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, 1997.
( ) Transition report pursuant to section 13 or 15 (d) of the
Securities Exchange Act of 1934, for the transition period from
to .
Commission file number 333-03501
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 March 31, 1997
Common Stock, $.001 par value 2,612,500 shares
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The Harmat Organization, Inc.
Index to Form 10-Q
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Page
Item Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
March 31, 1997 and March 31, 1996 3-4
Consolidated Statement of Operations -
Three months and six months ended March 31, 1997
and March 31, 1996 5
Consolidated Statements of Cash Flow - 6
Six months ended March 31, 1997
and March 31, 1996
Consolidated Statement of Stockholder's Equity 7-8
Notes to Consolidated Financial Statements 9-15
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
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The Harmat Organization, Inc. And Subsidiaries
Consolidated Balance Sheet
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ASSETS
CURRENT ASSETS March 31, 1997 March 31, 1996
Cash and Cash Equivalents $1,446,637 $ 82,340
Marketable Securities 13,581 87,556
Accounts Receivable 91,310 30,052
Land and Construction Costs 922,501 798,523
Prepaid Expenses 82,323 8,367
Total Current Assets 2,556,351 1,006,838
Property and Equipment-Net 1,235,681 1,143,770
Other Assets
Land and Construction Costs 2,201,016 608,349
Land Held for Development - 72,298
Due From Affiliated Companies 31,364 23,200
Goodwill-Net 62,325 70,366
Investment in Partnership 26,447 29,727
Deferred Offering Costs - 176,300
Land Deposits 91,000 75,000
Total Other Assets 2,412,151 1,055,240
Total Assets $6,204,183 $3,205,848
</TABLE>
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The Harmat Organization, Inc. And Subsidiaries
Consolidated Balance Sheet
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LIABILITIES & STOCKHOLDERS' EQUITY March 31, 1997 March 31, 1996
CURRENT LIABILITIES
Current Portion of Mortgage Payable $ 107,700 $ 331,266
Notes Payable-Shareholders - 270,260
Notes Payable-Related Parties - 215,000
Loans Payable-Bank - 240,000
Other Notes and Loans Payable 139,140 139,360
Accounts Payable and Accrued Expenses 286,786 635,969
Customer and Security Deposits 265,618 399,800
Total Current Liabilities 799,245 2,231,655
Other Liabilities
Mortgage Payable-Net of Current Maturities 1,021,669 925,445
Construction Loans Payable - Net
of Current Maturities 1,108,241 -
Total Other Liabilities 2,129,910 925,445
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 2,250,000
Shares Issued and Outstanding at March 31, 2,613 2,250
1997 and March 31, 1996
Additional Paid-In Capital-Common Stock 4,253,604 300,563
Retained Earnings (Deficit) (981,188) (254,065)
Total Stockholders' Equity 3,275,029 48,748
Total Liabilities and Stockholders' Equity $6,204,183 $3,205,648
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The Harmat Organization, Inc. And Subsidiaries
Consolidated Statement of Operations
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Three Three Six Months Six Months
Months Months ended ended
ended ended March 31, March 31,
March 31, March 31, 1997 1996
REVENUES 1997 1996
Construction Sales $ - $ 1,873 $ 1,476 $ 45,063
Rental Income 37,401 48,449 69,934 100,200
Management Fee Income - 37,500 - 75,000
Total Revenues 37,401 87,822 71,410 220,263
Cost of Sales and Direct Operating Expenses 9,888 - 20,306 39,643
Gross Profit 27,513 87,822 51,104 180,620
Selling, General and Administrative Expenses 297,541 116,890 530,272 220,200
Charge for Executive Compensation Capitalized - 14,750 - 67,250
Income (Loss) from Operations (270,028) (43,818) (479,168) (106,830)
Other Income (Expenses)
Gain on Sale of Marketable Securities 52,710 30,222 53,780 140,315
Unrealized Gain on Marketable Securities 24 8,711 - 37,178
Interest and Dividend Income 25,462 451 52,780 5,335
Interest Expense (24,579) (40,622) (43,279) (83,029)
Total Other (Expense) Income 53,617 ( 1,238) 63,281 99,799
Net Income (Loss) (216,411) (45,056) (415,887) (7,031)
Charge in Lieu of Income Taxes - - - -
Pro Forma Net Income (Loss) $(216,411) $(45,056) (415,887) $ (7,031)
(Loss) per Share ( .0.08) ( 0.02) ( 0.16) -
Weighted Average Number of Shares 2,598,607 1,952,381 2,510,683 1,851,190
</TABLE>
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THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
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Six Months Six Months
ended ended
March 31, 1997 March 31, 1996
Operating Activities:
$(415,887) $ (7,030)
Net (Loss) Income
Adjustments to Reconcile Net Income (Loss) to Net
Cash (Used For) Provided by Operating Activities:
Depreciation and Amortization 12,704 23,809
Gain on Sale of Marketable Securities (53,780) (140,315)
Change in Unrealized (Gain) Loss on Investments - 19,756
Executive Compensation Capitalized - 67,250
Changes in Assets and Liabilities:
Contract Receivables (63,716) (15,288)
Purchase of Marketable Securities (4,212) (204,667)
Sale of Marketable Securities 66,918 360,087
Prepaid Expenses (38,825) (7,192)
