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 March 31, 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 December 31, 1997

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


<PAGE>






                          The Harmat Organization, Inc.



                               Index to Form 10-Q





                                                                      Page
                   Item                                               Number


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:

         Consolidated Balance Sheets -
         March 31, 1998                                              3-4

         Consolidated Statements of Operations -
         Three months ended March 31, 1998
           and March 31, 1997                                          5

         Consolidated Statements of Cash Flows -                     6-8
         Three months ended March 31, 1998
           and March 31, 1997

         Notes to Consolidated Financial Statements                  9-20

         Management's Discussion and Analysis of Financial
          Condition and Results of Operations                         21

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

                                 March 31, 1998

                                     ASSETS






CURRENT ASSETS
  Cash and cash equivalents                                 $ 1,168,967
  Marketable securities                                          10,639
  Accounts receivable                                            58,970
  Notes receivable                                              218,000
  Notes receivable - shareholder                                165,939
  Prepaid expenses                                               56,218
                                                             --------------

Total Current Assets                                          1,678,733
                                                              ---------

PROPERTY AND EQUIPMENT - NET                                  1,239,125
                                                              ---------
OTHER ASSETS
  Construction costs                                          1,201,266
  Land held for development                                     729,579
  Due from affiliated companies                                  89,467
  Goodwill - net                                                 54,279
  Investment in Partnership                                      76,447
  Land deposits                                                  85,000
                                                             -------------
                                                              2,236,038
TOTAL ASSETS                                                 $5,153,896



<PAGE>
                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                 March 31, 1998



                                        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current portion of notes and mortgages payable                     $   35,400
  Notes payable                                                         228,120
  Other notes payable                                                     5,525
  Accounts payable and accrued expenses                                  83,160
  Customer and security deposits                                        330,090
                                                                      ---------

Total Current Liabilities                                               682,295

OTHER LIABILITIES
  Mortgages payable - net of current maturities                         780,944
  Construction loans payable - net of current maturities                622,002
    Total other liabilities                                           1,402,946

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)                                        (1,187,561)

Total Stockholders' Equity                                            3,068,655

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 5,153,896
                                                                    ===========


<PAGE>
                                                                            
                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


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


                                                                               Six Months            Six Months
                                                                                  Ended                Ended
                                                                                March 31             March 31,
                                                                                     1998                 1997
                                                                                  ------                 ----- 
REVENUES
  Construction sales                                                            $  957,936      $         1,476
  Sale of land held for development                                              3,105,705                    -
  Rental income                                                                     90,712               69,934
                                                                              ------------        -------------

    Total Revenues                                                               4,154,353               71,410

COST OF SALES AND DIRECT OPERATING EXPENSES                                      3,191,710               20,306
                                                                              ------------       --------------

  Gross profit                                                                     962,643               51,104

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                       611,073              530,272

CHARGE FOR EXECUTIVE COMPENSATION CAPITALIZED                                                -                  -
                                                                           -------------------  -----------------

(LOSS) INCOME FROM OPERATIONS                                                      351,570             (479,168)
                                                                             -------------         -------------

OTHER INCOME (EXPENSE)
  Gain on sale of marketable securities                                             37,227               53,780
  Interest and dividend income                                                      35,814               52,780
  Interest expense                                                                 (84,853)             (43,279)
                                                                             --------------      ---------------

Total Other Income (Expense)                                                       (11,812)              63,281
                                                                            ---------------      --------------

Net Income (LOSS)                                                                  339,758             (415,887)

Charge in lieu of income taxes                                                             -                     -
                                                                           -----------------    ------------------

Pro Forma net income (loss)                                                  $     339,758         $   (415,887)
                                                                             =============         =============

  Income and (Loss) per share                                              $      0.13          $      (0.17)
                                                                           ============         ================
                                                                                     

  Weighted average number of shares                                              2,575,596            2,510,683
                                                                              ============          ===========


</TABLE>

<PAGE>

                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

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



                                               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 - March 31, 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                                                                    339,759          339,758

Balance - March 31, 1998              2,612,500     $     2,613     $4,253,604       $(1,187,561)      $3,068,656
                                    ===========     ===========     ==========       ============      ==========



