**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

**FORM 10-K**

**(Amendment No. 1)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe fiscal year ended December 31, 2006**

**or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Commissionfile number:  001-32688**

**HARBOR ACQUISITION CORPORATION**

(Exact name of registrantas specified in its charter)

| **Delaware**                             |   | **56-2518836**      |
|------------------------------------------|--------|---------------------|
| (State or other jurisdiction of          |   | (I.R.S. Employer    |
| incorporation or organization)           |   | Identification No.) |
| **One Boston Place,  Suite 3630**   |   | ** **          |
| **Boston, Massachusetts**                |   | **02108**           |
| (Address of principal executive offices) |   | (Zip Code)          |

 

**(617) 624-8409**

Registrant’s telephonenumber, including area code

**Securitiesregistered pursuant to Section 12(b) of the Act:**

| **Title of Each Class**                           |   | **Name of Each Exchange on Which Registered** |
|---------------------------------------------------|--------|-----------------------------------------------|
| **Common Stock, Par value $.0001 per share**      |   | **American Stock Exchange**                   |
| **Common Stock Purchase Warrants**                |   | **American Stock Exchange**                   |
| **Units consisting of one share of Common Stock** |   | **American Stock Exchange**                   |
| **and two Warrants**                              |   | ** **                                    |

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yeso   No x

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o   Nox

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained here, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kx

Indicate by check mark whether the registrant is largeaccelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

Large acceleratedfiler o      Acceleratedfiler o      Non-acceleratedfiler x

Indicate by check mark whether the Registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes x   No o

As of June 30, 2006, the aggregate market valueof the registrant’s common stock held by non-affiliates was approximately $55,600,000, calculated on the basis of the closing price of the registrant’scommon stock as reported by the American Stock Exchange on such date.

As of March 26, 2007, 16,800,000 shares of theregistrant’s common stock, par value $0.001 per share, were outstanding.

**DOCUMENTSINCORPORATED BY REFERENCE: NONE**

 

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**EXPLANATORY NOTE**

**HarborAcquisition Corporation is filing this Amendment No. 1 to its AnnualReport on Form 10-K (“Amended Report”) to amend its Annual Report onForm 10-K for the fiscal year ended December 31, 2006  filed with the Securities and Exchange Commissionon April 2, 2007 (“Original Report”). The Amended Report is being filedsolely to correct an omission in the list of beneficial owners of our commonstock set forth in Item 12 of the Original Report, to correct certaintypographical errors relating to our date of incorporation in the report ofindependent public accountants and in certain captions in the financialstatements, and to delete the word “Unaudited” from the statement of stockholders’equity. Except for these edits, the Original Report, including the financialstatements therein, is unchanged.**

**ITEM 12.**         SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

The following tablesets forth information regarding the beneficial ownership of our common stockas of March 26, 2007 by:

·       eachperson known by us to be the beneficial owner of more than 5% of ouroutstanding shares of common stock;

·       eachof our officers and directors; and

·       allour officers and directors as a group.

Unlessotherwise indicated, we believe that all persons named in the table have solevoting and investment power with respect to all shares of common stockbeneficially owned by them.

| **Name and Address of Beneficial Owner(1)** | ** ** | ** ** | ** ** | **Shares  Beneficially  Owned(2)** | ** ** | **% of  Outstanding  Common Stock** | ** ** |
|----------------------------------------------------------------------|------------|------------|------------|------------------------------------|------------|-----------------------------------------------|------------|
| Azimuth Opportunity, Ltd.(3)                                         |       |       | 1,506,100  |                               |       |                                          | 9.0%       |   |   |
| The Baupost Group, LLC(3)                                            |       |       | 1,497,300  |                               |       |                                          | 8.9%       |   |   |
| Sapling, LLC and Fir Tree Recovery Master Fund,  L.P.(3)             |       |       | 1,644,800  |                               |       |                                          | 9.8%       |   |   |
| Wellington Management Company LLP(3)                                 |       |       | 1,146,000  |                               |       |                                          | 6.8%       |   |   |
| Oliviera Capital, LLC(3)                                             |       |       | 875,000    |                               |       |                                          | 5.2%       |   |   |
| Robert J. Hanks(4)                                                   |       |       | 855,000    |                               |       |                                          | 5.1%       |   |   |
| David A.R. Dullum(5)                                                 |       |       | 855,000    |                               |       |                                          | 5.1%       |   |   |
| John Carson                                                          |       |       | 450,000    |                               |       |                                          | 2.6%       |   |   |
| Todd A. Fitzpatrick                                                  |       |       | 240,000    |                               |       |                                          | 1.4%       |   |   |
| Christopher R. Young                                                 |       |       | 240,000    |                               |       |                                          | 1.4%       |   |   |
| Timothy J. Durkin(6)                                                 |       |       | 60,000     |                               |       |                                          | *          |   |   |
| William E. Mahoney                                                   |       |       | 60,000     |                               |       |                                          | *          |   |   |
| Edward Cady                                                          |       |       | —     |                               |       |                                          | *          |   |   |
| All directors and officers as a group  (8 individuals)(4)(5)(6) |       |       | 2,730,000  |                               |       |                                          | 16.3%      |   |   |

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*                    less than onepercent.

(1)          Exceptas set forth below, the business address of each person is One Boston Place, Suite 3630,Boston, Massachusetts 02108. The address of Azimuth Opportunity, Ltd. isc/o W Smiths Finance, Nemours Chambers, P.O. Box 3170, Road Town, Tortola,British West Indies. The address of The Baupost Group, LLC is 10 St. JamesAvenue, Boston, Massachusetts 02116. The address of Sapling, LLC and Fir TreeMaster Fund, L.P. is 535 Fifth Avenue, 31st Floor, New York,New York 10017. The address of Wellington Management Company, LLC is75 State Street, Boston, Massachusetts 02109. The address of OlivieraCapital, LLC is 18 Fieldstone Court, New York City, New York 10956.

