SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

(Mark One)
(X)      Quarterly  report  pursuant  to section 13 or 15 (d) of the  Securities
         Exchange Act of 1934, for the quarterly period ended December 31, 1996.

( )      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, 1996

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 -
         December 31, 1996 and December 31, 1995                           3-4

         Consolidated Statements of Operations -
         Three months ended December 31, 1996
           and December 31, 1995                                            5

         Consolidated Statements of Cash Flows -                           6-8
         Three months ended December 31, 1996
           and December 31, 1995

         Notes to Consolidated Financial Statements                       9-15

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

PART II.          OTHER INFORMATION

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

Signatures                                                                19











<PAGE>


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                          The Harmat Organization, Inc.



THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

                                      December 31,          December 31,
ASSETS                                     1996                   1995
------                                         
                                      -------
CURRENT ASSETS

 Cash and Cash                                    $2,627,266          $   15,439
Equivalents

 Marketable Securities                                26,719             367,492

 Accounts Receivable                                  28,144              14,764

 Land and Construction
Costs                                                990,617             114,889

 Prepaid
Expenses                                              70,863               1,175

                                      ---------------------------
 Total Current Assets                              3,743,610             513,759

Property and Equipment-
Net                                                1,229,372           1,125,067

                                      ---------------------
Other Assets

 Land and Construction                          -
Costs                                                                    776,327

 Land Held for                                  -
Development                                                               72,298

 Due From Affiliated                                                 -
Companies                                              8,790

 Goodwill-Net
                                                      64,335              72,377
 Investment in
Partnership                                           26,447              29,727

 Deferred Offering Costs                         -                        30,000

 Land Deposits                                        75,000              75,000

                                      ----------------------------
 Total Other
Assets                                               174,572           1,055,729

                                      ----------------------------
             Total Assets                         $5,147,553          $2,694,555

                                      -------------------------------

<PAGE>

THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
CONSOLIDATED BALANCE SHEET

                                                   December 31,       December 31,
LIABILITIES & STOCKHOLDER'S EQUITY                        1996                 1995
----------------------------------                            

                                                   ------------------ --------------------- -----------------
CURRENT LIABILITIES

 Current Portion of Mortgage Payable                  $       218,611        $      229,577

 Notes Payable-Shareholders                                 -                       277,000

 Notes Payable-Related Parties                                 20,000                90,000

 Loans Payable-Bank                                         -                       240,000

 Other Notes and Loans Payable                                152,040               139,360

 Accounts Payable and Accrued Expenses                        216,885               646,775

 Customer and Security Deposits                               138,814                97,500

                                                   ------------------ --------------------- -----------------
 Total Current Liabilities                                    746,350             1,720,212

Other Liabilities

 Mortgages Payable-Net of Current Maturities           909,764               1,031,273

 Notes Payable-Related Party                                -                      125,000

                                                   ------------------ ---------------------
    Total Other Liabilities                              909,764            1,156,273

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 and 1,250,000

   Shares Issued and Outstanding at

  December 31,1996 and December 31,1995                            2,613              1,250

 Additional Paid-in Capital -Common Stock                      4,253,604            129,250

 Retained Earnings  (Deficit)                                  (764,777)          (312,430)

                                                      ------------------------------------- -----------------
Total Stockholders' Equity                                     3,491,439          (181,930)

                                                      ------------------------------------- -----------------
Total Liabilities and Stockholders' Equity                    $5,147,554         $2,694,555

                                                      ------------------------------------- -----------------
<PAGE>


THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

                                                                Three Months      Three Months
                                                                     ended             ended
                                                                December 31,      December 31,
REVENUES                                                             1996               1995
--------                                                                 

                                                                -------------------------------------
 Construction Sales                                               $          1,476  $          43,190

 Sale of Land Held for Development                                                                   -

 Rental Income                                                              32,533             51,751

 Management Fee Income                                                                         37,500

                                                                -------------------------------------

  Total Revenues                                                            34,008            132,441


Cost of Sales and Direct Operating Expenses                                 10,418             39,643

                                                                -------------------------------------

             Gross Profit                                                   23,590             92,798


