SECURITIES AND EXCHANGE COMMISSION
                                    Washington, D.C.  20549

                                          FORM 10-Q

                            QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
                              THE SECURITIES AND EXCHANGE ACT OF 1934

(Mark One)
(X)      Quarterly report pursuant to section 13 or 15 (d) of the
         Securities Exchange Act of 1934, for the quarterly period ended
         December 31, 1997.

( )      Transition report pursuant to section 13 or 15 (d) of the
         Securities Exchange Act of 1934, for the transition period from
                       to              .

Commission file number

                               THE HARMAT ORGANIZATION, INC.

                    (Exact name of registrant as specified in its charter)

Delaware                                         11-2780723
(State of Incorporation)                        (I.R.S. Employer ID No.)

                                                    22 Old Country Road
                                                  Quogue, New York 11959
                                                      (516) 653-3303

                              (Address of Principal Executive Offices
                     and Principal Place of Business and Telephone Number)

               (Former name, former address and former fiscal year,
                       if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.

                                                 Yes   X     No        

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date.



            Class                    Outstanding at December 31, 1997

Common Stock, $.001 par value                   2,612,500 shares


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                                              The Harmat Organization, Inc.



                                                    Index to Form 10-Q





                                                                     Page
                   Item                                                 Number


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:

         Consolidated Balance Sheets -
         December 31, 1997 and December 31, 1996                         3-4
 
         Consolidated Statements of Operations -
         Three months ended December 31, 1997
           and December 31, 1996                                           5
 
         Consolidated Statements of Cash Flows -                           6-8
         Three months ended December 31, 1996
           and December 31, 1995

         Notes to Consolidated Financial Statements                        9-15

         Management's Discussion and Analysis of Financial
          Condition and Results of Operations                             16-17

PART II.          OTHER INFORMATION

         Item 1.  Legal Proceedings                                       18
         Item 6.  Exhibits and Reports on Form 8-K                        18

Signatures                                                                19










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                             The Harmat Organization, Inc. and subsidiaries

                                                   Financial Statements

                                                    December 31, 1997


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                              The Harmat Organization, Inc. and subsidiaries

                                                    Table of Contents

                                                                                                Page
                                                                                          ======================




                      Consolidated Balance Sheet - As of December 31, 1997                                  1

                      Consolidated Statements of Operations -
                        For the Three Months Ended December 31, 1997 and
                        the Three Months Ended December 31, 1996                                            2

                      Consolidated Statements of Stockholders' Equity                                       3

                      Consolidated Statements of Cash Flows -
                        For the Three Months Ended December 31, 1997
                        and the Three Months Ended December 31, 1996                                       4,5

                      Notes to Consolidated Financial Statements                                           6-18




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                                                                 Page 1
                               The Harmat Organization, Inc. and subsidiaries

                                                Consolidated Balance Sheet

                                                    December 31, 1997

                                                          ASSETS


CURRENT ASSETS

  Cash and cash equivalents                                    $    943,275
  Marketable securities                                              10,639
  Accounts receivable                                               507,776
  Land and construction costs                                       883,007
  Prepaid expenses                                                   34,490

Total Current Assets                                              2,379,187

Property and Equipment - net                                      1,241,229

OTHER ASSETS
  Land and construction costs                                      534,868
  Land held for development                                        195,000
  Due from stockholders                                            165,939
  Due from affiliated companies                                     56,629
  Goodwill - net                                                    54,279
  Investment in Partnership                                         76,447
  Deferred offering costs                                              -
  Land deposits                                                     85,000
                                                                 1,168,162
Total Assets                                                    $4,788,579

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Page 2
                      The Harmat Organization, Inc. and subsidiaries

                                                Consolidated Balance Sheet

                                                    December 31, 1997

                                                          ASSETS




                                        LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES

  Current portion of notes and mortgages payable              $      53,100
  Notes payable - shareholders                                          -
  Notes payable - related parties                                       -
  Loans payable - bank                                                  -
  Other notes payable and accrued expenses                          118,645
  Accounts payable and accrued expenses                              62,720
  Customer and security deposits                                    487,029

Total Current Liabilities                                           721,494

OTHER LIABILITIES
  Mortgages payable - net of current maturities                     773,066
  Construction loans payable - net of current maturities            178,254
  Notes payable - related party                                        -
    Total other liabilities                                         951,320

STOCKHOLDERS' EQUITY
  Preferred stock - $.001 par value, 5,000,000 shares authorized
    no shares issued and outstanding                                   -

  Common stock - $.001 par value, 25,000,000 shares
      authorized, 2,612,500 shares issued and outstanding             2,613

  Additional paid-in capital - common stock                       4,253,603

  Retained earnings (Deficit)                                    (1,140,450)