1

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(2)          Does not reflect theownership of warrants purchased by certain of the initial stockholders or theiraffiliates in a private placement in April 2006 as described below, whichare not exercisable until the later of April 25, 2007 or the date of ourconsummation of a business combination.

(3)          Basedsolely upon (i) Amendment No. 1 to the report on Schedule 13Gfiled by Azimuth Opportunity, Ltd. with the Securities and ExchangeCommission (the “SEC”) on or about February 14, 2007, (ii) the Form 13Ffiled by The Baupost Group, LLC with the SEC for the quarter ended December 31,2006, (iii) the report on Schedule 13G filed by Sapling, LLC and FirTree Recovery Master Fund, L.P. with the SEC on or about February 14,2007, (iv) the report on Schedule 13G filed by Oliviera Capital, LLCwith the SEC on or about April 28, 2006, and (v) the report onSchedule 13G filed by Wellington Management Co., LLP with the SEC on orabout February 14, 2007. Such reports as filed with the SEC state that, asof the dates those reports were signed, (i) Paul C. Gannon was the chieffinancial officer of The Baupost Group, LLC, (ii) Jeffery Tannenbaum wasthe president of Fir Tree, Inc., which was the manager of each of Sapling,LLC and Fir Tree Recovery Master Fund, L.P., and (iii) Steven Oliviera was thesole member of Oliviera Capital, LLC.

(4)          Includes 825,000 sharesheld individually by Mr. Hanks and 30,000 shares held by Grand CruManagement, LLC, with respect to which Mr. Hanks possesses sharedvoting and dispositive power.

(5)          Includes 825,000 sharesheld individually by Mr. Dullum and 30,000 shares held by Grand CruManagement, LLC, with respect to which Mr. Dullum possesses sharedvoting and dispositive power.

(6)          Includes 60,000 sharesheld individually by Mr. Durkin. Does not include 120,000 shares held ofrecord by Latona Associates Fund I, LLC, an investment fund of which Mr. Durkinserves as an officer of the manager.

All of the shares of our common stock outstandingprior to our initial public offering were placed in escrow with ContinentalStock Transfer & Trust Company, as escrow agent, until, subject tocertain limited exceptions (each of which requires that the shares remain inescrow for the required period) six months after the consummation of aliquidation, merger, stock exchange or other similar transaction which resultsin our public stockholders having the right to exchange their shares of commonstock for cash, securities or other property subsequent to our consummating abusiness combination with a target business. During the escrow period, theholders of these shares will not be able to sell or transfer their securitiesexcept to their spouses and children, trusts established for their benefit, orto affiliated companies, but will retain all other rights as our stockholders,including, without limitation, the right to vote their shares of common stock(but subject, in the case of voting on a proposed business combination, to theagreement described below) and the right to receive cash dividends, ifdeclared. If dividends are declared and payable in shares of common stock, suchdividends will also be placed in escrow. If we are unable to effect a businesscombination and liquidate, none of our initial stockholders will receive anyportion of the liquidation proceeds with respect to common stock owned by themprior to our initial public offering.

In connection with any vote required to approve anybusiness combination, our directors, officers and those stockholders who ownedshares of our common stock prior to our initial public offering have agreed tovote all of their shares, including shares that they purchased in our publicoffering or in the aftermarket, in accordance with the vote of the majority ofthe shares of common stockholders voted by the public stockholders. Asdescribed in the table above, our directors, officers and initial stockholderscollectively owned as of March 26, 2007, an aggregate of3 million shares of common stock, or 17.9% of our then total outstandingshares. All of these shares were purchased prior to our public offering andwill therefore be voted on the acquisition proposal in accordance with the voteof the majority of the shares of common stock voted by the public stockholders.If the acquisition proposal is approved at the special meeting, our directors,officers and initial stockholders intend to vote all of these shares in favorof the amendment proposal and the incentive compensation plan proposal.

2

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Certain of ourinitial stockholders (or their affiliates) purchased an aggregate of2 million warrants at a price of $0.65 per warrant in a private placementin April 2006. These warrants may not be sold, assigned or transferreduntil after the date we consummate a business combination and may not beexercised until the later of April 25, 2007 or such date of consummation.

Thefollowing table sets forth the name and respective number of warrants for eachof such initial stockholders:

| Robert J. Hanks                              |   | 230,769 |   |
|----------------------------------------------|--------|---------|--------|
| David A. R.  Dullum                          |   | 384,616 |   |
| John Carson                                  |   | 153,846 |   |
| Todd A.  Fitzpatrick                         |   | 38,462  |   |
| Christopher R.  Young                        |   | 76,923  |   |
| William E.  Mahoney                          |   | 153,846 |   |
| Latona Associates  Fund I, LLC (1)           |   | 384,615 |   |
| Grand Cru  Management, LLC (2)               |   | 250,000 |   |
| Thomas Bullock                               |   | 76,923  |   |
| September Morning  Investments, LLC (3) |   | 250,000 |   |

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(1)          Latona Associates FundI, LLC is an investment fund of which Timothy J. Durkin, one of our directors,serves as an officer of the manager.

(2)          Grand Cru Management,LLC is one of our initial stockholders and an affiliate of Robert J. Hanks andDavid A. R. Dullum.

(3)          September MorningInvestments, LLC is an affiliate of Frank H. Jellinek, Jr., one of ourinitial stockholders, who is now deceased.

**ITEM 15.**         EXHIBITSAND FINANCIAL STATEMENT SCHEDULES

**(1)****          FinancialStatements**

See Index to Consolidated Financial Statementscommencing on Page F-1.

**(2)****          FinancialStatement Schedules**

All supplemental schedules have been omitted since therequired information is not present in amounts sufficient to require submissionof the schedule, or because the required information is included in theconsolidated financial statements or notes thereto.