Selling, General and Administrative Expenses                               232,731            103,310


Charge for Executive Compensation Capitalized                                                  52,500

                                                                -------------------------------------

             Income (Loss) from Operations                               (209,141)           (63,012)


Other Income (Expense)

 Gain on Sale of Marketable Securities                                       1,070            110,093

 Unrealized Gain on Marketable Securities                                       (24)           28,467

 Interest and Dividend Income                                               27,318              4,884



 Interest Expense                                                         (18,700)           (42,407)

                                                                -------------------------------------
 Total Other (Expense) Income                                                9,665            101,037

                                                                -------------------------------------
Net Income (Loss)                                                     $  (199,477)           $ 38,025

                                                                -------------------------------------
(Loss) per Share                                                              (0.08)             (0.01)

                                                                -------------------------------------
 Weighted Average Number of Shares                                       2,422,758          1,750,000


<PAGE>

                                                                -------------------------------------
THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOW

                                                          Three Months    Three Months
                                                               ended               ended
                                                          December 31,    December 31,
                                                               1996                 1995
                                                          ------------------- ------------------
Operating Activities:

 Net (Loss) Income                                                 $(199,477)            $38,026

                                                          ------------------- ------------------
 Adjustments to Reconcile Net(Loss) Income to Net

                                                          ------------------- ------------------
 Cash(Used For) Provided by Operating Activities:

  Depreciation and Amortization                                         5,922             14,476

  Gain on Sale of Marketable Securities                               (1,070)          (110,093)

  Change in Unrealized(Gain) Loss on Investments                        24                28,467

  Executive Compensation Capitalized                                        -             52,500

Changes in Assets and Liabilities:

 Contract Receivables                                                   (550)


  Purchase of Marketable Securities                                   (4,212)

  Sale of Marketable Securities                                         3,057             22,951

  Prepaid Expenses                                                   (27,365)

  Accounts Payable and Accrued Expenses                               (7.905)             57,569

  Customer Deposits                                                   126,890             47,500


   Accrued Interest Receivables                                                          (8,332)

                                                          ------------------- ------------------

  Total Adjustments                                                    94,791           105,038

                                                          -------------------------------------
Net Cash - Operating Activities-Forward                             (104,686)           143,064

                                                          -------------------------------------

Investing Activities:


  Advances from / to Affiliates and Related Parties                   (8,790)


  Acquisition of Property & Equipment                                (83,179)           (16,153)

  Land Deposit                                                         10,000          (137,652)

  Land and Construction Cost                                        (292,432)

                                                          ------------------- ------------------

 Net Cash-Investing Activities-Forward                              (374,401)         (153,805)

                                                          -------------------------------------


Financing Activities:


 Repayment of Notes Payable-Related Party                            (70,000)

 Repayment of Mortgage Payable                                        (7,856)           (14,764)

 Repayment of Other Notes & Loans Payable                            (19,460)



                                                          -------------------------------------
 Net Cash-Financing Activities                                       (97,316)          (14,764)

                                                          -------------------------------------




Net Increase(Decrease) in Cash and Cash
Equivalents                                                            (576,403)        (25,505)

Cash and Cash Equivalents-Beginning of Periods                         3,203,669           40,944

                                                                --------------------------------
Cash and Cash Equivalents-End of Periods                              $2,627,266         $15,439

                                                                ================================
Supplemental Disclosures of Cash Flow Information:

                                                                ================
   Cash paid during periods for:

      Interest                                                            $18,700         $42,407



                                                         - 3 -

<PAGE>






THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY



                                          Common Stock            Additional                          Total

                                      ---------------------------
                                      Number of         Amount      Paid-in       Accumulated   Stockholders'
                                          Shares        At Par      Capital        (Deficit)          Equity
                                      -------------- ------------------------- -----------------------------------
Balance-September 30,1995                  1,250,000    $   1,250     $129,250    $    (350,456)  $      (219,956)


 Net Income(Loss) for period                                                              38,026            38,026