</TABLE>

<PAGE>
                                                                         


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                                               Six Months            Six Months
                                                                                  Ended                Ended
                                                                                March 31,            March 31,
                                                                                     1998                 1997
                                                                                 -----                  -----
OPERATING ACTIVITIES:
  Net (loss) income                                                             $    339,758       $     (415,887)
                                                                                ------------       ---------------
  Adjustments to reconcile net (loss) income to net cash
    (used for) provided by operating activities:
      Depreciation and amortization                                                   10,968               12,704
      Gain on sale of marketable securities                                                -              (53,780)

    Changes in assets and liabilities:
      Contracts receivable                                                           (25,507)             (63,716)
      Purchase of marketable securities                                                    -               (4,212)
      Sales of marketable securities                                                       -               66,918
      Prepaid expenses                                                                   752              (38,825)
      Accounts payable and accrued expenses                                         (301,187)              61,996
      Refundable deposits                                                             45,749              253,694
      Customer deposits                                                              273,624                     -
                                                                                ------------    ------------------

      Total Adjustments                                                                4,399              234,779
                                                                              --------------         ------------

      Net Cash Used by Operating Activities Forward                                  344,157             (181,108)
                                                                                ------------          ------------

INVESTING ACTIVITIES:
  Advances from/to affiliates and related parties                                    (21,867)             (31,364)
  Acquisition of land, property and equipment                                              -              (96,269)
  Investment in partnership                                                          (50,000)                   -
  Land deposits                                                                       25,000               (6,000)
  Land and construction costs                                                      1,771,694           (1,313,069)
                                                                                  ----------         -------------

      Net Cash from (used by) Investing Activities Forward                         1,724,827           (1,446,702)
                                                                                 -----------         -------------
</TABLE>


<PAGE>
                                                                         


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                               Six Months            Six Months
                                                                                  Ended                Ended
                                                                                March 31,            March 31,
                                                                                     1998                 1997
                                                                                 ------              -----

FINANCING ACTIVITIES:
  Repayment of notes payable - related party                                               -              (90,000)
  Repayments of mortgages payable                                                   (951,013)              (6,862)
  Repayments of other notes payable & loan payable                                  (143,000)             (32,360)

    Net Cash from Financing Activities                                            (1,094,013)            (129,222)
                                                                               --------------      ---------------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                                        974,971           (1,757,032)

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

CASH AND CASH EQUIVALENTS - end of period                                        $ 1,168,967          $ 1,446,637
                                                                                 ===========          ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
    Cash paid during the periods for:
      Interest                                                                 $      84,853       $       43,799
                                                                               =============       ==============
      Income taxes                                                            $        2,280       $       20,545
                                                                              ==============       ==============
</TABLE>

<PAGE>
                                                                          


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 1998




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 March 31, 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.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                     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


</TABLE>


<PAGE>


                                                                       


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 1998




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  six-month
                  period ended March 31, 1998 and March 31, 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 $1,168,967
                  at March 31, 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 March
                  31, 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

                                 March 31, 1998



NOTE 2:        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Economic Dependency

                  There  were five and zero  construction  contracts  which were
                  deemed major  customers and  accounted for total  construction
                  sales for the six  months  ended  March  31,  1998 and the six
                  months ended March 31, 1997. For the six-month ended March 31,
                  1998,  these contracts  represented 74%, 11%, 7%, 3% and 5% 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 March 31, 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

                                 March 31, 1998




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  March  31,  1998,   such  land  and
                      construction   costs  totaled   $729,579  and  $1,201,226.
                      Customer  deposits on such contracts  totaled  $330,090 at
                      March 31, 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

                                 March 31, 1998



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 March  31,  1998 are as
                  follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                        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                                                                              -%
</TABLE>

                  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 March
                  31, 1998 was $38,200.  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

                                 March 31, 1998




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  (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 March 31, 1998.


NOTE 4:        PROPERTY AND EQUIPMENT

                  Property and  equipment  consist of the following at March 31,
1998:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                        Land                                                                    $   523,974
                        Building and building improvements                                          858,529
                        Furniture and office equipment                                               68,905
                                                                                             --------------

                        Total                                                                     1,451,408
                        Less: Accumulated depreciation                                              212,283

                        Property and Equipment - Net                                            $ 1,239,125
                                                                                                ===========
</TABLE>

                  Depreciation  expense for the six months  ended March 31, 1998
                  and for the six months  ended March 31, 1997  totaled  $17,210
                  and $11,844, 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 March 31, 1998 is $165,939.