Total Stockholders' Equity                                        3,115,766

Total Liabilities and Stockholders' Equity                      $ 4,788,579




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                                                                    Page 3


                         The Harmat Organization, Inc. and subsidiaries

                                          Consolidated Statements of Operations

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                                                                                Three Months           Three Months
                                                                                    Ended                 Ended
                                                                                 December 31           December 31,
                                                                                    1997                   1996
REVENUES
  Construction sales                                                           $  451,300            $    1,476
  Sale of land held for development                                             2,998,205                   -
  Rental income                                                                    46,099                32,533
  Management fee income                                                              -                    -

    Total Revenues                                                             3,495,604                 34,009

COST OF SALES AND DIRECT OPERATING EXPENSES                                    2,764,723                 10,418

  Gross profit                                                                   730,882                 23,591

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                     317,798                232,731

CHARGE FOR EXECUTIVE COMPENSATION CAPITALIZED                                      -                       -

(LOSS) INCOME FROM OPERATIONS                                                     413,084             (209,140)

OTHER INCOME (EXPENSE)
       Gain on sale of marketable securities                                        -                    1,070
  Unrealized gain (loss) on marketable securities                                   -                      (24)
  Interest and dividend income                                                      9,168               27,318
  Interest expense                                                                (35,383)             (18,700)

Total Other Income (Expense)                                                      (26,215)               9,664

Net Income (LOSS)                                                                 386,869             (199,476)

Charge in lieu of income taxes                                                       -                      -

Pro Forma net income (loss)                                                 $     386,869         $   (199,476)

  Income and (Loss) per share                                               $       0.15          $      (0.08)
                                                                            

  Weighted average number of shares                                            2,575,596            2,422,758



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                                                                        Page 4


                     The Harmat Organization, Inc. and subsidiaries

                     Consolidated Statements of Stockholders' Equity
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                                             Common Stock

                                                                         Additional                              Total
                                       Number of         Amount            Paid-In         Accumulated       Stockholders'
                                        Shares          (At Par)           Capital          (Deficit)            Equity


Balance - September 30,             2,612,500        $      2,613     $ 4,253,604       $  (565,300)       $  3,690,917
1996

Net (Loss) for period                                                                      (199,477)          (199,477)
 
Balance - December 31, 1996           2,612,500      $     2,613      $4,253,604        $  (764,777)        $3,491,440




                                             Common Stock

                                                                         Additional                              Total
                                       Number of         Amount            Paid-In         Accumulated       Stockholders'
                                        Shares          (At Par)           Capital          (Deficit)            Equity


Balance - September 30,             2,612,500        $      2,613     $ 4,253,604       $                  $  2,728,898
1997                                                                                    (1,527,319)

Net (Loss) for period                                                                      386,869              386,869

Balance - December 31, 1997           2,612,500      $     2,613      $4,253,604        $(1,140,450)         $3,115,767



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                                                                         Page 5


                      The Harmat Organization, Inc. and subsidiaries

                            Consolidated Statements of Cash Flows
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                                                                                Three Months           Three Months
                                                                                    Ended                 Ended
                                                                                December 31,           December 31,
                                                                                    1997                   1996
OPERATING ACTIVITIES:
  Net (loss) income                                                         $    386,869          $     (199,477)
  Adjustments to reconcile net (loss) income to net cash
    (used for) provided by operating activities:
      Depreciation and amortization                                               8,864                    5,922
      Gain on sale of marketable securities                                         -                     (1,070)
      Change in unrealized (gain) loss on investments                               -                         24
      Executive compensation capitalized                                            -                         -

    Changes in assets and liabilities:
      Contracts receivable                                                      (6,310)                     (550)
      Purchase of marketable securities                                            -                      (4,212)
      Sales of marketable securities                                               -                       3,057
      Prepaid expenses                                                          22,480                   (27,365)
      Accounts payable and accrued expenses                                   (321,627)                   (7,905)
      Refundable deposits                                                       45,749                        -
      Customer deposits                                                        430,563                   126,890

      Total Adjustments                                                        179,719                    94,791

      Net Cash Used by Operating Activities                                    566,588                  (104,686)

INVESTING ACTIVITIES:
  Advances from/to affiliates and related parties                               10,791                   (8,790)
  Acquisition of land, property and equipment                                    -                      (83,179)
  Investment in partnership                                                    (50,000)                    -
  Land deposits                                                                (25,000)                  10,000
  Land and construction costs                                                2,089,660                 (292,432)
  Payment of deferred offering costs                                              -                        -

      Net Cash from (used by) Investing Activities forward                    2,075,631                (374,401)
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                                                                                                                    Page 6