                                      -------------- ------------------------- -----------------------------------
Balance-December 31,1995                   1,250,000    $   1,250     $129,250    $    (312,430)  $      (181,930)

                                      -------------- ------------------------- -----------------------------------




THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT 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    $   2,612      $4,253,604  $     (565,300)     $   3,690,916


 Net (Loss) for period                                                                   (199,477)         (199,477)


                                      -------------- --------------------------------------------- -----------------
Balance-December 31,1996                   2,612,500    $   2,612      $4,253,604  $     (764,777)     $   3,491,439

                                      -------------- --------------------------------------------- -----------------




</TABLE>
                                                         - 4 -

<PAGE>



                                       The Harmat Organization, Inc.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                (UNAUDITED)



NOTE 1 -          SIGNIFICANT ACCOUNTING POLICIES
                  -------------------------------

                  BASIS OF PRESENTATION
                  The interim financial  statements are prepared pursuant to the
                  requirements for reporting on Form 10-Q. The December 31, 1996
                  balance   sheet  data  was  derived  from  interim   financial
                  statements  whereas the December  31, 1195 balance  sheet data
                  was derived from  audited  financial  statements  and together
                  with the interim financial statements and notes thereto should
                  be read in conjunction with the financial statements and notes
                  included in the  Company's  latest annual report on Form 10-K.
                  In  the  opinion  of the  management,  the  interim  financial
                  statements  reflect  all  adjustments  of a  normal  recurring
                  nature  necessary  for a fair  statement  of the  results  for
                  interim periods.  The current period results of operations are
                  not necessarily indicative of results which ultimately will be
                  reported for the full fiscal year.

                  BUSINESS

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

                  The  December  31,  1996  and  December  31,  1995   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.

                  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

                                                         - 5 -

<PAGE>



                  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 The Harmat  Management Co., Inc. -
                  New York has a limited partnership interest.

                  The Plan for Incentive Compensation of Matthew Schilowitz [the
                  "Schilowitz incentive Plan"] who is the principal, 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.  In the
                  event the  Company's  earnings  before  taxes first  equals or
                  exceeds  and 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 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
                  would  result  in  substantial  compensation  expense  to  the
                  Company in future years.

NOTE 2 -          ACCOUNTING PERIOD
                  -----------------

                  Effective  September 30, 1996, the Company changed to a fiscal
                  year  ending on  September  30th.  Prior to 1996,  the Company
                  utilized  a  calender  year end.  The  accompanying  financial
                  statements  include the three month period ended  December 31,
                  1996 and December 31, 1995.

                  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 $2,627,266
                  at December 31, 1996.

                  CONCENTRATION OF CREDIT RISK

                  Financial instruments which potentially subject the Company to
                  concentrations  of credit  risk are cash and cash  equivalents
                  and accounts receivable

                                                         - 6 -

<PAGE>



                  arising  from the  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,  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  $2,553,000  at December 31,  1996.  The Company
                  believes no  significant  concentration  of credit risk exists
                  with respect to these cash equivalents.


NOTE 3 -          ECONOMIC DEPENDENCY
                  -------------------

                  There  were four and six  construction  contracts  which  were
                  deemed major customers and accounted for  approximately 99% of
                  total  construction  sales for the three months ended December
                  31, 1996 and  December  31,  1995.  For the three months ended
                  December 31, 1996, these contracts  represented 25%, 20%, 19%,
                  and 27% of total sales.  For the three  months ended  December
                  31, 1995,  five contracts  represented 16% each of total sales
                  and one contract  represented 19% 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;   trading   securities;   and   available-for-sale
                  securities.  In  accordance  with SFAS No. 115,  prior  years'
                  financial  statements  are not to be  restated  to reflect the
                  change in adopting the new accounting method.

                  Management  determines the appropriate  classification  of its
                  investments  in debt  and  equity  securities  at the  time of
                  purchase and reevaluates  such  determination  at each balance
                  sheet date. At December 31, 1996 and 1995, all of

                                                         - 7 -

<PAGE>



                  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.  The Company
                  primarily  uses the specific  identification  method for gains
                  and losses on the sales of marketable securities.

