured.                              0            1,072,668

                Loan    receivable   from   a
                company related to a director
                of a subsidiary, non-interest
                bearing, payable upon demand,
                unsecured.                              0              406,651
                                                     ---------     -----------
                Total loan receivable                $  0           $1,494,730
                                                     =========     ===========

                The Company  recorded a provision for the above loans receivable
                of $0 and  $150,000  for the years ended  December  31, 2002 and
                2001, respectively.

                b) During 2002,  the Company issued  1,280,364  shares of common
                stock for  services to four (4)  directors  with a fair value of
                $144,000.
..
                c) During 2002,  the Company issued  2,494,149  shares of common
                stock to officers in lieu of  compensation  for services  with a
                fair value of $390,400.

                d) During  2001,  the Company  issued  295,206  shares of common
                stock for services to directors with a fair value of $118,240.

                e) During  2001,  the Company  issued  511,764  shares of common
                stock to officers in lieu of  compensation  for services  with a
                fair value of $221,600.





                                       22
<PAGE>
NOTE 7         PROPERTY AND EOUIPMENT

                Property  and  equipment as of December  31, are  summarized  as
                follows:

                                                            2002        2001

                Computer and transmission equipment       $974,241   $6,306,017
                Building                                         0      897,510
                Office equipment and computers             402,502      481,246
                Furniture and fixtures                     183,225      381,224
                Leasehold improvements                      21,236      252,278
                Vehicle                                     13,090            0
                Computer equipment held under
                   capital lease                                 0      213,977
                                                         ---------   ----------
                                                         1,594,294    8,532,252
                Less: accumulated depreciation          (1,119,773)  (6,086,820)

                Property and equipment, net               $474,521   $2,445,432
                                                         =========   ==========

                Depreciation  expenses for the years ended December  31,2002 and
                2001 are $342,147 and $671,282 respectively (see Note 2g).

NOTE 8          INTANGIBLES

                Both goodwill resulting from various acquisitions and intangible
                resulting from internet software are recorded under this account
                balance.

                a)  Intangibles  from the  acquisition of FTL as of December 31,
                are summarized as follows:
                                                     2002              2001
                                                ------------        -----------
                Goodwill                        $ 2,262,598         $2,262,598
                Loss on impairment               (1,818,155)        (1,500,486)
                Less: accumulated amortization     (444,443)          (444,443)
                                                -----------         ----------
                Goodwill, net                   $         0         $  317,669
                                                ===========         ==========

                b)  Intangibles  from the  acquisition  of Elephant Talk Limited
                (ETL) as of December 31, are summarized as follows:

                                                           2002          2001
                                                         ----------  ----------

               Goodwill                                  $     0     $4,207,731
               Less: accumulated amortization                  0       (245,450)
                                                         __________  __________

               Goodwill, net                             $     0     $3,962,281
                                                         ==========  ==========




                                       23
<PAGE>
                c) Intangibles from the acquisition of Hartcourt  Companies Ltd.
                (HCL,  formerly known as Sinobull.com,  Inc.) as of December 31,
                are summarized as follows:

                                                       2002           2001
                                                  --------------  ------------
                Goodwill                          $   1,562,788   $  1,562,788
                Less: impairment                       (859,417)      (742,207)
                Less: accumulated amortization          (78,682)       (78,682)
                                                  -------------   ------------
                Goodwill, net                     $     624,689   $    741,899
                                                  =============   ============


                d) Intangibles from the acquisition of StreamingAsia.com Ltd. as
                of December 31, are summarized as follows:

                                                       2002          2001
                                                   -----------    ----------
                Goodwill                           $   351,771    $  351,771
                Loss on impairment                    (344,971)     (109,171)
                Less: accumulated amortization          (6,800)       (6,800)
                                                   -----------    ----------
                Goodwill, net                      $         0    $  741,899
                                                   ===========    ==========

                The following  table  summarizes  goodwill,  net of  accumulated
                amortization and impairments as of December 31, 2002:

                                     FTL        SA         HCL.       Total
                                -----------------------------------------------
                Goodwill        $ 2,262,598  $ 351,771  $1,562,788  $ 4,177,157
                Impairment       (1,818,155)  (344,971)   (859,417)  (3,022,543)
                Acc Amortization   (444,443)    (6,800)    (78,682)    (529,925)
                                -----------------------------------------------
                Goodwill, net   $         0  $       0  $  624,689  $   624,689
                                ===============================================