                  The Harmat Organization, Inc. and subsidiaries

                        Consolidated Statements of Cash Flows





                                                                                                       Nine Months
                                                                                 Year Ended               Ended
                                                                                September 30,         September 30,
                                                                                    1997                   1996

FINANCING ACTIVITIES:
  Repayment of notes payable - related party                                       -                     (70,000)
  Repayments of notes and mortgages payable                                     (1,499,940)               (7,856)
  Proceeds of mortgage payable                                                     -                         -
  Repayments of other notes payable & loan payable                                (393,000)              (19,460)
  Repayments of notes payable - stockholder                                          -                     -
  Distribution to stockholders                                                       -                     -
  Proceeds of private placement                                                      -                     -

    Net Cash from Financing Activities                                          (1,892,940)             (97,316)

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                                      749,279             (576,403)

CASH AND CASH EQUIVALENTS - beginning of period                                   193,996             3,203,669

CASH AND CASH EQUIVALENTS - end of period                                   $     943,275            $2,627,266


SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
    Cash paid during the periods for:
      Interest                                                              $     35,383         $      18,700
      Income taxes                                                          $      5,070         $       -



</TABLE>
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                                                                      Page 7

                               The Harmat Organization, Inc. and subsidiaries

                                  Notes to Consolidated Financial Statements

                                                    December 31, 1997




NOTE 1:           PRINCIPLES OF CONSOLIDATION AND BUSINESS

In November 1995, The Harmat  Organization,  Inc. (Delaware) (the "Company") was
formed  for the  purpose  of  offering  securities  to the  general  public  and
1,750,000  shares of common stock were issued to the  individual  stockholder of
the Harmat Companies. On March 1, 1996, the individual stockholder of the Harmat
Companies   transferred  his  stock  in  the  Harmat  Companies  to  The  Harmat
Organization   (Delaware)   for  a  100%   ownership   interest  in  the  Harmat
Organization, Inc. (Delaware).

The  December  31, 1997 and 1996  financial  statements  reflect  the  financial
position  and results of  operations  of The Harmat  Organization,  Inc. and its
subsidiaries  on a  consolidated  basis,  which  reflects the Company's  current
organizational   structure.   The  Company's   policy  is  to  consolidate   all
majority-owned  subsidiaries.  All intercompany  amounts have been eliminated in
consolidation.
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Entity                                                  Nature of Business

Parent Company:

The Harmat Organization, Inc. - Delaware                Holding Company

Subsidiaries:

Harmat Homes, Inc. ("Harmat Homes")                     Construction of custom homes and
                                                        residential and commercial rental
                                                        properties, in the eastern portion of
                                                        Long Island, New York

Harmat Holding Corp. ("Harmat Holding")                 Subdivision and development of
                                                        undeveloped land in the eastern
                                                        portion of Long Island, New York

Northside Woods, Inc. ("Northside")                     Rental of residential property in the
                                                        eastern portion of Long Island, New
                                                        York.

Harmat Capital Corp. ("Harmat Capital")                 Rental of residential property in the
                                                        eastern portion of Long Island, New
                                                        York

Harmat Management, Inc.                                 Limited Partner in real estate
                                                        partnership in the eastern portion of
                                                        Long Island, New York

Quick Storage, Inc.                                     Short-term rental of storage facilities
                                                        in the eastern portion of Long
                                                        Island, New York



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                                                                      Page 8
                    The Harmat Organization, Inc. and subsidiaries

                       Notes to Consolidated Financial Statements

                                                    December 31, 1997




NOTE 1:           PRINCIPLES OF CONSOLIDATION AND BUSINESS (continued)

The construction industry poses certain inherent risks to the Company, such as a
shortage  of skilled  labor.  In  addition,  certain  other  problems  may arise
resulting in construction  delays such as weather  delays,  cost of supplies and
late  deliveries  and/or  cost  overruns  that the  Company  may have to absorb.
Furthermore,  the Company may incur  unexpected  costs with  respect to warranty
service on completed projects even though it carries warranty insurance to cover
such  contingencies.  Such construction risks can affect the Company's cash flow
and  profits.  To date,  the  Company has not been  materially  affected by such
construction  risks.  The  Company  faces  competition  from a  number  of local
builders,  many of which can offer either the same or lower  building costs than
the Company.

The principal stockholder of the Company is a general partner in the partnership
in which Harmat Management, Inc. has a limited partnership interest.


NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Accounting Period

Effective  September  30, 1996,  the Company  changed to a fiscal year ending on
September  30th.  Prior to 1996,  the Company  utilized a calendar year end. The
accompanying   financial   statements  include  financial   statements  for  the
three-month period ended December 31, 1997 and December 31, 1996.