                  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 common 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

                  HARMAT HOLDING AND HARMAT HOMES

                  Harmat Holding Corp. ("Harmat Holding") and Harmat Homes, Inc.
                  ("Harmat   Homes")recognize   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. The method provides that all
                  construction costs be recorded as incurred and monies received
                  from the  purchases  recorded as deposits  until the  purchase
                  contracts  close  when  all  revenue  costs  and  profits  are
                  recognized.

                  Harmat Holding classifies all land and
                  construction costs that are expected to be

                                                         - 8 -

<PAGE>



                  completed  within one year as a current asset. At December 31,
                  1996 and  1995,  such  land  and  construction  costs  totaled
                  $141,962  and  $114,889.  Customer  deposits  received on such
                  contracts  totaled  $131,374  and $97,500 at December 31, 1996
                  and 1995.

                  NORTHSIDE WOODS AND HARMAT CAPITAL

                  Rental income of Northside Woods, Inc. ("Northside
                  Woods") and Harmat Capital Corp. ("Harmat Capital")
                  is recognized as it is earned pursuant to the
                  terms of each lease on a straight line basis.  All
                  leases have an initial or remaining term of one
                  year or less.

NOTE 3 -          PROPERTY AND EQUIPMENT
                  ----------------------

                  Property and equipment are recorded at cost and depreciated by
                  the  straight-line  method over the estimated  useful lives of
                  the assets  for  building  and  improvements  and  accelerated
                  methods  for  furniture  and  equipment  of 5 - 40  years  and
                  consist of the following:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                     December                   December
                                                     31, 1996                   31, 1995

         Land                                        $ 523,000                  $ 450,495
         Buildings and
           improvements                                830,299                    795,950
         Furniture and fixtures                         46,178                     33,324
                                                     ---------                  ---------
                                                     1,399,806                  1,279,769

         Less: accumulated
           depreciation
           and amortization                            170,434                    154,702
                                                     ---------                  ---------

                                                $1,229,372                 $1,125,067
                                                 =========                  =========

</TABLE>

NOTE 4 -          INCOME TAXES
                  ------------

                  The Company will file a consolidated federal income tax return
                  with its subsidiaries.  At December 31, 1996, the Company will
                  have  net  operating  loss   carryforwards   of  approximately
                  $570,000  available to reduce future taxes. These carryforward
                  losses expire in 2011. Pursuant to Section 382 of the Internal
                  Revenue  Code   regarding   substantial   changes  in  Company
                  ownership, utilization of these losses may be limited.

                  For the year ended December 31, 1995, each of the subsidiaries
                  had elected  S-corporation  status under the Internal  Revenue
                  Code and similar state statutes and, therefore,  did not incur
                  federal  or state  income  taxes  except  for a New York State
                  equalization tax on S-corporation  earnings.  Taxes are passed
                  through to the individual shareholder for S-corporations.  Pro
                  forma net income and  earnings  per share are  presented as if
                  the companies were C-corporations. On March 1, 1996,

                                                         - 9 -

<PAGE>



                  each of the S-corporations terminated their
                  S-corporation status and became C-corporations.


NOTE 5 -          GOODWILL
                  --------

                  The cost of the newly  acquired  subsidiary,  Quick Storage of
                  Quogue, Inc., 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 ten
                  years under the straight-line method. Accumulated amortization
                  at December  31,  1996 and 1995 was  $16,083  and $8,042.  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 of  Quogue,  Inc.
                  Impairment  is  recognized if the Company value of goodwill is
                  less than the projected  undiscounted  cash flow from acquired
                  assets or business.

NOTE 6 -          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.

                  The following is a schedule of warrants:

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

Date                                       No. of                                    FMV at                No. of
of                                         Warrants             Exercise             Date of               Warrants
Grant                 Type                 Issued               Price                Grant                 Exercised
February              Series A             1,500,000            $6.00                $5.75
1996
February              Series B               500,000            $9.00                $5.75
                                           ---------
1996
TOTAL                                      2,000,000




                                                         - 10 -
</TABLE>

<PAGE>



NOTE 7 -          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 in lieu of an escrow of 750,000 of his shares. The
                  escrow  was  part  of the  "earnout"  agreement.  The  500,000
                  contributed  shares were canceled.  The  contribution has been
                  reflected  retroactively  in these  financial  statements as a
                  recapitalization.