**(3)****          Exhibits**

The following exhibits are filed as part of this AmendedReport:
| EXHIBIT NO. | ** ** | **DESCRIPTION** |
|-------------|------------|-----------------|
|        | 31.1       |            |   | Certification of Principal Executive Officer  pursuant to Rule 13a-14a of the Securities Exchange Act of 1934,  as amended |
|        | 31.2       |            |   | Certification of Principal Financial Officer  pursuant to Rule 13a-14a of the Securities Exchange Act of 1934,  as amended |
|        | 32.1       |            |   | Certification pursuant to Section 908 of the  Sarbanes-Oxley Act of 2002 |

 

3

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|                    | ** ** | **HARBOR ACQUISITION CORPORATION** |
|-------------------------|------------|------------------------------------|
| Date: May 25, 2007 |       | By:                                |   | /s/ ROBERT J. HANKS |
|                    |       |                               |   | Robert J. Hanks |
|                    |       |                               | * * | *Chief  Executive Officer and Treasurer* |
|                    |       |                               | * * | *(Principal  Executive Officer)* |
| Date: May 25, 2007 |       | By:                                |   | /s/ TODD A. FITZPATRICK |
|                    |       |                               |   | Todd A. Fitzpatrick |
|                    |       |                               | * * | *Vice  President* |
|                    |       |                               | * * | *(Principal Financial and Accounting Officer)* |

 

 

4

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**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**
| Report of Independent  Registered Public Accounting Firm |   | F-2 |   |
|----------------------------------------------------------|--------|-----|--------|
| Balance  Sheets                                          |   | F-3 |   |
| Statements  of Operations                                |   | F-4 |   |
| Statement of Stockholders’ Equity                   |   | F-5 |   |
| Condensed  Statements of Cash Flows                      |   | F-6 |   |
| Notes to Consolidated Financial Statements               |   | F-7 |   |

 

F-1

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**Report of Independent Registered PublicAccounting Firm**

To the Board of DirectorsHarbor Acquisition Corporation

We have audited the accompanying balance sheet ofHarbor Acquisition Corporation (a development stage corporation) (the“Company”) as of December 31, 2006 and 2005, and the related statements ofoperations, stockholders’ equity and cash flows for the year endedDecember 31, 2006, the period from June 20, 2005 (inception) toDecember 31, 2005, and the cumulative period from June 20, 2005 (inception)to December 31, 2006. These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion of thesefinancial statements based on our audits.

We conducted our audits in accordance with the standardsof the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred toabove present fairly, in all material respects, the financial position ofHarbor Acquisition Corporation as of December 31, 2006 and 2005, and theresults of its operations and its cash flows for the year endedDecember 31, 2006, the period from June 20, 2005 (inception) toDecember 31, 2005, and the cumulative period from June 20, 2005(inception) to December 31, 2006 in conformity with United Statesgenerally accepted accounting principles.

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern. As discussed in Note 15 to the financialstatements, the Company may face a mandatory liquidation by November 1,2007 if a business combination is not consummated, unless certain extensioncriteria are met, which raises substantial doubt about its ability to continueas a going concern. The financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.
| /s/ GOLDSTEIN GOLUB KESSLER LLP |
|---------------------------------|
| New York, New  York             |
| March 6, 2007                   |

 

F-2

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**Harbor AcquisitionCorporation and Subsidiary(A Development Stage Company)**

**Balance Sheets**

| ** **                                                                                                                                                                                                                                                  | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Assets**                                                                                                                                                                                                                                                  |       |                            |       |                            |       |   |   |   |   |
| ***Current:***                                                                                                                                                                                                                                              |       |                            |       |                            |       |   |   |   |   |
| Cash                                                                                                                                                                                                                                                        |       |                            | $          | 534,970                         |       |   |   | $ | 6,654 |   |   |
| Investments held  in trust                                                                                                                                                                                                                                  |       |                            | 77,840,000 |                            |       |   | — |   |   |
| Investments held  in trust from Underwriter                                                                                                                                                                                                                 |       |                            | 1,620,000  |                            |       |   | — |   |   |
| Investment income  not subject to trust                                                                                                                                                                                                                     |       |                            | 213,364    |                            |       |   | — |   |   |
| Prepaid Expense                                                                                                                                                                                                                                             |       |                            | 66,000     |                            |       |   | — |   |   |
| ***Total  current assets***                                                                                                                                                                                                                                 |       |                            | 80,274,334 |                            |       |   | 6,654 |   |   |
| Deferred offering  costs                                                                                                                                                                                                                                    |       |                            | —     |                            |       |   | 303,509 |   |   |
| Deferred  acquisition costs                                                                                                                                                                                                                                 |       |                            | 643,592    |                            |       |   | — |   |   |
| Deferred tax  asset                                                                                                                                                                                                                                         |       |                            | 146,362    |                            |       |   | — |   |   |
| **Total  Assets**                                                                                                                                                                                                                                           |       |                            | $          | 81,064,288                      |       |   |   | $ | 310,163 |   |   |
| **Liabilities  And Stockholders’ Equity**                                                                                                                                                                                                              |       |                            |       |                            |       |   |   |   |   |
| **Current  Liabilities**                                                                                                                                                                                                                                    |       |                            |       |                            |       |   |   |   |   |
| Accrued Offering  Expenses                                                                                                                                                                                                                                  |       |                            | $          | —                          |       |   |   | $ | 210,000 |   |   |
| Accrued Expenses                                                                                                                                                                                                                                            |       |                            | 305,434    |                            |       |   | 5,000 |   |   |
| Notes Payable,  Stockholders                                                                                                                                                                                                                                |       |                            | —     |                            |       |   | 75,000 |   |   |
| Due to  Underwriter                                                                                                                                                                                                                                         |       |                            | 1,620,000  |                            |       |   | — |   |   |
| Income Taxes  Payable                                                                                                                                                                                                                                       |       |                            | 111,043    |                            |       |   | — |   |   |
| **Total  Liabilities**                                                                                                                                                                                                                                      |       |                            | 2,036,477  |                            |       |   | 290,000 |   |   |
| Common stock subject to possible conversion,  2,758,620 shares at conversion value                                                                                                                                                                          |       |                            | 15,560,216 |                            |       |   | — |   |   |
| Commitments                                                                                                                                                                                                                                                 |       |                            |       |                            |       |   |   |   |   |
| **Stockholders’  Equity**                                                                                                                                                                                                                              |       |                            |       |                            |       |   |   |   |   |
| Preferred Stock,  $.0001 par value, 1,000,000 shares authorized; none issued or  outstanding                                                                                                                                                           |       |                            | —     |                            |       |   | — |   |   |
| Common Stock,  $.0001 par value, 70,000,000 shares authorized; 16,800,000 shares (which  includes 2,758,620 subject to possible conversion) and 3,000,000 shares  issued and outstanding at December 31, 2006 and December 31, 2005  respectively |       |                            | 1,680      |                            |       |   | 300 |   |   |
| Additional Paid  in Capital                                                                                                                                                                                                                                 |       |                            | 62,104,087 |                            |       |   | 24,700 |   |   |
| Earnings  (Deficit) Accumulated during the development stage                                                                                                                                                                                                |       |                            | 1,361,828  |                            |       |   | (4,837 | ) |   |
| **Total  Stockholders’ Equity**                                                                                                                                                                                                                        |       |                            | 63,467,595 |                            |       |   | 20,163 |   |   |
| **Total Liabilities and  Stockholders’ Equity**                                                                                                                                                                                                        |       |                            | $          | 81,064,288                      |       |   |   | $ | 310,163 |   |   |