                The  following  table  summarizes  software  intangible,  net of
                accumulated  amortization and impairment as of December 31, 2002
                and 2001:

                                                    2002           2001
                                                 ----------     ----------
                Software Intangible              $1,390,619     $1,390,619
                Impairment                         (851,192)             0
                Accumulated Amortization           (198,660)      (198,660)
                                                 ----------     ----------
                Intangible Software, net         $  340,767     $1,191,959
                                                 ==========     ==========

NOTE 9          DISCONTINUED OPERATIONS

                In October of 2002,  Hartcourt and Elephant Talk  Communications
                Inc. (ETCI) has consummated a divesture/spin-off  agreement (see


                                       24
<PAGE>
                Note #3e).  In which,  Hartcourt  agreed to return  among  other
                things,  to ETCI  12,895,579  shares of ETCI in exchange for two
                (2) promissory  notes of $1,250,000  and $140,595  together with
                4,756,058  common  shares of the  Company,  held by ETCI and its
                shareholders   so  that  these  two  parties   terminate   their
                relationship.  The  Company  recorded  a gain of  $1,284,048  in
                connection  with the  completion of the  divesture  agreement in
                2002.

                During  2002,  the  Company  disposed  of  its  66.7%  ownership
                interest in Haike Caijin TV (HCTV) joint  venture (see Note #3d)
                and recorded a gain of $159,512 in connection  with the disposal
                (see Note # 3d)

                Financial Telecom Ltd (FTL), a Company's subsidiary, disposed of
                a  100%  owned  subsidiary  (Topo  Media)  to a  shareholder  on
                9/30/2002. Topo Media having little operational activities,  has
                recorded a gain of $500,141 in  connection  with the disposal in
                the current year.

                The results of  operations  for the current  year of 2002 of the
                three   subsidiaries   have  been   classified  as  discontinued
                operations in the consolidated financial statements.

                Information relating to the operations of the subsidiaries up to
                the  periods of disposal  during the year ended on December  31,
                2002 is as follows:

                                                      HCTV           ETCI
                                                   ----------    ------------
                Revenue                            $  220,596    $  5,041,793
                Costs and expenses                    238,258       6,044,384
                                                   ----------    ------------
                Loss from discontinued operations  $  (17,662)   $ (1,002,591)
                                                   ==========    ============

NOTE 10         NOTES PAYABLE

                Notes payable are summarized as follows:

                                                           2002         2001
                                                        ----------  -----------
                Note  payable,  renew  logistics,
                non-interest bearing , and due on
                demand                                  $  18,988   $        0


                Note payable,  for acquisition of
                Elephant Talk  Limited,  interest
                at 8.1%.  Entire  amount  was due
                February  2002,  extended  to May
                31,2002                                         0    1,250,000





                                       25
<PAGE>
                Note   payable,   bank,   monthly
                principal  and interest  payments
                of $1,483  including  interest at
                1% below  prime.  Loan secured by
                the  Company's  property  and  is
                repayable    over   144   monthly
                payments                                        0       160,765

                Note payable,  former officer and
                director,  principal and interest
                due on demand, interest at 6%                   0        80,000

                Note   payable,   bank,   monthly
                payments  of interest at 2% above
                prime. The note is secured by the
                guarantees   of   the   Company's
                shareholders.  The  note  is  due
                January 16, 2003                                0       282,051
                                                        ---------   ----------
                Total                                      18,988     1,772,816
                Less: current portion                     (18,988)   (1,339,517)
                                                         --------    ----------
                Notes  payable,  net  of  current
                portion                                  $      0    $  433,299
                                                         ========    ==========
NOTE 11         PAYABLES TO RELATED PARTIES

                Payables to related parties as of December 31, are summarized as
                follows:
                                                          2002          2001
                                                       ----------    ----------
                Payable to ET Network Services, Ltd.   $        0    $  344,048
                Payable to shareholder of FTL                   0       548,295
                Payable to shareholders of FTL                  0       458,333
                Payable to shareholders                 1,343,011           321
                Payable to owner of UAC Trading                 0             0
                                                       ----------    ----------
                Total                                  $1,343,011    $1,350,997
                                                       ==========    ==========

NOTE 12         ACCRUED EXPENSES AND OTHER CURENT LIABILITIES

                Accrued  expenses and other current  liabilities  as of December
                31, are summarized follows:

