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 June 30, 1998.

( )      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 June 30, 1998

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


<PAGE>






                          The Harmat Organization, Inc.



                               Index to Form 10-Q

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                                                                                                                   Page
                   Item                                                                                           Number


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:

         Consolidated Balance Sheet -
         June 30, 1998                                                                                               3-4

         Consolidated Statements of Operations -
         Nine months ended June 30, 1998
           and June 30, 1997                                                                                           5

         Consolidated Statements of Cash Flows -                                                                     6-8
         Nine months ended June 30, 1998
           and June 30, 1997

         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




<PAGE>


THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1998



ASSETS

CURRENT ASSETS
  Cash and cash equivalents                       $   613,971
  Marketable securities                                10,639
  Accounts receivable                                 240,962
  Notes receivable                                    218,000
  Notes receivable - shareholder                      165,939
  Prepaid expenses                                     64,098

Total Current Assets                                1,313,609

PROPERTY AND EQUIPMENT - NET
                                                    1,213,603


OTHER ASSETS
  Construction costs                               1,091,998
  Land held for development                          744,579
  Due from affiliated companies                      234,467
  Goodwill - net                                      54,279
  Investment in Partnership                           76,447
  Land deposits                                       85,000
                                                   2,286,770

TOTAL ASSETS                                      $4,831,983

<PAGE>
                                                                                                             Page 2
                                  THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                                          Consolidated Balance Sheet

LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
  Current portion of notes and mortgages payable          $      17,700
  Notes payable                                                 128,120
  Other notes payable                                             5,525
  Accounts payable and accrued expenses                         (33,853)
  Customer and security deposits                                446,095

Total Current Liabilities                                       563,586

OTHER LIABILITIES
  Mortgages payable - net of current maturities                 792,242
  Construction loans payable - net of current maturities        552,556
    Total other liabilities                                   1,344,798

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)                               (1,332,618)

Total Stockholders' Equity                                   2,923,598

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 4,831,983


<PAGE>
                                  THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                                       Consolidated Statements of Operations

                                                   June 30, 1998



                                                                              Nine Months
                                                                                 Ended
                                                                               June 30,
                                                                                 1998
                                                                                                    Nine Months
                                                                                                       Ended
                                                                                                     June 30,
                                                                                                       1997
REVENUES
  Construction sales                                                         $  1,427,760          $  1,254,405
  Sale of land held for development                                             3,105,705                 -
  Rental income                                                                   185,691                60,616

    Total Revenues                                                              4,719,156             1,315,021

COST OF SALES AND DIRECT OPERATING EXPENSES                                     3,618,475             1,173,907

  Gross profit                                                                  1,100,681               141,114


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                      862,798               418,323

CHARGE FOR EXECUTIVE COMPENSATION CAPITALIZED                                        -                      -

(LOSS) INCOME FROM OPERATIONS                                                     237,883               (277,209)

OTHER INCOME (EXPENSE)
  Gain on sale of marketable securities                                            37,227                  8,495
  Unrealized gain on marketable securities                                             -                 (11,066)
  Interest and dividend income                                                     40,180                 12,628
  Interest expense                                                               (120,588)               (15,323)

Total Other Income (Expense)                                                      (43,182)                (5,266)

Net Income (LOSS)                                                                  194,701              (282,475)
Charge in lieu of income taxes                                                         -                     -

Pro Forma net income (loss)                                                   $    194,701            $ (282,475)

  Income and (Loss) per share                                                 $       0.08            $    (0.11)

Weighted average number of shares                                                2,564,593             2,585,402


<PAGE>

                    THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                     Consolidated Statements of Stockholders; Equity

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


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

Net (Loss) for period                                                   (415,888)           (415,888)

Balance - June 30, 1997         2,612,500     $ 2,613    $4,253,604   $ (981,188)         $3,275,029




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



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

Net (Loss) for period                                                       194,701          194,701

Balance - June 30, 1998          2,612,500  $ 2,613     $4,253,604      $(1,332,618)      $2,923,599

<PAGE>

                  THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                                June 30, 1998

                                                                                Nine Months
                                                                                   Ended
                                                                                 June 30,
                                                                                   1998
                                                                                                     Nine Months
                                                                                                        Ended
                                                                                                       June 30,
                                                                                                         1997
OPERATING ACTIVITIES:


  Net (loss) income                                                            $    194,701        $ (698,362)
  Adjustments to reconcile net (loss) income to net cash
    (used for) provided by operating activities:
      Depreciation and amortization                                                  18,490            19,483
      Gain on sale of marketable securities                                              -            (62,274)
      Change in unrealized gain(loss) on investments                                     -             11,066

    Changes in assets and liabilities:
      Contracts receivable                                                          (207,496)         (33,689)
      Purchase of marketable securities                                                  -                -
      Sales of marketable securities                                                     -             62,647
      Prepaid expenses                                                                (7,128)         (37,931)
      Accounts payable and accrued expenses                                         (418,199)         197,384
      Refundable deposits                                                             45,749           29,914
      Customer deposits                                                              389,629             -