 

The accompanying notes should be read in conjunction with the financial statements.

F-3

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**Harbor AcquisitionCorporation and Subsidiary(A Development Stage Company)**

**Statement of Operations**

| ** **                                                                   | ** ** | ** **                            | ** ** | ** **                             | ** ** | **For the period from**       | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------|------------|----------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                   | ** ** | ** **                            | ** ** | **For the period from** | ** ** | **June 20, 2005 (inception)** | ** ** |
| ** **                                                                   | ** ** | **For the year ended** | ** ** | **June 20, 2005 to**    | ** ** | **to December 31, 2006**      | ** ** |
| ** **                                                                   | ** ** | **December 31, 2006**       | ** ** | **December 31, 2005**        | ** ** | **(cumulative)**                             | ** ** |
| Interest income                                                              |       |                                  | $          | 2,599,821                              |       |                                         |       | $ | 163 |   |   |   | $ | 2,599,984 |   |   |
| **Operating Expenses**                                                       |       |                                  |       |                                   |       |                                         |       |   |   |   |   |   |   |
| General &  Administrative                                                |       |                                  | 488,475    |                                   |       |                                         | 5,000      |   |   |   | 493,475 |   |   |
| Net Income (Loss)  before income taxes                                       |       |                                  | 2,111,346  |                                   |       |                                         | (4,837     | ) |   |   | 2,106,509 |   |   |
| Income tax  expense                                                          |       |                                  | 744,681    |                                   |       |                                         | —     |   |   |   | 744,681 |   |   |
| **Net  Income (Loss)**                                                       |       |                                  | $          | 1,366,665                              |       |                                         |       | ($4,837 | ) |   |   | $ | 1,361,828 |   |   |
| Weighted Average  number of common shares outstanding—basic and diluted |       |                                  | 12,489,863 |                                   |       |                                         | 3,000,000  |   |   |   | 9,207,527 |   |   |
| **Income (Loss) per Share**—**basic and diluted**                       |       |                                  | $          | 0.11                                   |       |                                         |       | ($0.00 | ) |   |   | $ | 0.15 |   |   |

 

The accompanying notes should be read in conjunction with the financial statements.

F-4

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**Harbor AcquisitionCorporation and Subsidiary(A Development Stage Company)**

**Statement of Stockholders’ Equity**

| ** **                                                                                                                                | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                           | ** ** | **Earnings (Deficit)** | ** ** | ** ** | ** **  |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|--------------------------------------|------------|-----------------------------|------------|------------|-------------|
| ** **                                                                                                                                | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | **Accumulated During the** | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                | ** ** | **Shares**            | ** ** | **Amount**     | ** ** | **Paid-in-Capital**                  | ** ** | **Development Stage**  | ** ** | **Total**  | ** **  |
| Stock issued June 22, 2005 at $.008 per share                                                                                             |       | 3,000,000             |       | $              | 300        |                                 | $          | 24,700                      |       |       | $           | — |   |   | $ | 25,000 |   |
| Net Loss                                                                                                                                  |       |                  |       |           |       |                                 |       |                        | (4,837     | )          |        | (4,837 | ) |
| **Balance at December 31, 2005**                                                                                                          | ** ** | **3,000,000**         | ** ** | **$**          | **300**    | ** **                           | **$**      | **24,700**                  | ** ** | ** ** | **($4,837** | **)** | ** ** | **$** | **20,163** | ** ** |
| Sale of Private Placement Warrants                                                                                                        |       | —                |       | —         |       | 1,300,000                            |       |                        | —     |       |        | 1,300,000 |   |
| Sale of 13,800,000 Units net of underwriter's discount  and offering expenses (includes 2,758,620 shares subject to possible  conversion) |       | 13,800,000            |       | 1,380          |       | 76,339,503                           |       |                        | —     |       |        | 76,340,883 |   |
| Proceeds subject to possible conversion of 2,758,620  shares                                                                              |       | —                |       | —         |       | (15,560,216                          | )          |                        | —     |       |        | (15,560,216 | ) |
| Sale of underwriter option                                                                                                                |       | —                |       | —         |       | 100                                  |       |                        | —     |       |        | 100 |   |
| Net Income                                                                                                                                |       | —                |       | —         |       | —                               |       |                        | 1,366,665  |       |        | 1,366,665 |   |
| **Balance at December 31, 2006**                                                                                                          | ** ** | **16,800,000**        | ** ** | **$**          | **1,680**  | ** **                           | **$**      | **62,104,087**              | ** ** | ** ** | **$**       | **1,361,828** | ** ** | ** ** | **$** | **63,467,595** | ** ** |

 

The accompanying notes should be read in conjunction with the financial statements.