                                                        2002          2001
                                                      ---------    --------
                Accrued officer's salary               $ 81,632    $250,000
                Accrued director's fee                   48,000           0
                Accrued payroll taxes                         0      50,000
                Accrued legal settlement                100,000      40,000
                Accrued professional fees                30,000      65,833
                Other current liabilities                97,633      72,383
                                                       --------    --------
                                                       $357,265    $478,216


                                       26
<PAGE>
NOTE 13         COMMITMENTS AND CONTINGENCIES

                (A) Operating Leases

                The   Company   leases   its   facilities    under    long-term,
                non-cancelable   lease  agreements  expiring  at  various  dates
                through  December,  2004.  The  non-cancelable  operating  lease
                agreements   provide  that  the  Company  pays  property  taxes,
                insurance  and  certain  operating  expenses  applicable  to the
                leased  premises.  Rent expense for the years ended December 31,
                2002 and 2001 was $162,006 and $372,408, respectively.

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

                                  Year Ending December 31          Payments
                                  -----------------------          --------
                                           2003                    $21,758
                                           2004                     15,208
                                                                   -------
                                  Total future lease payments      $36,966
                                                                   =======

                (B) Employment Agreement

                On June 1, 2002, The Company entered an employment contract with
                its Acting Chief Executive Officer  ("Executive",  Mr. D. Chen )
                to provide  salary,  shares  option,  and other fringe  benefits
                through May 31, 2003. Minimum salary payments under the contract
                currently  amounted  to  $120,000  per  year.  Payments  to  the
                Executive will be made in equal monthly  installments  of $5,000
                cash and $5,000 worth of the Company's common shares each at the
                first of each month.  The average 20 days  trading  price of the
                Company  prior  to the  first  of the  month  will  be  used  to
                calculate this  compensation  amount.  During the year 2002, Mr.
                Chen  received  450,000  shares valued at $31,500 and $10,000 in
                cash for his compensation.

                Employment  agreements with the other  executives are terminable
                with or without  cause with prior notice of 90 days or less.  In
                certain  instances,  the  termination  of employment  agreements
                without  cause  entitles  the  executives  to certain  benefits,
                including  acceleration  of the  vesting  of stock  options  and
                severance payments.

                (C) Consulting Agreement

                The  Company  has entered a  consulting  agreement  with a major
                shareholder,  who  had  been  employed  by  the  Company  as its
                Chairman & CEO before  January  1, 2002,  to provide  salary and
                shares option through December 31, 2004. Minimum salary payments
                under  the  contract  currently  amounted  to $1 per year and an
                option  to  purchase  three  (3)  million  common  shares of the
                Company at the closing  price of the Company on the first day of
                each year.


                                       27
<PAGE>
                (D) Legal Proceedings

                a) Comerica Bank of California vs. Pego Systems. Inc., et al
                   ---------------------------------------------------------
                ("Pego"), Los Angeles Superior Court No. NC 027075
                --------------------------------------------------

                The litigation  concerns  Hartcourt's  alleged  obligation as an
                alleged guarantor for Pego. The complaint alleges that Hartcourt
                executed a guarantee of obligation of Pego which obligation went
                into  non-financial   default.   The  parties  have  executed  a
                stipulation  for  entry of  judgment  to  enforce  a  settlement
                agreement,  which  stipulation  calls for certain  payments  and
                transfers of funds by Pego. In the event of non-payment by Pego,
                Hartcourt's liability could be approximately  $635,000, with the
                amount decreasing upon payments by Pego. During 2001 the Company
                realized an additional $150,000 related to guarantees under this
                obligation.  The Company has not accrued any additional  amounts
                as of December 31,2002.

                b) Charles Hogue Vs the Hartcourt Companies. Orange County
                   -------------------------------------------------------
                Circuit Court, Florida case No. CIO 00-2190, filed on or  about
                ---------------------------------------------------------------
                March 22, 2000
                --------------

                Charles  Hogue  filed a  complaint  to claim a finder's  fee for
                introducing   Hartcourt  to  a  potential   acquisition  target.
                Hartcourt  sent  the  payment  to Mr.  Hogue  via a check in the
                amount of $40,500 for such finder's fee, but Mr. Hogue  demanded
                that he be paid in shares of Hartcourt with the amount of shares
                in dispute. Hartcourt's counsel in Florida failed to timely file
                an answer to the complaint and a default  judgment in the amount
                of $2,901,752 was entered on January 31, 2000. Hartcourt brought
                a motion to set  aside the  default,  which was  denied  and for
                which Hartcourt appealed. The Appellate Court ruled in favor the
                Company  and  reversed  the  verdict  as well as  dismissed  the
                complaint  for lack of  jurisdiction.  The Company  subsequently
                filed and  received a judgment  against Mr. Hogue in Los Angeles
                Superior Court in the principal amount of $5,349 for Mr. Hogue's
                failure to return levied funds.