<PAGE>


                                                                          


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 1998



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 March 31, 1998 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
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                  At March 31, 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 $1,971 each,  bearing  interest at 8.25%
                       and  maturing on  September 1, 2021.  The  mortgages  are
                       secured by rental properties.                                 $  487,406

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.                                   203,717


<PAGE>


                                                                                                                   Page 14


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 1998


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
                                                                                                           125,221

                       Three  construction  loans, in the original  amount  totaling  $1,065,000,
                       payable  monthly  with  interest  only at 9.75%  until  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                                                                          622,002

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

                       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                                                 1,671,991
                       Less: Current Portion                                                                35,400
                                                                                                      ------------

                       Total Long Term Notes and Mortgages Payable                                      $1,636,591
                                                                                                        ==========

</TABLE>




<PAGE>


                                                                            


                 THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 1998



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 March 31, 1998.

                  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

                                 March 31, 1998


                  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.

a) 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.

                  b)  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

                                 March 31, 1998


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


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

                    March 31, 1998                                         360,000          $              1.40
                                                                           =======          ===================


                    Exercisable at March 31, 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.

                                                     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  March 31,
                  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

                                 March 31, 1998



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  $89,467 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
                  three  months  ended  March  31,  1998  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 SIX MONTHS ENDED MARCH 31, 1998 COMPARED WITH THE

                         SIX MONTHS ENDED MARCH 31, 1997



Total revenues for the six months ended March 31, 1998 were $4,154,353  compared
to revenues of $71,410 for the six months ended March 31,  1997,  an increase of
approximately  $4,082,943 due to sale of Jagger Woods  Development,  Polo Ground
Lot 5, and three home sales.

Construction Sales

Deliveries  of three  homes,  Jagger  Woods  Development  and Polo Ground Lot #5
resulted in revenues of $4,063,641  for the six months ended March 31, 1998. For
the six months  ended March 31, 1997 there were no sales  rendered.  The reasons
for the increase in revenues is the Company sold Jagger Woods Development, which
consisted of 57 Lots, for $2,998,205 and three single family homes for $957,936.

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 $90,712 for the six months
ended  March 31,  1998.  For the six months  ended in March 31, 1997 the Company
generated rental income of $69,934. Rental income is increased by $20,278. Quick
Storage of Quogue a Self Storage  Facility,  generated rental income for the six
months ended March 31, 1998, $55,342.  The reason for the increase is the rental
properties  were fully  rented at higher  rates of rents  than six months  ended
March 31, 1997.

Gross Profit Margin

The  Company's  gross  profit  margin on homes  and  development  delivered  was
approximately  twenty-four  (24%) percent  during the six months ended March 31,
1998,  compared to no percent in the six months  ended March 31,  1997,  because
there were no sales reported.  The increase in gross profit margin resulted from
the  sale of three  single  family  homes,  a  developed  Lot and  Jagger  Woods
Development.

Cost of sale for the six months ended March 31, 1998 was  $3,191,710 as compared
to $20,306 for the six months ended March 31, 1997. The increase in cost of sale
resulted primarily from the sale of Jagger Woods Development.






<PAGE>



Selling and general  administration  expenses  were  $611,073 for the six months
ended March 31, 1998 as compared to $530,272  for the six months ended March 31,
1997. The increase is due to primarily  increasing costs of administration staff
marketing and professional fees.


Gross Interest Costs

Gross  interest  costs were  $84,853  for the six months  ended  March 31,  1998
compared to $43,279 for the six months  ended March 31,  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.

Subsequent Events

The Company has entered into a contract to sell five lots from its 
development known as "Polo Ground" for $505,000.  In addition, the Company
has entered into a separate contract to sell a lot from North Side Woods
located in Westhampton, New York for $70,000.

<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 six months ended March 31, 1998,  the Company had positive cash flows
from  operating  activities of $344,157  versus a negative cash flow of $181,108
for the six months  ended  March 31,  1997.  Investing  activities  used cash of
$1,724,827  for the six months ended March 31, 1998 and  $1,446,702  for the six
months ended March 31, 1997.





<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

<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: May 13, 1998