F-5

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**Harbor AcquisitionCorporation and Subsidiary(A Development Stage Company)**

**Statement of Cash Flows**

| ** **                                               | ** ** | ** **                                 | ** **  | ** **                                   | ** ** | **For the period from**       | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------|-------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                               | ** ** | ** **                                 | ** **  | ** **                                   | ** ** | **June 20, 2005 (inception)** | ** ** |
| ** **                                               | ** ** | **For the year**                 | ** **  | **June 20, 2005 (inception)** | ** ** | **to December 31, 2006**      | ** ** |
| ** **                                               | ** ** | **ended December 31, 2006** | ** **  | **to December 31, 2005**      | ** ** | **(cumulative)**                             | ** ** |
| ***Cash  Flows From Operating Activities***              |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Net Income (Loss)                                        |       |                                       | $           | 1,366,665                                    |       |                                         |       | ($4,837 | ) |   |   | $ | 1,361,828 |   |   |
| Adjustment to  reconcile net income to net cash provided |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| by operating  activities:                                |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Income taxes  payable                                    |       |                                       | 111,043     |                                         |       |                                         | —     |   |   |   | 111,043 |   |   |
| Changes in  operating assets and liabilities:            |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Increase in prepaid  expenses                            |       |                                       | (66,000     | )                                            |       |                                         | —     |   |   |   | (66,000 | ) |   |
| Increase in value  of investments held in   trust        |       |                                       | (2,592,864  | )                                            |       |                                         | —     |   |   |   | (2,592,864 | ) |   |
| Increase in  Deferred tax asset                          |       |                                       | (146,362    | )                                            |       |                                         | —     |   |   |   | (146,362 | ) |   |
| Increase in  Accrued expenses                            |       |                                       | 95,860      |                                         |       |                                         | 5,000      |   |   |   | 100,860 |   |   |
| **Net Cash  provided by Operating Activities**           |       |                                       | (1,231,658  | )                                            |       |                                         | 163        |   |   |   | (1,231,495 | ) |   |
| ***Cash  Flows From Investing Activites***               |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Payment of  deferred acquisition costs                   |       |                                       | $           | (439,018                                     | )          |                                         |       | — |   |   |   | $ | (439,018 | ) |   |
| Cash held in Trust  Account                              |       |                                       | (79,460,000 | )                                            |       |                                         | —     |   |   |   | (79,460,000 | ) |   |
| Disbursements from  trust                                |       |                                       | 2,379,500   |                                         |       |                                         | —     |   |   |   | 2,379,500 |   |   |
| **Net Cash  used in Investing Activities**               |       |                                       | (77,519,518 | )                                            |       |                                         | —     |   |   |   | (77,519,518 | ) |   |
| ***Cash Flows From Financing  Activities***              |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Proceeds from  public offering                           |       |                                       | 82,800,000  |                                         |       |                                         | —     |   |   |   | 82,800,000 |   |   |
| Proceeds from private placement of warrants              |       |                                       | 1,300,000   |                                         |       |                                         | —     |   |   |   | 1,300,000 |   |   |
| Proceeds from  issuance of underwriting option           |       |                                       | 100         |                                         |       |                                         | —     |   |   |   | 100 |   |   |
| Proceeds from sale  of stock                             |       |                                       | —      |                                         |       |                                         | 25,000     |   |   |   | 25,000 |   |   |
| Proceeds from  notes payable, Stockholders               |       |                                       | 150,000     |                                         |       |                                         | 75,000     |   |   |   | 225,000 |   |   |
| Payments of notes  payable, Stockholders                 |       |                                       | (225,000    | )                                            |       |                                         | —     |   |   |   | (225,000 | ) |   |
| Payment of  advances due to Stockholders                 |       |                                       | (5,000      | )                                            |       |                                         | —     |   |   |   | (5,000 | ) |   |
| Payment of  offering costs                               |       |                                       | (4,740,608  | )                                            |       |                                         | (93,509    | ) |   |   | (4,834,117 | ) |   |
| **Net Cash  provided by Financing Activities**           |       |                                       | 79,279,492  |                                         |       |                                         | 6,491      |   |   |   | 79,285,983 |   |   |
| Net increase in  Cash                                    |       |                                       | 528,316     |                                         |       |                                         | 6,654      |   |   |   | 534,970 |   |   |
| Cash at beginning  of period                             |       |                                       | 6,654       |                                         |       |                                         | —     |   |   |   | — |   |   |
| **Cash at  end of period**                               | ** ** | ** **                                 | **$**       | **534,970**                                  |       | ** **                                   | ** ** | **$** | **6,654** |   | ** ** | ** ** | **$** | **534,970** |   |   |
| Supplemental schedule of non-cash financing  activities: |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Advance due to  Stockholder for Public Offering costs    |       |                                       | $           | 5,000                                        |       |                                         |       | — |   |   |   | $ | 5,000 |   |   |
| Accrual of  deferred underwriting fees                   |       |                                       | $           | 1,620,000                                    |       |                                         |       | — |   |   |   | $ | 1,620,000 |   |   |
| Supplemental schedule of non-cash investing  activities: |       |                                       |        |                                         |       |                                         |       |   |   |   |   |   |   |
| Accrual of deferred acquisition costs                    |       |                                       | $           | 204,574                                      |       |                                         |       | — |   |   |   | $ | 204,574 |   |   |
|                                                          |            |                                            |             |                                              |            |                                              |            |  |  |  |  |  |  |  |  |  |

 

The accompanying notes should be read in conjunction with the financial statements.