Accounts Payable and Accrued Expenses 61,996 46,763
Customer Deposits 253,694 349,800
Accrued Interest Receivable - (8,332)
Total Adjustments 234,779 491,671
Net Cash-Operating Activities-Forward (181,108) 484,641
Investing Activities:
Advances from/to Affiliates and Related Parties (31,364) (23,200)
Acquisition of Property & Equipment (96,269) (42,178)
Land Deposit (6,000) (137,652)
Land and Construction cost (1,313,069) (515,656)
Payment of Deferred Offering Costs - (146,300)
Net Cash-Investing Activities-Forward (1,446,702) (864,986)
Financing Activities:
Repayment of Notes Payable-Related Party (90,000) -
Repayment of Mortgage Payable (6,862) (18,903)
Repayment of Other Notes & Loans Payable (32,360) -
Repayment of Notes Payable-Shareholder - (6,740)
Distribution to Shareholder - (52,616)
Process of Private Placement - 500,000
Net Cash-Financing Activities (129,222) 421,741
Net Increase (Decrease) in Cash and Cash Equivalents (1,757,032) 41,396
Cash and Cash Equivalents-Beginning of Periods 3,203,669 40,944
Cash and Cash Equivalents-End of Periods $1,446,637 $82,340
Supplemental Disclosures of Cash Flow Information:
Cash paid during periods for:
Interest $43,799 $83,029
Income Taxes $20,545 $ -
Supplemental Disclosures on Non-Cash Investing
and Financing Activities:
For the six months ended March 31, 1996, the Company
distributed marketable securities with a fair value of
$186,400 to its controlling stockholder.
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THE HARMAT ORGANIZATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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<S> <C> <C> <C> <C> <C> <C>
Common Stock Additional Accumulated Total
Number of Amount Paid-in (Deficit) Stockholders
Shares At Par Capital 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 Accumulated Total
Number of Amount Paid-In (Deficit) Stockholders'
Shares At Par Capital Equity
Balance- September 30, 1,750,000 $1,750 $ 128,750 $ (350,456) $(219,956)
1995
Proceeds from Private
Placement 500,000 500 499,500 - $ 500,000
Transfer of S
Corporation Deficit to
Additional Paid-In-
Capital - - (342,437) 342,437 $ -
Executive Compensation
Capitalized - - 14,750 - $ 14,750
Net Income(Loss) for - - - (7,031) (7,031)
period
Stockholder
Distributions - - - (239,016) (239,016)
Balance-March 31, 1996 2,250,000 $ 2,250 $300,563 $(254,066) $ 48,747
</TABLE>
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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
March 31, 1997 and March 31, 1996 balance sheet data was
derived from interim 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 March 31, 1997 and March 31, 1996 financial
statements reflect the financial position and results of
operations of The Harmat Organization, Inc. and its
subsidiaries on a consolidated basis, which reflects the
Company's current organizational structure. The
Company's policy is to consolidate all majority-owned
subsidiaries. All intercompany amounts have been
eliminated in consolidation.
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
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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 $2.125 per share. In the event the
Company`s earnings before taxes first equals or exceeds
any 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 six month
period ended March 31, 1997 and March 31, 1996.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be
cash equivalents. Cash equivalents totaled
approximately $1,446,637 at March 31, 1997.
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
the normal business activities. The Company routinely
assesses the financial strength of its customers and
based upon factors surrounding the credit risk of its
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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
$1,342,648 at March 31, 1997. The Company believes no
significant concentration of credit risk exists with
respect to these cash equivalents.
NOTE 3 - ECONOMIC DEPENDENCY
There were no construction sales recorded during the six
months ended March 31, 1997. For the six months ended
March 31, 1997, there were four construction contracts
in process that were deemed major customers. These
contracts represent 27%, 25%, 20% and 19% of
construction in process at March 31, 1997. There were
six construction contracts which were deemed major
customers and accounted for approximately 99% of total
construction sales for the six months ended March 31,
1997. For the six months ended March 31, 1996, 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 March 31, 1997 and 1996,
all of the Company investments were classified as
trading securities. Trading securities are securities
bought and held principally for the purpose of selling
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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 completed within one year
as a current asset. At March 31, 1997 and 1996 such
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land and construction costs totaled $922,501 and
$798,523. Customer deposits received on such contracts
totaled $265,618 and $399,800 at March 31, 1997 and
1996.