                  Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of
three  months  or  less  to  be  cash  equivalents.   Cash  equivalents  totaled
approximately  $943,275 at December 31, 1997. Cash includes $77,500 set aside to
satisfy a Suffolk County bonding requirement.

                  Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and cash equivalents and accounts  receivable  arising from
its normal business  activities.  The Company  routinely  assesses the financial
strength of its customers and based upon factors  surrounding the credit risk of
its  customers,   establishes  an  allowance  for  uncollectible   accounts  (as
necessary),  and as a consequence,  believes that its accounts receivable credit
risk exposure beyond such allowances is limited.  Deposits are usually  required
on  house  construction  contracts.   The  Company  places  its  cash  and  cash
equivalents  with high  credit  quality  financial  institutions.  The amount on
deposit in any one institution that exceeds  federally insured limits is subject
to credit risk. Such amount was approximately  $10,639 at December 31, 1997. The
Company believes no significant concentration of credit risk exists with respect
to these cash equivalents.




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                                                                       Page 9
                              The Harmat Organization, Inc. and subsidiaries

                                 Notes to Consolidated Financial Statements

                                                    December 31, 1997



NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Economic Dependency

There were two and four construction contracts which were deemed major customers
and accounted for total  construction  sales for the three months ended December
31, 1997 and the three months ended December 31, 1996. For the three-month ended
December 31, 1997, these contracts  represented 87% and 13% of total sales. Most
of  the  Company's  business  is of a  nonrecurring  nature.  The  Company  must
continually  market its homes in order to  attract  new  purchasers.  Unless the
Company is successful in attracting  new purchasers for its homes, a lack of new
purchasers will have a severe negative impact to the Company in the near term.
                 
Marketable Securities

The Company  accounts  for its  investments  pursuant to  Statement of Financial
Accounting  Standards ("SFAS") No. 115,  "Accounting for Certain  Investments in
Debt and Equity Securities". SFAS No. 115 addresses the accounting and reporting
for investments in equity securities that have readily  determinable fair values
and  for  all  investments  in  debt  securities.  Those  investments  are to be
classified  into  the  following   three   categories:   held-to-maturity   debt
securities; trade securities; and available-for-sale securities.

Management determines the appropriate  classification of its investments in debt
and equity securities at the time of purchase and reevaluates such determination
at each balance sheet date. At December 31, 1997, all of the Company investments
were classified as trading securities.  Trading securities are securities bought
and held  principally  for the purpose of selling  them in the near term and are
reported at fair value,  with unrealized gains and losses included in operations
for the current year.

                  Property and Equipment and Depreciation

Property and  equipment  are stated at cost.  Depreciation  is computed over the
estimated  useful  lives of the  assets,  using  the  straight-line  method  for
buildings and building  improvements  and accelerated  methods for furniture and
equipment, as follows:

                  Building and Building Improvements                40 years
                  Furniture and Equipment                           5 to 7 years



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                                                             Page 10
                     The Harmat Organization, Inc. and subsidiaries

                        Notes to Consolidated Financial Statements

                                                    December 31, 1997




NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                  Earnings (Loss) Per Share

Earnings (loss) per share are computed by dividing the net income (loss) for the
year by the weighted average number of common shares outstanding.  Stock options
and warrants are assumed converted to stock, when dilutive.

                  Use of Estimates

The preparation of 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  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

                  Land Development Costs

Costs that clearly relate to land development  projects are  capitalized.  Costs
are  allocated  to project  components  by the  specific  identification  method
whenever  possible.  Otherwise,  acquisition  costs are allocated based on their
relative  fair value before  development,  and  development  costs are allocated
based on their  relative  sales  value.  Interest  costs are  capitalized  while
development is in progress.

                  Revenue Recognition

The Company  recognizes  revenue from the  acquisition,  development and sale of
land, and construction and sale of houses on such land. Pursuant to the terms of
such contracts and Statement of Financial  Accounting Standards ("SFAS") No. 66,
"Accounting  for Sales of Real Estate",  the Company uses the deposit  method of
accounting.  This method  provides  that all  construction  costs be recorded as
incurred and monies  received from the  purchases be recorded as deposits  until
the  purchase  contracts  close at which time all revenue  costs and profits are
recognized.

The Company  classifies all land and construction  costs that are expected to be
completed  within one year as a current asset.  At December 31, 1997,  such land
and construction costs totaled  $1,417,875.  Customer deposits on such contracts
totaled $463,058 at December 31, 1997.

Rental income is  recognized as it is earned  pursuant to the term of each lease
on a straight-line  basis. Leases generally have an initial or remaining term of
one year or less.