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**Harbor AcquisitionCorporation and Subsidiary(A Development Stage Company)**

**Notes to Consolidated Financial Statements**

**1.   Basis ofPresentation**

The consolidated financialstatements include the accounts of Harbor Acquisition Corporation and itswholly owned subsidiary Harbor Acquisition Security Corporation (collectivelyreferred to as the “Company”). All significant intercompany transactions andbalances have been eliminated. The statements and related notes have beenprepared on the accrual basis of accounting in accordance with accountingprincipals generally accepted in the United States.

**2.   Organizationand Business Operations**

The Company was incorporated in Delaware on June 20,2005 as a blank check company whose objective is to acquire an operatingbusiness. At December 31, 2006, the Company had neither engaged in anyoperations nor generated significant operating revenue to date. The Company isconsidered to be in the development stage and is subject to the risksassociated with activities of development stage companies.

All activity through December 31, 2006, relatesto the Company’s formation, its initial public offering described below, andthereafter, pursuing potential acquisitions of target businesses.

The registration statement for the Company’s initialpublic offering (the “Public Offering”) (as described in Note 4) was declaredeffective April 25, 2006. The Company consummated the Public Offering on May 1,2006, and preceding the consummation of the Public Offering on May 1, 2006certain officers, directors, and initial shareholders of the Company purchasedan aggregate of 2,000,000 warrants at $.65 per warrant from the Company in aprivate placement (the “Private Placement”). The warrants sold in the PrivatePlacement were identical to the warrants sold in the offering. The Companyreceived net proceeds from the Private Placement and the Offering ofapproximately $77,640,883 (Note 4).

The Company’s management has broad discretion withrespect to the specific application of the net proceeds of this PublicOffering, although substantially all of the net proceeds of this PublicOffering are intended to be generally applied toward consummating a businesscombination with an operating business (“Business Combination”), which may notconstitute a business combination for accounting purposes.

Furthermore, there is no assurance that the Companywill be able to successfully effect a Business Combination. Upon the closing ofthe Offering, $79,460,000 including $1,620,000 of deferred underwriters’nonaccountable expense allowance described in Note 4, is being held in atrust account (“Trust Fund”) and, commencing May 2, 2006, is invested ingovernment securities until the earlier of (i) the consummation of itsfirst Business Combination and (ii) the distribution of the Trust Fund asdescribed below. The placing of funds in the Trust Fund may not protect thosefunds from third party claims against the Company. Although the Company willseek to have all vendors, prospective target businesses or other persons itengages, execute agreements with the Company waiving any right, title, interestor claim of any kind in or to any monies held in the Trust Fund, there is noguarantee that they will execute such agreements. Certain of the Company’sdirectors have severally agreed that they will be personally liable undercertain circumstances to ensure that the proceeds in the Trust Fund are notreduced by the claims of target businesses or vendors or other persons that areowed money by the Company for services rendered, contracted for or productssold to the Company. However, there can be no assurance that the directors willbe able to satisfy those obligations. The remaining proceeds (not held in theTrust Fund), along with interest earned on the Trust Fund, may be used to payfor business, legal and accounting due diligence on prospective acquisitionsand continuing general and administrative expenses. The Company, after signinga definitive agreement for the acquisition of a target business, will submitsuch transaction for stockholder 

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approval. In the eventthat stockholders owning 20% or more of the shares issued in the Offering voteagainst the Business Combination and exercise their conversion rights describedbelow, the Business Combination will not be consummated. All of the Company’sstockholders prior to the Offering, including all of the officers and directorsof the Company (“Initial Stockholders”), have agreed to vote their 3,000,000founding shares of common stock, as well as any shares of common stock acquiredin connection with or following the Offering, in accordance with the vote ofthe majority in interest of all other stockholders of the Company (“PublicStockholders”) with respect to any Business Combination. After consummation ofa Business Combination, these voting safeguards will no longer be applicable.

With respect to a Business Combination which isapproved and consummated, any Public Stockholder who voted against the BusinessCombination may demand that the Company convert his or her shares. The pershare conversion price will equal the amount in the Trust Account, calculatedas of two business days prior to the consummation of the proposed BusinessCombination, divided by the number of shares of common stock sold in theOffering. Accordingly, Public Stockholders holding 19.99% of the aggregatenumber of shares owned by all Public Stockholders may seek conversion of theirshares in the event of a Business Combination. Such Public Stockholders areentitled to receive their per share interest in the Trust Fund computed withoutregard to the shares held by Initial Stockholders. Accordingly, a portion ofthe net proceeds from the Public Offering (19.99% of the amount held in theTrust Fund, excluding the deferred portion of the underwriters’ non-accountableexpense allowance) has been classified as common stock subject to possibleconversion on the accompanying December 31, 2006 balance sheet. Inaddition, such stockholders would also be entitled to a portion of the deferredportion of the underwriters’ non-accountable expense allowance held in trust(see Note 4). As of December 31, 2006, the estimated per shareconversion price is $5.76.

The Company’s Certificate of Incorporation providesfor mandatory liquidation of the Company in the event that the Company does notconsummate a Business Combination within 18 months from the date of the consummationof the Offering, or 24 months from the consummation of the Offering if certainextension criteria have been satisfied. In the event of liquidation, it islikely that the per share value of the residual assets remaining available fordistribution (including Trust Fund assets) will be less than the initial publicoffering price per share in the Offering (assuming no value is attributed tothe Warrants contained in the Units sold in the Offering discussed in Note 4).

On May 1, 2006, the Company formed a wholly ownedsubsidiary, Harbor Acquisition Security Corporation, for tax planning purposes.The Company assigned the rights to the investments in the Trust Fund to thissubsidiary.