                c) Apollo Financial Network, LLC Vs the Hartcourt Companies,
                   ---------------------------------------------------------
                Inc., Los Angeles Superior Court Case No. BC 245398, filed on
                -------------------------------------------------------------
                February 21, 2001
                -----------------

                Apollo Financial  Network filed an action for breach of contract
                arising out of a  consulting  agreement,  which was  canceled in
                January 1999. The matter was settled when the Company stipulated
                to enter of judgment against Apollo in the amount of $11,500.00,
                which  represented  an amount less than the  projected  costs of


                                       28
<PAGE>
                defense.  Judgment  in such an amount was  entered  against  the
                Company on November 20, 2002.

                d) Alan Phan Vs Tony Forberg, et al., Los Angeles Superior Court
                ----------------------------------------------------------------
                Case No. BC 268 302, cross-complainants
                ---------------------------------------

                Gerald    Newman   and   Arlene    Goldstein-Newman    filed   a
                cross-complaint  against the Company and others for  conversion,
                breach of fiduciary  duty,  constructive  fraud and  intentional
                infliction  of emotional  distress  arising out of the Company's
                refusal of demands made such  cross-complainants  to prematurely
                and  improperly  remove Rule144  restrictions  on certain shares
                held in the name of another  shareholder.  The Company  plans on
                vigorously contesting such matter.

                e) The  Company  has been  threatened  with a labor claim in the
                   ------------------------------------------------------
                approximate  amount of $52,000.00 from Manu Ohri, its former CFO
                and Director of the  Company.  Mr. Manu Ohri left the Company in
                2002 and  becomes a CFO of ETCI in 2002.  The  Company  plans on
                vigorously contesting such matter if it arises.

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

                (E) Potential liabilities relating to the ceased subsidiaries.

                As mentioned in Note #1,  General,  that the Company  ceased the
                operations of numerous subsidiaries,  during the current year of
                2002. These companies,  not being legally  dissolved,  are still
                legal   entities  as  of  December  31,  2002.   The   Company's
                subsidiaries are located in various geographic locations in Hong
                Kong,  China  and  BVI,  and  are  subject  to  different  legal
                jurisdictions  and laws. Each of the subsidiaries may subject to
                potential  claims,  or  has  un-fulfilled   obligations   or/and
                litigations  which may due to the  cessations of the  operations
                and/or  dismissals  of  employees.  No  risk-exposure  study was
                performed to identify the risks and potential liabilities of the
                Company's  subsidiaries  as of December  31,  2002.  The Company
                legal  advisor  was not able to provide a legal  opinion  nor an
                analysis on legal status of each of these ceased  entities.  The
                financial  statements  for the years ended on December  31, 2002
                and 2001 do not make any  adjustments  for the  possible  result

                                       29
<PAGE>
                from  the  outcome  of  this  uncertainty.  Potential  risks  or
                liabilities  exposures  of in this area  related  to the  ceased
                operating subsidiaries call for special attention,  when reading
                the Company's audit report for the years ended in December 31 of
                2002 and 2001.

NOTE 14         SHAREHOLDERS' EQUITY

                (A) Capitalization

                The total number of shares of stock which the Company shall have
                the authority to issue is 110,001,000, consisting of 100,000,000
                shares  of  common  stock,  $0.01  par  value,  1,000  shares of
                original   preferred  stock,   $0.01  par  value  (the  Original
                Preferred Stock),  and preferred series A, B, C, D, and AB stock
                are 4,000, 2,000 1,500, 10,000, and 25,000, respectively.

                (B) Original Preferred Stock

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

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

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

                (C) Class A Preferred Stock

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

                (D) Series A 9% Convertible Preferred Stock

                Non-voting  convertible preferred stock, 4,000 shares authorized
                with a stated value of $1,000 per share. Holders of shares shall
                be entitled to receive  cumulative  dividends at a rate equal to
                9% per annum. Series A convertible preferred stock is subject to
                redemption  at any  time,  at the  option of the  Company,  at a
                redemption  price  equal to $1,000  per share plus  accrued  and
                unpaid   dividends  to  the  date  of   redemption.   No  Series
                convertible preferred stocks were issued and outstanding.