NOTE 8 -          COMMITMENTS AND CONTINGENCIES
                  -----------------------------

                  LAND CONTRACT

                  Pursuant to an agreement dated December 1995, the
                  Harmat Organization, Inc. has agreed to purchase
                  three parcels of undeveloped land located in
                  Westhampton, New York for $1,247,000.  The Harmat
                  Organization, Inc. has deposited $75,000 pursuant
                  to the terms of such contract.  This contract is
                  subject to the Company receiving a commitment for
                  the financing of land acquisitions.

                  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 the inherent uncertainty of
                  the legal process,  however, this assessment may be subject to
                  change in the near term.

                  COMMITMENTS AND STOCK OPTION PLAN

                  In 1996,  the Board of  Directors  adopted a stock option plan
                  providing  for the  granting  of up to  400,000  shares of the
                  Company's common stock. This Plan excludes the Company's chief
                  executive  officer and principal  shareholder.  No shares have
                  been granted pursuant to this stock option plan.

                  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 shareholder 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  warrants  to
                  purchase up to an aggregate  of 500,000  shares of the Company
                  common stock for ten years exercisable at $5.75 per share with
                  rights vesting upon attainment of certain earnings levels.


                                                         - 11 -

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                          The Harmat Organization, Inc.

                                       MANAGEMENT'S DISCUSSION AND ANALYSIS

                          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THE

                                       THREE MONTHS ENDED DECEMBER 31, 1995


Net revenues  decreased  $98,433 to $34,008 for the three months ended  December
31, 1996 from $132,441 for the three months ended December 31, 1995. The $41,714
decrease in gross sales was due  primarily  to the fact that there were no sales
recorded in the three months ended  December 31, 1996.  The remaining  change in
net  revenues  related  primarily  to a lower  rental  income and a reduction in
management fee income.

Cost of sales  for 1996 was  $10,418  as  compared  to  $39,643  for  1995.  The
reduction  is due to the lack of sales in the three  months  ended  December 31,
1996 versus 1995.

Selling,  general and administrative  expenses were $232,731 in 1996 as compared
to  $103,310  in  1995.  The  increase  is  due  primarily  to the  addition  of
administrative staff and marketing costs in 1996 versus 1995.

Interest expense  decreased from $42,407 in 1995 to $18,720 in 1996 primarily as
a result of a reduction in construction loans and the repayment of bank debt and
payables  to  Shareholders  and  Related  Parties  from the public  offering  in
September, 1996.

The net loss for the three months ended  December 31, 1996 increased by $237,502
from a net profit of $38,025  for the three  months  December  31, 1995 to a net
loss of $199,477.


                                                         - 12 -

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                          The Harmat Organization, Inc.

                                       MANAGEMENT'S DISCUSSION AND ANALYSIS

                           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                         LIQUIDITY AND CAPITAL RESOURCES

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

During the three months ended  December 31, 1996,  the Company had negative cash
flows from  operating  activities  of  $104,686  versus a positive  cash flow of
$143,064 for the three months ended December 31, 1995. Investing activities used
cash of $374,401 in 1996 and $153,805 in 1995  primarily for the  acquisition of
land and construction costs.



                                                         - 13 -

<PAGE>



                          The Harmat Organization, Inc.

PART II           OTHER INFORMATION

ITEM 1.           Legal Proceedings

                  There have been no new legal  proceedings or material  changes
                  to legal proceedings  during the period from those reported in
                  the Company's Form 10-K for the year ended September 30, 1996.


ITEM 6.           Exhibits and Reports on Form 8-K

                  a.  Exhibits - None

                  b.  Reports on Form 8-K
                           None


                                                         - 14 -

<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
                  Matthew C. Schilowitz
                  Chief Executive Officer




         By
                  Vincent E. Hunt
                  Chief Financial Officer



Date:       , 1997

                                                         - 15 -

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