      Total Adjustments                                                             (178,955)         186,600

      Net Cash Used by Operating Activities Forward                                   15,746         (511,762)


INVESTING ACTIVITIES:

  Advances from/to affiliates and related parties                                   (166,867)         (81,109)
  Acquisition of land, property and equipment                                           -             (99,850)
  Investment in partnership                                                          (50,000)             -
  Land deposits                                                                       25,000              -
  Land and construction costs                                                      1,865,962       (1,262,223)

      Net Cash from (used by) Investing Activities Forward                         1,674,095       (1,443,182)




<PAGE>

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows


                                                                                Six Months
                                                                                   Ended
                                                                                 June 30,
                                                                                   1998
                                                                                                      Six Months
                                                                                                        Ended
                                                                                                       June 30,
                                                                                                         1997

FINANCING ACTIVITIES:
  Repayment of notes payable - related party                                         -                (90,000)
  Repayments of mortgages payable                                                (1,126,863)          (71,977)
  Repayments of other notes payable & loan payable                                 (143,000)          (44,426)

    Net Cash from Financing Activities                                           (1,269,863)         (206,403)

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                                       419,975        (2,161,347)

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

CASH AND CASH EQUIVALENTS - end of period                                      $    613,971       $ 1,042,322

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
    Cash paid during the periods for:
      Interest                                                                 $    120,588       $    68,422
      Income taxes                                                             $      2,280       $    48,620
</TABLE>

<PAGE>

                         THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                           Notes to Consolidated Financial Statements

                                                                       


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 June  30,  1998 and 1997  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


                 Harmat Hospitality, Inc.
                                                                       Construction   hotels   and
                                                                       motels,     and     provide
                                                                       hospitality services.

</TABLE>

<PAGE>


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
              Notes to Consolidated Financial Statements

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 nine-month period
               ended June 30, 1998 and June 30, 1997.

               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 $613,971 at June 30, 1998.
               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
               June 30, 1998. The Company believes no significant  concentration
               of credit risk exists with respect to these cash equivalents.



<PAGE>
                                                                             
                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                      Notes to Consolidated Financial Statements

NOTE 2:        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                  Economic Dependency

               There were six and three construction contracts which were deemed
               major  customers and accounted for total  construction  sales for
               the nine months  ended June 30,  1998 and the nine  months  ended
               June 30 1997. 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
               June 30, 1998, 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


<PAGE>


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                        Notes to Consolidated Financial Statements

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.
<PAGE>

                  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 June 30, 1998,
such land and  construction  costs  totaled  $744,579 and  $1,091,998.  Customer
deposits on such contracts totaled $446,095 at June 30, 1998.

               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.


<PAGE>

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                      Notes to Consolidated Financial Statements

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 June 30, 1998 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                     $    -


<PAGE>

              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 June 30, 1998 was $44,232.
               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.



<PAGE>

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                       Notes to Consolidated Financial Statements

NOTE 2:        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

           Stock 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.
               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.


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 June 30, 1998.


NOTE 4:        PROPERTY AND EQUIPMENT

               Property  and  equipment  consist of the  following  at March 31,
1998:

                    Land                                         $    523,974
                    Building and building improvements                858,529
                    Furniture and office equipment                     70,229

                    Total                                           1,452,773
                    Less: Accumulated depreciation                    221,130

                    Property and Equipment - Net                  $ 1,231,603

Depreciation  expense for the nine  months  ended June 30, 1998 and for the nine
months ended June 30, 1997 totaled $18,490 and $19,483, 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 June 30, 1998 is $165,939.



<PAGE>

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                        Notes to Consolidated Financial Statements

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   $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
               June 30, 1998 is $8,000.

               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 June 30, 1998, 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       $486,846
$1,971  each,  bearing  interest  at 8.25%  and  maturing  on
September  1,  2021.  The  mortgages  are  secured  by rental
roperties.


Mortgage payable dated March 26, 1997, in the original amount 
of $215,400, with monthly interest at prime plus 1.5% payable        200,531
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.


<PAGE>

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,         122,565
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


Three construction loans, in the original amount totaling
$1,065,000, payable monthly with interest only at 9.75% until        552,556
June 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, crossing Lot 13 and Beach Lane

Notes  payable with no interest is due upon sale of Crossings        115,000
Lot 13 Spec home.


Loan payable with interest at 12% per annum and is due on             100,000
demand. Repayment of this loan is guaranteed by the principal
stockholder of the Company.

Legal settlement obligation from 1991 to a contractor is
payable in equal semi-annual installments on June 1 and               13,120
December 1 of each year with annual payments of $8,120.

Other notes and mortgages                                              5,525
Total Notes and Mortgages Payable                                  1,596,143
Less: Current Portion                                                 17,700

Total Long Term Notes and Mortgages Payable                       $1,578,443


<PAGE>








                                            

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
 Notes to Consolidated Financial Statements

                                                 


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.

