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>
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<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 -
<PAGE>
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.
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<PAGE>
The Harmat Organization, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been the proceeds of its initial
public offering, cash generated from sales, and borrowings from its officers and
related parties.
During the three months ended December 31, 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.
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<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
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the three months ended December 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> AUG-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,627,266
<SECURITIES> 26,719
<RECEIVABLES> 28,144
<ALLOWANCES> 0
<INVENTORY> 990,617
<CURRENT-ASSETS> 3,743,610
<PP&E> 1,399,806
<DEPRECIATION> 170,434
<TOTAL-ASSETS> 5,147,553
<CURRENT-LIABILITIES> 746,350
<BONDS> 909,764
0
0
<COMMON> 2,613
<OTHER-SE> 4,253,604
<TOTAL-LIABILITY-AND-EQUITY> 5,147,554
<SALES> 1,476
<TOTAL-REVENUES> 34,008
<CGS> 10,418
<TOTAL-COSTS> 282,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,700
<INCOME-PRETAX> (199,477)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199,477)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