On October 17, 2006,the Company entered into a Stock Purchase Agreement with Elmet Technologies,Inc (“Elmet”) and the holders of all of the outstanding shares and warrants ofElmet. Subject to the terms and conditions of the Stock Purchase Agreement, theCompany has agreed to acquire all of the outstanding Elmet shares and all ofits outstanding warrants. The acquisition is expected to be consummated duringthe second quarter of 2007, after the required approval by the Company’sstockholders and the fulfillment of certain other conditions. The pendingtransaction is further described in the Company’s current report filed with theU.S. Securities and Exchange Commission on Form 8-K on October 17,2006.

**3.   Summary ofSignificant Accounting Policies**

***A.   Income taxes:***

Deferred income tax assetsand liabilities are computed for differences between the financial statementand tax basis of assets and liabilities that will result in future taxable ordeductible amounts and are based on enacted tax laws and rates applicable tothe periods in which the differences are expected to 

F-8

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affecttaxable income. Valuation allowances are established when necessary to reducedeferred income tax assets to the amount expected to be realized.

***B.   Earnings (Loss) per common share:***

Basic earnings per shareis computed by dividing net loss by the weighted average number of shares ofcommon stock outstanding during the period. Diluted earnings per share giveseffect to dilutive options, warrants, and other potential common stockoutstanding during the period. The effect of the 27,600,000 outstandingwarrants issued in connection with the initial public offering described inNote 4 has not been considered in the diluted net income per share sincethe warrants are contingently exercisable. The effect of the 600,000 unitsincluded in the underwriters’ purchase option, as described in Note 2,along with the warrants underlying such units, has not been considered in thediluted earnings per share calculation since they are contingently exercisableand since the market price of the option was less than the exercise priceduring the period.

***C.   Use of estimates:***

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities atthe date of the financial statements and the reported amounts of revenue andexpenses during the reporting period. Actual results could differ from thoseestimates.

***D.   Cash and Cash Equivalents:***

For financial statementpurposes, the Company considers all highly liquid debt instruments with amaturity of three months or less when purchased to be cash equivalents. TheCompany maintains its cash in bank deposit accounts in the United States ofAmerica which, at times, may exceed applicable insurance limits. The Companybelieves it is not exposed to any significant credit risk on cash and cashequivalents.

***E.   Recent Accounting Pronouncements:***

In July 2006, the Financial Accounting StandardsBoard (“FASB”) issued FASB Interpretation No. 48, “Accounting forUncertainty in Income Taxes,” an interpretation of FASB Statement No. 109(“FIN 48”), which provides criteria for the recognition, measurement,presentation and disclosure of uncertain tax position. A tax benefit from anuncertain position may be recognized only if it is “more than likely not” thatthe position is sustainable based on its technical merits. The provisions ofFIN 48 are effective for fiscal years beginning after December 15, 2006.The Company does not expect FIN 48 will have a material effect on its financialcondition or results of operations.

Management does notbelieve that any recently issued, but not yet effective, accounting standardsif currently adopted would have a material effect on the accompanying financialstatements.

**4.   InitialPublic Offering**

On May 1, 2006, the Company sold 13,800,000 units(“Units”), including 1,800,000 in connection with the Underwriter’sover-allotment, in the Public Offering at a price of $6.00 per Unit. Each Unitconsists of one share of the Company’s common stock, $.0001 par value, and twoRedeemable Common Stock Purchase Warrants (“Warrants”). Each Warrant entitlesthe holder to purchase from the Company one share of common stock at anexercise price of $5.00 commencing the later of the completion of a BusinessCombination or one year from the effective date of the Public Offering andexpiring five years from the effective date of the Public Offering. The Companymay redeem the Warrants at a price of $.01 per Warrant upon 30 days’ noticeafter the Warrants become exercisable, only in the event that the last saleprice of the common stock is at least $8.50 per share for any 20 trading dayswithin a 30 trading day period 

F-9

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ending on the third dayprior to the date on which notice of redemption is given. If the Company callsthe Warrants, the holder will either have to redeem the Warrants by purchasingthe common stock from the Company for $5.00 per share or allow the Company toredeem the Warrants at a price of $.01 per warrant.

In connection with the Offering, the Company paid theunderwriters of the Public Offering (collectively, the “Underwriter”) anunderwriting discount of 5.0% of the gross proceeds of the Public Offering($4,140,000). In addition, a non-accountable expense allowance of 2.25% of thegross proceeds of the Public Offering, excluding the over-allotment option, isdue to the Underwriter, who has agreed to deposit the non-accountable expenseallowance ($1,620,000) into the Trust Fund until the earlier of the completionof a business combination or the liquidation of the Trust Fund. The Underwriterhas further agreed to forfeit any rights to or claims against such proceedsunless the Company successfully completes a business combination. If a BusinessCombination is approved and completed, public stockholders who voted againstthe combination and have exercised their conversion rights will be entitled totheir pro rata share of the deferred non-accountable expense allowance.

Preceding the consummation of the Public Offering on May 1,2006, certain of the initial stockholders purchased 2,000,000 warrants at apurchase price of $.65 per warrant in a private placement. The proceeds of$1,300,000 were deposited into the Trust Fund, and the initial stockholderswill not have any claim on this amount if the Trust Fund is liquidated.

The Initial Stockholders are entitled to registrationrights with respect to their founding shares and private placement warrantspursuant to agreements dated April 25, 2006. The holders of the majorityof these shares and warrants are entitled to make up to two demands that theCompany register these shares. In addition, the Initial Stockholders have “piggy-back”registration rights on certain registration statements filed subsequent to theconsummation of a Business Combination.