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Page 11
                 The Harmat Organization, Inc. and subsidiaries

                       Notes to Consolidated Financial Statements

                                                    December 31, 1997




NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                  Income Taxes

Under FAS No. 109,  "Accounting  for Income Tax",  deferred income taxes reflect
the net tax effects of (a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes,  and (b) operating loss  carryforwards.  The tax effects of
significant  items  comprising  the Company's  deferred taxes as of December 31,
1997 are as follows:


Deferred Tax Liabilities:
  Difference between book and tax basis of property,
    plant and equipment                                       $  (36,500)

Deferred Tax Assets:
  Federal and State Net Operating Loss Carryforwards             279,700
  Less: Valuation Allowance                                     (243,200)

Net Deferred Tax Liability                                    $     -

The  provision  for income  taxes for both 1996 and 1997  arises from the amount
computed by applying statutory rates for the reasons summarized below:


Provision Based on Statutory Rates                                34 %
Benefit of Graduated Rates                                       (19)%
State Taxes Net of Federal Benefit                                 6 %
Benefit of NOL Carryforward                                   (   21)%

Total                                                             -  %

The  Company  will  have  net  operating  loss  carryforwards  of  approximately
$1,332,000  available to reduce future taxes. These  carryforward  losses expire
through  the year 2012.  Pursuant to Section 382 of the  Internal  Revenue  Code
regarding substantial changes in Company ownership,  utilization of these losses
may be limited.

                  Goodwill

The cost of the newly acquired subsidiary,  Quick Storage, in excess of the fair
value of the net assets of such  subsidiary  has been charged to  goodwill.  The
Company  has decided to amortize  its  goodwill  over a period of up to 10 years
under the straight-line  method.  Accumulated  amortization at December 31, 1997
was  $32,168.  The  Company's  policy is to  evaluate  the  periods of  goodwill
amortization to determine whether later events and circumstances warrant revised
estimates of useful lives. The Company also evaluates whether the carrying value
of goodwill has become  impaired by comparing the carrying  value of goodwill to
the value of projected undiscounted cash flows from the acquired assets of Quick
Storage, Inc. Impairment is recognized if the recorded goodwill is less than the
projected undiscounted cash flow from acquired assets or business.


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                                               Page 12

                     The Harmat Organization, Inc. and subsidiaries

                         Notes to Consolidated Financial Statements

                                                    December 31, 1997




NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                ock Options and Similar Equity Instruments Issued to Employees

The Company currently accounts for its stock-based  compensation plans using the
accounting  prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees  (see Note 10).  Since the Company is not required
to adopt the fair value based recognition  provisions prescribed under Statement
of  Financial   Accounting   Standards  No.  123,   Accounting  for  Stock-Based
Compensation, it has elected only to comply with the disclosure requirements set
forth in the Statement, which includes disclosing pro forma net income as if the
fair value based method of accounting had been applied (See Note 10).

NOTE 3:           MARKETABLE SECURITIES

Marketable  securities  consist of investments in equity and debt  securities at
fair value. The cost of such securities is $10,639 as of December 31, 1997.


NOTE 4:           PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1997:


Land                                                          $   523,974
Building and building improvements                                855,844
Furniture and office equipment                                     64,929

Total                                                           1,444,747
Less: Accumulated depreciation                                    203,578

Property and Equipment - Net                                  $ 1,241,229

Depreciation  expense for the three months  ended  December 31, 1997 and for the
three months ended September 30, 1996 totaled $8,864 and $5,922, respectively.


NOTE 5:           LOANS RECEIVABLE

                  Stockholder

The Company loaned Mr.  Schilowitz,  its primary  stockholder,  $200,000 in July
1997.  The loan is evidenced by a  Promissory  Note with simple  interest at the
Prime Rate charged by Chase Manhattan Bank, NA. Mr.  Schilowitz  pledged 500,000
shares of Common  Stock of the Company as  collateral  security.  The balance of
this loan as of December 31, 1997 is $165,939.


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                                                                       Page 13

                 The Harmat Organization, Inc. and subsidiaries

                         Notes to Consolidated Financial Statements

                                                    December 31, 1997



NOTE 5:           LOANS RECEIVABLE (continued)

                  Other

The Company loaned $175,000 to Axxess,  Inc., an unaffiliated  third party.  The
loan is evidenced by a $175,000  Promissory Note dated August 15, 1997. The note
bears  interest at 2% above prime rate and unpaid  interest and principal is due
August 15, 1998.  Axxess,  Inc.  pledged  600,000  shares of its common stock as
security  collateral and authorized the issuance of rights to purchase 1,000,000
warrants for a price of $.50 per share (as amended) expiring August 14, 2000.