                                       30
<PAGE>
                (E) Series B 9% Convertible Preferred Stock

                Non-voting  convertible preferred stock, 2,000 shares authorized
                with a stated value of $1,000 per share.  Holder of shares shall
                be entitled to receive  cumulative  dividends at a rate equal to
                9% per annum. Series B convertible preferred stock is subject to
                redemption  at any  time,  at the  option of the  Company,  at a
                redemption  price  equal to $1,000 per share,  plus  accrued and
                unpaid  dividends  to  the  date  of  redemption.  No  Series  B
                convertible preferred stocks were issued and outstanding.

                (F) Series C Redeemable Preferred Stock

                Non-voting,  non-participating redeemable preferred stock, 1,500
                authorized,  with a par  value of  $1,000  per  share.  Series C
                preferred  stock is junior to the original  preferred  stock and
                any other class or series of capital  stock of the Company which
                are  specifically  ranked senior (senior  securities).  Series C
                preferred  stock is redeemable at any time, at the discretion of
                the  Company,  at a  redemption  price of $1,000 per  share.  No
                Series  C   redeemable   preferred   stocks   were   issued  and
                outstanding.

                (G) Series D Convertible Preferred Stock

                Voting  convertible  preferred stock,  10,000 shares  authorized
                with a stated  value of $1,000  per  share.  Holders of Series D
                Convertible  Preferred Stock shall be entitled to receive,  when
                declared  by the  Board  of  Directors,  dividends  at par  with
                holders  of the  Company's  common  stock,  as if the  Series  D
                Convertible Preferred Stock had been converted into common stock
                on the record date for the payment of dividend. Each outstanding
                share  of  Series  D  Convertible   Preferred   Stock  shall  be
                convertible,  at the option of its bolder,  at any time,  into a
                number of shares of common  stock of the Company at a conversion
                rate  equal  to  $1,000  divided  by  the  market  price  of the
                Company's common stock. No Series D convertible preferred stocks
                were issued and outstanding.

                (H) Series AB Convertible Preferred Stock

                Non-voting convertible preferred stock, 25,000 shares authorized
                with a stated  value of $100 per shared.  Series AB  convertible
                preferred  stock is subject to  redemption  at any time,  at the
                option of the Company, at a redemption price equal to $1,000 per
                share plus accrued  interest and unpaid dividends to the date of
                redemption. Holders of Series AB convertible preferred stock may
                convert their preferred  shares into common stock.  During 1998,
                the  Company  issued  4,050  shares  of  Series  AB  convertible
                preferred  stock in  payment  of  dividends  for  Series A and B
                convertible preferred stock. In March 1999, certain shares of AB
                preferred stock were returned and canceled.

                (I) Common Stock Issued for Cash

                During 2002, the Company issued 7,417,520 shares of common stock
                to individuals for cash of $670,833.

                                       31
<PAGE>
                (J) Common Stock Issued for Services

                During the year of 2002, the Company issued  1,280,364 shares of
                common stock to directors  for services  rendered  having a fair
                value of $144,000.  During the year of 2001,  the Company issued
                295,206  shares  of  common  stock  to  directors  for  services
                rendered having a fair value of $118,240.

                During 2002, the Company issued 2,494,149 shares of common stock
                to  officers  for  services  rendered  having  a fair  value  of
                $390,400.  During 2001,  the Company  issued  511,764  shares of
                common  stock to officers for  services  rendered  having a fair
                value of $221,600.

                During 2002, the Company issued 3,440,334 shares of common stock
                to  consultants  for  services  rendered  having a fair value of
                $359,810.  During 2001, the Company issued  1,136,054  shares of
                common stock to consultants for services  rendered having a fair
                value of $374,173.

                (K) Common Stock Issued for Warrants

                During  the  year of  2002,  no  common  stock  was  issued  for
                warrants.

                (L) Common Stock Issued for Stock Options

                During  the year of 2002,  no common  stock was issued for stock
                options.

NOTE 15         INCOME TAXES

                The  Company  has  deferred  tax assets  for the tax  effects of
                temporary  differences  between  financial and tax reporting for
                the years ended  December  31,2002 and 2001.  The  deferred  tax
                assets consist primarily of net operating losses and impairments
                of investments and goodwill.  The Company has established a 100%
                valuation  allowance against the deferred tax assets at December
                31,2002 and 2001,  because  management is unable to determine if
                it is more likely than not that these net  operating  losses and
                impairments of investments and goodwill will be realized.