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 depre-
ciated 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:
March March
31, 1997 31, 1996
Land $ 523,330 $ 450,495
Buildings and
improvements 842,802 821,975
Furniture and fixtures 46,765 35,335
1,412,897 1,307,805
Less: accumulated
depreciation
and amortization 177,216 164,035
$1,235,681 $1,143,770
NOTE 4 - INCOME TAXES
The Company will file a consolidated federal income tax
return with its subsidiaries. At March 31, 1997, the
Company will have net operating loss carry forwards of
approximately $750,000 available to reduce future taxes.
These carry forward 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,
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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 March 31, 1997 and
1996 was $10,052 and $4,021. 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
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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. In January, 1997, the Company granted five
year options under the Company's Qualified Stock Option
Plan providing for 10,000 shares at a price of $2.125
per share to five directors and one key employee of the
Company.
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 $2.125 per
share with rights vesting upon attainment of certain
earnings levels.
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The Harmat Organization, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 COMPARED WITH THE
SIX MONTHS ENDED MARCH 31, 1996
Net revenues decreased $148,853 to $71,410 for the six months ended
March 31, 1997 from $220,263 for the six months ended March 31, 1996.
Net revenues decreased $50,421 to $37,401 for the three months ended
March 31, 1997 from $87,822 for the three months ended March 31, 1996.
The $43,190 decrease in gross sales was due primarily to the fact that
there were no sales recorded in the six months ended March 31, 1997.
The remaining change in net revenues related primarily to a lower
rental income and a reduction in management fee income.
Cost of sales for the six months ended March 31, 1997 was $20,306 as
compared to $39,643 for the six months ended March 31, 1996. Cost of
sales for the three months ended March 31, 1997 was $9,888 as compared
to none for the three months ended March 31, 1996. The reduction is due
to the lack of sales in the three months and six months ended March 31,
1997 versus 1996.
Selling, General and Administrative expenses were $530,272 for the six
months ended March 31, 1997 as compared to $220,200 for the six months
ended March 31, 1996. For the three months ended March 31, 1997,
Selling, General and Administrative expenses were $297,541 versus
$116,890 for the three months ended March 31, 1996. The increase is
due primarily to the addition of administrative staff and marketing
costs in 1997 and 1996 versus 1996 and 1995.
Interest expense decreased from $83,029 for the six months ended March
31, 1996 to $43,279 for the six months ended March 31, 1997. For the
three months ended March 31, 1997, interest expense decreased from
$40,622 for the three months ended March 31, 1996 to $24,579 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 of $415,887 for the six months ended March 31, 1997
increased by $408,856 from a net loss of $7,031 for the six months
ended March 31, 1996. For the three months ended March 31, 1997 the net
loss of $216,411 increased by $171,355 from a net loss of $45,056 for
the three months ended March 31, 1996.
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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 six months ended March 31, 1997, the Company had negative
cash flows from operating activities of $181,108 versus a positive cash
flow of $484,641 for the six months ended March 31, 1996. Investing
activities used cash of $1,446,702 in the six months ended March 31,
1997 and $864,986 in the six months ended March 31, 1996 primarily for
the acquisition of land and construction costs.
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The Harmat Organization, Inc.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
On January 20, 1997,the Greater Westhampton Civic Association
and Edward Batcheller commenced in New York State Supreme Court
proceeding was commenced against the Town of Southampton Planning Board
pertaining to the approval process of the Jagger Village Subdivision,
the Company's 41-acre parcel. Although not named as a defendant, the
Company intervened to defend and filed a motion to dismiss the
petition. Oral argument was heard on April 30, 1997.
Management is of the opinion that there is no material exposure
to the Company and therefore, no provision has been made for any
possible loss in the Company's consolidated financial statements. Due
to the inherent uncertainty of the legal process, however, this
assessment may be subject to change in the near term.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K
None
17
<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: May 13, 1997
18
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the six months ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,446,637
<SECURITIES> 0
<RECEIVABLES> 91,310
<ALLOWANCES> 0
<INVENTORY> 990,617
<CURRENT-ASSETS> 3,743,610
<PP&E> 1,412,897
<DEPRECIATION> 177,216
<TOTAL-ASSETS> 6,204,183
<CURRENT-LIABILITIES> 799,245
<BONDS> 2,129,910
0
0
<COMMON> 2,613
<OTHER-SE> 3,272,416
<TOTAL-LIABILITY-AND-EQUITY> 6,204,183
<SALES> 1,476
<TOTAL-REVENUES> 71,410
<CGS> 20,306
<TOTAL-COSTS> 20,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,279
<INCOME-PRETAX> (479,168)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415,887)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