The Company loaned $250,000 to Java Centrale Inc., an unaffiliated  third party.
The loan is evidenced by a $250,000 promissory note dated November 19, 1997. The
note bears  interest at 15% and principal is due December 31, 1997.  The loan is
still outstanding. Java Centrale, Inc. pledged 500,000 share of its common stock
as security collateral and authorized the issuance of rights to purchase 100,000
warrants for a price of .05 per share expiring November 19, 1999.

The Company loaned $28,000 to a Rabbi Marc Schnieer an unaffiliated third party.
The loan is evidenced by a promissory  note dated  September 30, 1997.  The note
bears no interest and  principle  is due January 15,  1999.  The balance of this
loan at December 31, 1997 is $18,000.

The Company loaned $25,000 to an unaffiliated third party. The loan is evidenced
by a Promissory  Note dated  August,  1997.  The Note bears  interest at 12% per
annum and is due August, 1998.


NOTE 6:           NOTES AND MORTGAGES PAYABLE

At December 31, 1997, the notes and mortgages payable consist of the following:


Two mortgages payable, dated August 19, 1996, in the original amount of $250,000
each, payable in monthly  installments of $1,971 each, bearing interest at 8.25%
and  maturing  on  September  1,  2021.  The  mortgages  are  secured  by rental
properties.



                                                           $  491,354

Mortgage payable dated March 26, 1997, in the original amount of $215,400,  with
monthly interest at prime plus 1.5% payable in monthly installments until April,
1999 when unpaid  principal and interest is due. The mortgage is secured by land
and building having a cost of approximately $415,000.



                                                                207,001


<PAGE>

                                                                       Page 14
                               The Harmat Organization, Inc. and subsidiaries

                                Notes to Consolidated Financial Statements

                                                    December 31, 1997

NOTE 6:           NOTES AND MORTGAGES PAYABLE (continued)

Mortgage  payable  dated  January  17,  1991 and  amended  June 14,  1994 in the
original amount of $180,000 payable in monthly  installments of $1,975 including
interest through February 1, 2006. Interest is payable at an adjustable interest
rate (10.125% at September 30, 1997) which is determined annually.  The mortgage
is secured by land and building having a cost of approximately $200,000





                                                              127,811

Construction  loan dated  December  1997,  in the  original  amount of $300,000,
payable  monthly  with  interest  only at 9.75%  until  December  1999  when the
principal  and unpaid  interest is due. The loan is secured by a building lot at
the development know Emerald Woods Lot 4


                                                               178,254

Loan payable with  interest at 12% per annum and is due on demand.  Repayment of
this loan is guaranteed by the principal stockholder of the Company.

                                                                100,000

Legal  settlement  obligation  from 1991 to a  contractor  is  payable  in equal
semi-annual  installments  on June 1 and  December  1 of each year  with  annual
payments of $8,120.

                                                                13,120

Other notes and mortgages                                        5,525
Total Notes and Mortgages Payable                            1,023,065
Less: Current Portion                                           53,100

Total Long Term Notes and Mortgages Payable                  1,069,965






<PAGE>


 Page 15


                             The Harmat Organization, Inc. and subsidiaries

                                    Notes to Consolidated Financial Statements
                                                    December 31, 1997




NOTE 7:           PRIVATE PLACEMENT

In February of 1996, Harmat Organization,  Inc. (Delaware) offered 500,000 units
at $1.00 per unit as part of a private placement transaction.  The units consist
of one share of common  stock,  three Series A warrants  entitling the holder to
purchase  three  shares of common stock for $6.00 for a period of four years and
one Series B warrant  entitling the holder to purchase one share of common stock
for $9.00 for a period of four years.  The shares of common stock and the Series
A warrants were registered as part of the initial public  offering.  On February
22, 1996, the Company received proceeds of $500,000 from the private placement.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                      No. of                          FMV at         No. of
    Date of                           Warrants         Exercise       Date of        Warrants
    Grant             Type            Issued           Price          Grant          Exercised

February 1996       Series A        1,500,000        $  6.00           $  5.75           -
February 1996       Series B             500,000     $  9.00           $  5.75           -

Total                               2,000,000
</TABLE>


NOTE 8:           COMMON STOCK

                  Capital Contribution

On August 3, 1996,  the  Company's  principal  stockholder  contributed  500,000
shares of the  Company's  common stock to the Company.  The 500,000  contributed
shares were cancelled.

                  Initial Public Offering

In September 1996, the Company  completed the initial public offering of 862,500
units (including the 112,500 underwriter's  over-allotment  shares) at $5.75 per
unit resulting in net proceeds to the Company of $3,929,673.