                Impairment  of  investments  and goodwill are not  deductible in
                2002 or 2001 for income tax purposes.  Losses on investments for
                income  tax  purposes  may be taken  in the year the  respective
                transactions  are completed.  Goodwill is amortized over fifteen
                years for income tax  purposes or until the Company has disposed
                of its ownership in the entity in which the goodwill relates.

                Current:                                2002         2001
                                                    ---------    ----------
                Federal                             $      0       $      0
                State                                      0              0
                Deferred-Federal and State                 0              0
                Change in Valuation Allowance              0              0
                                                    --------       --------
                Income tax expense (benefit)        $      0       $      0
                                                    ========       ========
                                       32
<PAGE>
                The  Company's  tax  expense  differs  from the  "expected"  tax
                expense  for the years  ended  December  31,  2002 and 2001,  as
                follows:

                                                              2002       2001
                                                           ---------- ----------
                U.S. Federal income tax provision benefit  $(196,138) $(425,250)
                Effect of net operating loss carry-forward   196,138    425,250
                                                           ---------  ---------
                                                           $       -  $       -
                                                           =========  =========

                The tax  effects  of  temporary  differences  that  gave rise to
                significant  portions of deferred tax assets and  liabilities at
                December 31 are as follows:

                                                       2002           2001
                                                   -----------    -----------
                Deferred tax assets:
                Net operating loss carry-forward   $ 4,554,438    $ 4,358,300
                                                   -----------    -----------
                Total gross deferred tax assets      4,554,438      4,358,300
                Less valuation allowance            (4,554,438)    (4,358,300)
                                                   -----------    -----------
                Net deferred tax assets            $         0    $         0
                                                   ===========    ===========

                The  Company  has   Federal   and  State  net   operating   loss
                carry-forwards  of  approximately  $13,395,406 and  $10,390,000,
                respectively.  The regular net  operating  loss  carry-forwards,
                which are approximately the same as the alternative  minimum tax
                net operating loss carry-forwards,  if not utilized, will expire
                in varying  amounts from 2003  through  2023,  respectively  for
                Federal  and State.  The  realization  of any future  income tax
                benefits from the  utilization  of net  operating  losses may be
                limited.  Federal  and state tax laws  provide  that when a more
                than 50%  change  in  ownership  of a  company  occurs  within a
                three-year period. The net operating loss may be limited. It has
                not been determined if such change has occurred.

                The  valuation  allowance  at January 1, 2001 was  approximately
                $4,358,300. The net change in the valuation allowance during the
                year ended December 31,2002 was an increase of $196,138.

NOTE 16         STOCK OPTION PLAN AND WARRANTS

                (A) Stock Option Plan

                In April  1995,  the  Company  adopted a stock  option plan (the
                Plan) to attract and retain  qualified  persons for positions of
                substantial responsibility as officers, directors,  consultants,
                legal  counsel,  and  other  positions  of  significance  to the
                Company,  The Plan  provides for the issuance of both  Incentive
                Stock Options and Non-Qualified  Stock Options.  The Plan, which
                is  administered  by the Board of  Directors,  provides  for the
                issuance of a maximum of 2,000,000 options to purchase shares of

                                       33
<PAGE>
                common stock at the market  price  thereof on the date of grant.
                Such options are  generally  exercisable  over a 10-year  period
                from the date of grant.  Each  option  lapses 90 days  after the
                optionee  has  terminated  his  continuous   activity  with  the
                Company, except that if his continuous activity with the Company
                terminates  by reason of his death,  such option of the deceased
                optionee  may be  exercised  within  one year after the death of
                such optionee.  Options granted under the Plan are restricted as
                to sale or  transfer.  All options were granted at not less than
                fair value at the date of grant and have terms of 10 years.

                The following table summarizes the activity in the plan:

                                                           Weighted    Average
                                                          Number of   Exercise
                                                            Shares      Price
                                                          ----------  ---------
                Shares under option at December 31, 2000     470,000      $1.86
                Granted                                            0          0
                Exercised                                          0          0
                Canceled                                     150,000       3.69
                                                          ----------      -----
                Shares under option at December 31, 2001     320,000      $1.30
                Granted                                    5,000,000       0.27
                Exercised                                          0          0
                Canceled                                           0          0
                                                          ----------      -----
                Shares under option at December 31, 2002   5,320,000      $0.33
                                                          ==========      =====

                All stock options issued to employees have an exercise price not
                less than the market value of the Company's  common stock on the
                date of grant,  and in accordance  with the  accounting for such
                options utilizing the intrinsic value method there is no related
                compensation   expense  recorded  in  the  Company's   financial
                statements.  Had compensation cost for stock-based  compensation
                been  determined  based on the fair value at the grant  dates in
                accordance  with  the  method  delineated  in  SFAB #  123,  the
                Company's  net  loss  and loss  per  share  for the  year  ended
                December 31,2002 and 2001 would not have changed.

