To: Investorman who wrote (1612 ) 11/29/2000 10:30:41 AM From: StockDung Respond to of 2413 Note 5. Litigations Charles E. Hogue vs. Hartcourt, Circuit Court of the Ninth Judicial Circuit, Orange County, Florida Case No. CIO-2190 The litigation concerns a claim filed on April 8, 2000 against Hartcourt for breach of contract for alleged fees due to Charles Hogue ("plaintiff") for introductory services. Such fee was set as a percentage of the transaction contemplated and a check of $40,500 for payment in full thereof was tendered to the plaintiff which the plaintiff refused claiming sums far in excess of those agreed to. Hartcourt's legal counsel has interposed a motion to dismiss the suit which is pending before the court and is confident of success in disposition of this matter. ComericaBank of California ("Comerica") vs. Enova. Et al. Superior Court of California, County of Los Angeles, California. Case No. BC 221 594. This litigation concerns Hartcourt's alleged obligation as an alleged guarantor of another entity's ("Pego") alleged obligation on a promissory note that is asserted to be in non-financial default. The plaintiff in that matter may be the subject of a cross-complaint by Hartcourt, which will depend on the evidence disclosed by documents Harcourt has demanded be produced. The complaint alleges that Harcourt executed a guarantee of obligation of Pego (approximately $925,000) which obligation went into non-financial default. Pego expects to be able to settle with plaintiff and such settlement will eliminate Hartcourt's liability. The prospects for the success of those settlement negotiations, as well as the approximately range or amount of any potential loss by Hartcourt, are uncertain at this time. American Equities, LLC v. Hartcourt, Los Angeles Superior Court: American Equities alleges that they are entitled to further shares pursuant to an anti-dilution clause contained in a warrant certificate. The Company disputes such an assertion, and trial is scheduled for March 2001. The Hartcourt Companies, Inc. v. American Equities, Sherman Mazur, Reid Breitman and Corporate Financial Enterprises, Inc., Los Angeles Superior Court Case No. BC 237 714: The Company is seeking to rescind certain consulting agreements and warrant agreements with American Equities, LLC., on the basis that American Equities, LLC and its principals, Sherman Mazur and Reid Breitman, failed to disclose Mr. Mazur's felony convictions and voluminous bankruptcies of his former real estate limited partnership entities and therefore fraudulently induced the Company to enter into such agreements. The Company is also seeking to rescind various stock issuances based on the failure of American Equities, LLC and Corporate Financial Enterprises, Inc. to pay the promissory notes upon which such shares were issued. This litigation has only recently commenced. F-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 to contractual rights and obligations, employment matters, and claims of product liability. 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.northernlight.com