NOTE 9:         COMMITMENTS AND CONTINGENCIES

                  Land Contract

In July 1997, the Company  deposited  $75,000 in escrow relating to the proposed
acquisition of certain real estate  properties in Greenport,  NY. In October 10,
1997 the Company entered into a contract to purchase a parcel of unimproved land
in Westhamption  Beach, N.Y. for $227,000 and made a $10,000 deposit pursuant to
such contract as of December 31, 1997.

                  Legal Proceedings

The Company is involved in legal  proceedings  which are considered  routine and
incidental to its  business.  The Company  believes  that the legal  proceedings
which are  presently  pending  have no potential  liability  which would have an
adverse material effect on the financial condition,  operations or cash flows of
the Company. Due to the inherent uncertainty of the legal process, however, this
assessment may be subject to change in the near term.



<PAGE>



                                                          Page 16
                            The Harmat Organization, Inc. and subsidiaries

                           Notes to Consolidated Financial Statements

                                                    December 31, 1997



                  Commitments and Stock Option Plans

The Company has two stock-based  compensation  plans, which are described below.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized.

The Plan for  Incentive  Compensation  of Matthew  Schilowitz  (the "Schilowitz
Incentive Plan"), who is the principal stockholder,  was adopted by the Board of
Directors and approved by the Company's  sole  stockholder  on March 1, 1996 and
amended August 3, 1996.  Pursuant to such plan, Mr.  Schilowitz has been granted
an option to purchase up to an aggregate of 500,000 shares of common stock at an
exercise  price of $5.75  per  share  ($1.125,  as  amended).  In the  event the
Company's  earnings  before taxes first equals or exceeds an amount listed below
for any  fiscal  year  ending  after the date of the  Company's  initial  public
offering, the shares shall be released to such stockholder as follows:

Earnings Before Taxes                   Shares to be Issued

$   750,000                             250,000
$ 1,500,000                             250,000

If  the  above  earnings  levels  are  achieved,   the  Company  will  recognize
compensation  expense equal to the difference  between the fair market value and
the exercise price at the time the performance conditions are achieved. Issuance
of the shares may result in substantial  compensation  expense to the Company in
future years.

In February  1996, the Board of Directors  adopted the 1996 Joint  Incentive and
Non-Qualified Stock Option Plan (the "Plan") providing for the granting of up to
400,000  shares of the  Company's  common stock.  In January  1997,  the Company
granted five year options under the Plan  providing for 10,000 shares at a price
of $2.125 per share to four  directors and two key employees of the Company.  In
March 1997, the Company's chief executive officer and principal  shareholder was
granted  300,000  shares at an  exercise  price of $2.337 per share  ($1.25,  as
amended).
The fair value of each  option  grant is  estimated  on the grant date using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in 1997:  dividend yield of 0%,  risk-free  interest
rate of 6.3%, expected volatility of 109%, and expected lives of 5 years for the
options.

<PAGE>

                                            Page 17
                    The Harmat Organization, Inc. and subsidiaries

                      Notes to Consolidated Financial Statements
                                         December 31, 1997



A summary of the status of the  Company's  stock  option plan as of December 31,
1997,  and the changes  during the year ending  December  31, 1997 is  presented
below:


                                                           Weighted-Averaged
Fixed Options                               Shares             Exercise Price
October 1, 1996                                0                   -
Granted                                     360,000           $  1.40
Exercised                                      0                   -
Forfeited                                      0                   -

December 31, 1997                           360,000           $  1.40


Exercisable at December 31, 1997            360,000
Weighted-average fair value of 
    options granted during the year        $   1.71

The following table summarizes information about fixed stock options outstanding
at December 31, 1997.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                 Outstanding Options                          Exercisable Options

                    Number            Weighted average      Weighted -         Number
Outstanding         Outstanding          Remaining            Average       Exercisable      Weighted-average
Exercise Price        9/30/97         Contractual Life    Exercise Price     At 9/30/97       Exercise Price

$1.25 to $2.215     360,000             4.5 years        $    1.40             360,000            $   1.40

</TABLE>

If the  Company  had used the fair  value  based  method of  accounting  for its
employee  stock option plan, as prescribed by Statement of Financial  Accounting
No. 123,  compensation cost included in the net loss for the year ended December
31, 1997 would have increased by approximately $614,000, resulting in a net loss
of $(1,576,000), net of tax, and loss per share of $(.60).

                  Employment Agreement

On April 1, 1996, the Company entered into a five year employment agreement with
the president and chief executive officer,  who is also the Company's  principal
stockholder,  effective  September  1996,  for a base  salary of  $105,000  with
increments  of $50,000  each year  thereafter.  In  addition,  the officer  will
receive a bonus of 5% of pre tax  annual  earnings  and is  granted  options  to
purchase up to an  aggregate of 500,000  shares of the Company  common stock for
ten years,  exercisable at $1.125 per share with rights vesting upon  attainment
of certain earnings levels (see above).