                                      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


<PAGE>


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.

                  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>



                                                      

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1998



NOTE 9:      COMMITMENTS AND CONTINGENCIES (continued)


                  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.


<PAGE>



               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:



<PAGE>



                          Earnings
                          Before Taxes
                                                         Shares to be Issued


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


<PAGE>




                  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>

                                               

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
          Notes to Consolidated Financial Statements

                                                          

NOTE 9:      COMMITMENTS AND CONTINGENCIES (continued)

               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:

             Fixed Options               Shares              Weighted-Averaged
                                                               Exercise Price

           October 1, 1996                0                       -
           Granted                      360,000                 $  1.40
           Exercised                      0                        -
           Forfeited                      0                        -

           June 30, 1998                360,000                 $ 1.40

   Exercisable at June 30, 1998         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 March 31, 1998.

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                            Outstanding Options                               Exercisable Options

    Outstanding                Number     Weighted average   Weighted-            Number
   Exercise Price           Outstanding       Remaining        Average         Exercisable     Weighed-average
                            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>

<PAGE>


                  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 June 30,  1998 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>


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
                     Notes to Consolidated Financial Statements

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  $234,467  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
               nine months  ended June 30, 1998 to a firm in
               which a director of the company is a partner.

NOTE 11:       SUBSEQUENT EVENTS

               In  July  and  August  1998,   the  Company  sold  the  following
properties:


                        Harmat Homes
                                                           Selling Price
                      Costo   Home  (x 13)                 $    475,000

                       Harmat Holding
                      Pologrounds
                      lots  #  1,3,7,8
                      & 12                                       505,000

                      Quick Storage, Inc.
                       Quick Storage
                          Facility                               710,000

                        North Side Woods
                          Lot #10                                 70,000

                                                             $ 1,760,000


<PAGE>

                          The Harmat Organization, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

            FOR THE NINE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE

                        NINE MONTHS ENDED MARCH 31, 1998



The total  revenues  for the nine  months  ended June 30,  1998 were  $4,719,156
compared to revenues of  $1,315,021  for the nine months ended June 30, 1997. An
increase of  approximately  $3,404,135 due to sale of Jagger Woods  Development,
Polo Ground lot #5, and four home sales.

Construction Sales

Deliveries  of four  homes,  Jagger  Woods  Development  and Polo  Ground Lot #5
resulted in revenues of $4,533,465  for the nine months ended June 30, 1998. For
the nine months ended June 30, 1997 there were sales of  $1,315,021.  The reason
for the increase in revenues is the Company sold Jagger Woods Development, which
consisted of 57 Lots, for $2,998,205  andand Polo Ground lot #5 for $105,000 and
four homes for $1,430,260.

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

Rental Income

Rental  based  properties  resulted in rental  income of  $185,691  for the nine
months ended June 30, 1998.  For the nine months ended June 30, 1997 the Company
generated  rental  income of $60,618.  Rental  income is  increased by $125,075.
Quick  Storage of Quogue a Self Storage  Facility,  generated  rental  income of
$83,845 for the nine months ended June 30, 1998.  The reason for the increase is
the  rental  properties  were  fully  rented at higher  rates of rents than nine
months ended June 30, 1997.

Gross Profit Margin

The  Company's  gross  profit  margin on homes  and  development  delivered  was
approximately  twenty-one  (21%)  percent  during  nine months and June 30, 1998
compared  to seven (7%)  percent  during nine months  ended June 30,  1997.  The
increase is gross profit margin resulted from the sale of four homes, a devloped
lot, 6 Jagger Woods Development.

Cost of sale for the nine months ended June 30, 1998 was  $3,618,475 as compared
to $1,173,907  for nine months ended June 30, 1997. The increase in cost of sale
resulted primarily from the sale of Jagger Woods Development.

Selling and general administrative  expenses were $862,798 for nine months ended
June 30, 1998 as compared to $418,323 for nine months

                                                         - 4 -

<PAGE>



ended June 30,  1997.  The  increase  is due to  primarily  increasing  costs of
administrative staff, marketing, and professional fees.

Gross Interest Costs

Gross  interest  costs were  $120,588  for the nine  months  ended June 30, 1998
compared to $15,323 for the nine months  ended June 30,  1997.  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.  The
Company  used  construction  financing  to build  homes and paid  financing  and
interest costs.

Subsequent Events

The Company sold the following:

                                   Selling Price

1.       Harmat Homes                  $475,000
         Custom Home x13

2.       Harmat Holding                $505,000
         Polo Grounds
         Lots 1,3,7,8 & 12

3.       Quick Storage of Quogue       $710,000
         Quick Storage, a self
        storage facility

4.       Northside Woods               $ 70,000
         Lot #10
                        Total      $1,760,000


                                                         - 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 nine months ended June 30, 1998,  the Company had positive cash flows
from operating activities of $15,746 versus a negative cash flow of $511,762 for
the nine months ended June 30, 1997.



                                                         - 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: August 14, 1998