                Additional information relating to stock options outstanding and
                exercisable at December 31, 2002 summarized by exercise price is
                as follows:

                           Options Outstanding            Options Exercisable
             -------------------------------------------------------------------
                                     Weighted
                           Number    Average   Weighted    Number      Weighted
             Range of   Outstanding Remaining   Average  Exercisable   Average
             Exercise   at December Contractual Exercise at December   Exercise
             Price        31, 2002     Life       Price   31, 2002      Price
             ---------- ----------- ------------- -----  ---------      ------
             $0.10-5.75  5,320,000   0.5-5.5 Year $0.33     5,320,000    $0.33




                                       34
<PAGE>
                In connection  with a fee agreement  for  introduction  services
                with   two   individuals,    (collectively    referred   to   as
                "Introducers"),   Hartcourt  agreed  to  grant  the  Introducers
                options to purchase up to 2,500,000  shares of Hartcourt  common
                stock  at a price  of  $5.50  per  share.  On May 4,  2000,  the
                Introducers  exercised their option to acquire  2,500,000 shares
                of Hartcourt  common stock.  As of December  31,2001,  Hartcourt
                received  $2,275,000  towards  the  exercise  price  of  500,000
                options into shares exercised by the Introducers.  The remaining
                2,000,000  options and the  subscription  receivable  balance of
                $11,000,000 were cancelled in 2001 due to non-payment.

                In  connection  with  providing  consulting  services,  on  July
                21,2000,  Hartcourt granted to a consultant  options to purchase
                20,000 shares of Hartcourt  stock at a price of $5.75 per share.
                The options  expire on July 20, 2003. The options were issued at
                the fair value on the date of issuance as required by SFAS #123.
                The value of the options was not material.

                In connection with providing consulting services,  on January 1,
                2002,  Hartcourt  granted  to Alan  Phan,  options  to  purchase
                3,000,000  shares  of  Hartcourt  stock at a price of $0.38  per
                share.  The options  expired on December 31,  2004.  The options
                were  issued  at the  fair  value  on the  date of  issuance  as
                required  by  SFAS  #123.  The  value  of the  options  was  not
                material.

                To attract  qualified  persons as substantial  responsibility of
                officers,  on June 1,  2002,  Hartcourt  granted to Mr. D. Chen,
                Acting Chief Executive  Officer,  options to purchase  2,000,000
                shares of  Hartcourt  stock at a price of $0.10 per  share.  The
                options  expired on May 31, 2003. The options were issued at the
                fair market value on the date of issuance therefore,  no expense
                was recorded.

                (B) Warrants

                In  connection  with  facilitating  an equity line of credit for
                Hartcourt,  on January 26, 2000,  the Company issued to a broker
                for brokerage services warrants to purchase 13,530 common shares
                at $15.52  per  share  that  expire on  January  25,  2004.  The
                warrants were issued at fair value at the fair value on the date
                of  issuance as required  by SFAS# 123.  The  warrants  were not
                material.

                In  connection  with  completion  of  a  private   placement  of
                Hartcourt  shares with PYR Management LLC, on March 6, 2001, the
                Company   issued  in  total   4,000,000  of  Class  II  warrants
                exercisable  at $0.69375 per share of common stock and expire on
                January  26,2005.  The warrants were issued at fair value at the
                fair value on the date of issuance as required by SFAS# 123. The
                value  of  the  warrants  is  a  direct  offering   expense  and
                accordingly, has been charged to equity in 2001.




                                       35
<PAGE>
                In connection  with signing an investment  agreement with Swartz
                Private Equity,  LLC, on January 26, 2000,  Hartcourt  issued to
                Swartz  warrants to purchase  400,000 shares at $13,10 per share
                that expire on January 25,2004. The warrants were issued at fair
                value at the fair value on the date of  issuance  as required by
                SFAS 123. The value of the warrants is a direct offering expense
                and accordingly, charged to equity in 2000.