<PAGE>
                                                           Page 18
                       The Harmat Organization, Inc. and subsidiaries

                           Notes to Consolidated Financial Statements

                                                    December 31, 1997



NOTE 10:          RELATED PARTY TRANSACTIONS

In April,  1997,  the  Company  purchased  a  building  lot from  Emerald  Woods
Development Corp. ("Emerald Woods") (of which Matthew Schilowitz is a 50% owner)
for  $195,000  and is in contract to  construct a house on such lot. The Company
purchased 2 additional  building lots from Emerald  Woods in December,  1997 for
$190,000  and  simultaneously  sold  them to an  unaffiliated  third  party  for
$200,000 (see Note 13).

The Company loaned $56,629 to entities related to Matthew Schilowitz. Such loans
are due on demand and have no stated interest rate.

The Company  paid legal fees of  approximately  $5,894 in the three months ended
December 31, 1997 to a firm in which a director of the company is a partner.




<PAGE>

                              The Harmat Organization, Inc.

                          MANAGEMENT'S DISCUSSION AND ANALYSIS

                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

            FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE

                            THREE MONTHS ENDED DECEMBER 31, 1996



Total revenues for the three months ended December 31, 1997 were
$3,495,604 compared to revenues of $34,009 for the three months ended
December 31, 1996, an increase of approximately $3,441,595 due to sale
of Jagger Woods Development and one house sale.

Construction Sales

Deliveries of one home and Jagger Woods Development resulted in
revenues of $3,449,505 for the three months ended December 31, 1997.
For the three months ended December 31, 1996 there were no sales
rendered.  The reasons for the increase in revenues is the Company sold
Jagger Woods Development for $2,998,205.

The Company shifted its focus and moved into the hotel and motel
construction market and to provide hospitality serves in addition to
successfully completing current projects under development.

Rental Income

Rental based properties resulted in rental income of $46,099 for the
three months ended December 31, 1997. For the three months ended in
December 31, 1996 the Company generated rental income of $32,533.
Rental income is increased by $13,566.  Quick Storage of Quogue and
Self Storage Facility, generated rental income for the three months
ended December 31, 1997 $26,859.  The reason for the increase is the
rental properties were fully rented at higher rates of rents than three
months ended December 31, 1996.

Gross Profit Margin

The Company's gross profit margin on homes and development delivered
was approximately twenty (20%) percent during the three months ended
December 31, 1997, compared to no percent in the three months ended
December 31, 1996, because there were no sales reported.  The increase
in gross profit margin resulted from the sale of one home and Jagger
Woods Development.

Cost of sale for the three months ended December 31, 1997 was
$2,764,723 as compared to $10,418 for the three months ended December
31, 1996.  The increase in cost of sale resulted primarily from the
sale of Jagger Woods Development.





                                                         - 4 -

<PAGE>


Selling and general administration expenses were $317,798 for the three
months ended December 31, 1997 as compared to $232,731 for the three
months ended December 31, 1996.  The increase is due to primarily
increasing costs of administration staff marketing and professional
fees.


Gross Interest Costs

Gross interest costs were $35,383 for the three months ended December
31, 1997 compared to $18,700 for the three months ended December 31,
1996.  During December 1997 the company had funds available from the
sale of Jagger Woods Development which enabled it to satisfy various of
its existing debts and obligations.


                                                         - 5 -

<PAGE>

                                 The Harmat Organization, Inc.

                             MANAGEMENT'S DISCUSSION AND ANALYSIS

                           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                   LIQUIDITY AND CAPITAL RESOURCES




The Company's primary sources of liquidity have been the proceeds of
its initial public offering, cash generated from sales, and borrowings
from its officers and related parties.

During the three months ended December 31, 1997, the Company had
positive cash flows from operating activities of $566,586 versus a
negative cash flow of $104,686 for the three months ended December 31,
1996.  Investing activities used cash of $2,075,631 for the three
months ended December 31, 1997 and $374,401 for the three months ended
December 31, 1996.



                                                         - 6 -
<PAGE>

                       The Harmat Organization, Inc.

PART II           OTHER INFORMATION



ITEM 6.           Exhibits and Reports on Form 8-K

                  a.  Exhibits - None

                  b.  Reports on Form 8-K - None

                                                         - 7 -

<PAGE>




                                                         SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.

                                                The Harmat Organization, Inc.
                                                        (Registrant)



         By:  /s/ Matthew C. Schilowitz
                  Chief Executive Officer




         By: /s/  Ray Dhir
                  Chief Financial Officer



Date: February 27, 1998


<PAGE>