                During 2000, the  warrant-holders  converted to purchase 407,000
                shares of common stock at prices ranging from $2.50 to $2.80 for
                a total consideration of $101,870.

NOTE 17         SEGMENT AND RELATED INFORMATION

                The  Company has four  reportable  segments.  Each  segment is a
                strategic  business that the Company manages  separately because
                each business  develops and sells products to a specific market.
                The four reportable segments are as follows: Telecommunications,
                provides comprehensive  telecommunications  services;  Financial
                Services,  provides  financial  content  through various sources
                including  television,  internet  and wireless  access  systems;
                Streaming Media,  provides internet related software development
                services  with an  expertise  in audio  and video  streaming  to
                businesses. The Consulting,  E-learning Group and Capital Groups
                operating segments do not meet the quantitative thresholds for a
                reportable  segment  and are  therefore  included in the "Other"
                category.  The principal  market for the  Company's  products is
                China.   Foreign   sales,   primarily   in  China   amounted  to
                approximately  $561,255 in 2002. The Chinese  operations account
                for  approximately  $3,017,684 of  consolidated  total assets in
                2002.  The  accounting  policies of the segments are the same as
                described in the summary of significant accounting policies. The
                Company  evaluates  segment  performance  based on  income  from
                prospective  operations.  All intercompany  transactions between
                segments have been  eliminated.  As a result,  the components of
                operating  loss for one segment may not be comparable to another
                segment. Segment results for 2002 and 2001 are as follows:
<TABLE>
<S>                                  <C>            <C>          <C>          <C>         <C>
                                         Tele-       Financial    Streaming
                                    Communications   Services       Media        Other        Total
                                    -------------------------------------------------------------------
                2002
                Net sales            $        0     $   929,567  $    99,352  $  108,092    1,137,011
                Loss from
                operations                    0      (1,660,724)    (414,692)   (474,586)  (2,550,002)
                Depreciation
                and amortization              0         338,424       21,606      11,749      371,779
                Assets                        0       2,838,016      151,360   1,752,436    4,741,812
                Capital expenditures          0               0            0           0            0
                                    --------------------------------------------------------------------
</TABLE>





                                       36
<PAGE>
<TABLE>
<S>                                  <C>            <C>          <C>          <C>         <C>
                                         Tele-       Financial    Streaming
                                    Communications   Services       Media        Other        Total
                                    -------------------------------------------------------------------

                2001
                Net sales            $7,684,004     $ 2,157,632  $   326,962  $  452,607  $10,621,205

                Loss from
                operations             (270,911)     (3,540,755)  (1,282,276)   (235,466)  (5,329,408)
                Depreciation
                and amortization        631,704         753,592       85,997       7,020    1,478,313
                Assets                8,175,429       4,804,794      520,294   3,479,619   16,980,136
                Capital expenditures          0               0            0      51,721       51,721
                ---------------------------------------------------------------------------------------
</TABLE>

NOTE 18         STOCK DIVIDEND

                Each  shareholder  of the  Company on record on October 21, 2002
                received one (1) share of ETLI for every  seventeen point twelve
                (17.12) shares of Hartcourt common stock.

NOTE 19         SUBSEQUENT EVENTS (un-audited)

                On February 14, 2003,  Hartcourt signed an agreement to purchase
                of  a  45%  of  all  of  the  interest  of  HuaQing  Corporation
                Development Co. Ltd. and HuaQing Economics  Development Co. Ltd.
                ("HuaQing") of China,  for a total  consideration of $2,202,545.
                Management of the Company indicated that the purchase price will
                be paid by issuance of  15,960,474  restricted  common shares of
                the Company.

                Hartcourt Capital, Inc., a wholly-owned  subsidiary of Hartcourt
                launched a bi-monthly  magazine  called China Report on March 4,
                2003.  Management of the Company  indicated that the first issue
                has a  circulation  of approx.  20,000  copies,  which have been
                distributed to the investment  community,  including  investment
                banking firms,  fund managers,  and brokerage  houses in the US,
                Europe and/or Asia.  The objective of the magazine is to provide
                investors  with  updates  and  analysis  on  the   fast-changing
                investment environment and opportunities in China.

                In March of 2003, Hartcourt has received balance of payment from
                Jiang Tai. (See Note #3d).

                On March 31 2002,  Hartcourt  received the  remaining  fund from
                Enlight  Corporation to satisfy the totaling funding requirement
                $1,000,000 (see Note #2q).




                                     ######


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