In connection with thisOffering, the Company issued an option, for $100, to the Underwriter topurchase 600,000 Units at an exercise price of $7.50 per Unit, exercisable onthe later of April 25, 2007 or the consummation of a Business Combination.The option has a life of five years from the effective date. The Units thatwould be issued upon exercise of this option are identical to those offered inthe Public Offering, except that each of the warrants underlying the optionentitles the holder to purchase one share of the Company’s common stock at aprice of $6.25 and will have a cashless exercise provision. The Company hasaccounted for the fair value of the option, inclusive of the receipt of the$100 cash payment, as an expense of the Public Offering resulting in a chargedirectly to stockholder’s equity. The Company estimated, using theBlack-Scholes method, the fair value of the option granted to the underwriteras of the date of grant was approximately $1,516,000 using the followingassumptions: (1) expected volatility of 49.3%, (2) risk-free interestrate of 4.635% and (3) expected life of five years. In order to estimatethe volatility, the Company considered the historic volatilities of 22 publiclytraded companies that operate within the consumer and industrial productssectors.

**5.   LimitedDistributions of Income from Trust Account**

Upon written request from the Company, which may begiven not more than once in any calendar month, the Trustee shall distribute tothe Company by wire transfer an amount computed and certified by the Company tobe equal to the collected and undistributed income earned on the originalamount deposited in the Trust Account for the preceding month. The maximumamount of distributions, net of taxes, that the Company may request and theTrustee shall distribute is $1,850,000. The Company has received distributions,net of taxes, of $1,599,500 through December 31, 2006. These funds will beused for working capital purposes associated with identifying and consummatinga Business Combination.

If there is any income taxobligation relating to the income of the property in the Trust Account, then,at the written instruction of the Company, the Trustee shall disburse to theCompany by wire transfer, out 

F-10

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of theproperty in the Trust Account, the amount indicated by the Company as requiredto pay income taxes. Such disbursements amounted to $780,000 throughDecember 31, 2006.

**6.   DeferredOffering Costs**

Deferred offering costsconsisted of legal, accounting, printing, and other fees incurred prior to theOffering which were directly related the Offering. These costs were charged toStockholders’ equity upon completion of the Offering.

**7.   DeferredAcquisition Costs**

Deferred acquisition costsconsist principally of legal fees directly associated with the negotiation andexecution of the Stock Purchase Agreement with Elmet Technologies Inc. Thesecosts will be treated as part of the purchase price upon the closing of thetransaction.

**8.   IncomeTaxes**

The components of the provision for income taxes areas follows:

| ** **                        | ** ** | **Year ended  December 31, 2006** | ** ** | **Year ended  December 31, 2005** | ** ** |
|-----------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Current:                          |       |                                             |       |                                             |       |   |   |   |   |
| Federal                           |       |                                             | $          | 850,400                                          |       |   |   | — |   |   |
| State and local                   |       |                                             | 40,643     |                                             |       |   | — |   |   |
| Deferred:                         |       |                                             |       |                                             |       |   |   |   |   |
| Federal                           |       |                                             | (146,362   | )                                                |       |   | — |   |   |
| State and local                   |       |                                             | —     |                                             |       |   | — |   |   |
| Total provision for  income taxes |       |                                             | $          | 744,681                                          |       |   |   | — |   |   |

 

TheCompany’s effective tax rate differs from the effective federal tax rate of 34%principally due to the following:

| ** **                     | ** ** | **Year ended  December 31, 2006** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|
| Federal statutory  rate        |       |                                             | 34.0%      |   |   |
| State and local  tax           |       |                                             | 0.1%       |   |   |
| Change in  valuation allowance |       |                                             | 1.2%       |   |   |
|                           |       |                                             | 35.3%      |   |   |

 

| ** **                       | ** ** | **Year ended  December 31, 2005** | ** ** |
|----------------------------------|------------|--------------------------------------------------|------------|
| Federal statutory  rate          |       |                                             | 34.0%      |   |   |
| Increase in  valuation allowance |       |                                             | (34.0%     | ) |   |
|                             |       |                                             | —     |   |   |

 

Thetax effect of temporary differences that give rise to the deferred tax asset isas follows:

| ** **                                 | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Expenses deferred  for income tax purposes |       |                            | $          | 172,508                         |       |   |   | $ | 2,000 |   |   |
| Less valuation  allowance                  |       |                            | (26,146    | )                               |       |   | ($2,000 | ) |   |
| Total                                      |       |                            | $          | 146,362                         |       |   |   | $ | 0 |   |   |

 

F-11

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**9.   Note Payable,Stockholders**

The Company issued an aggregate of $75,000 unsecuredpromissory notes to two of its Initial Stockholders on June 22, 2005. Thenotes were non-interest bearing and were payable on the earlier of June 15,2006 or the consummation of the Public Offering. Accordingly, the Company paidoff the notes on May 1, 2006. Separately, upon the consummation of theOffering, a shareholder loaned the Company $150,000. The loan with relatedinterest was paid in full on July 5, 2006. The loan bore interest at 4%per annum and was paid from the interest earned on the amounts in the TrustFund. Due to the short term nature of the notes, the fair value of the notesapproximated their carrying amount.

**10.   Commitments andRelated Party Transactions**

The Companypresently occupies office space provided by an affiliate of several of theInitial Stockholders. Such affiliate has agreed that, until the Companyconsummates a Business Combination, it will make such office space, as well ascertain office and secretarial services, available to the Company, as may berequired by the Company from time to time. The Company has agreed to pay suchaffiliate $7,500 per month for such services commencing on the effective dateof the Public Offering. The statement of operations includes $61,700 for theyear ended December 31, 2006.

Pursuant to letter agreements dated June 22, 2005with the Company and the representative of the underwriters, the InitialStockholders have waived their right to receive distributions with respect totheir founding shares upon the Company’s liquidation.

**11.   Common Stock**

On April 14,2006, the Company’s majority stockholders approved an amendment to the Company’sCertificate of Incorporation to increase the number of authorized shares ofcommon stock to 70,000,000. All references in the accompanying financialstatements to the number of shares of stock have been retroactively restated toreflect this transaction.

On April 20, 2006, the Board of Directorsapproved a stock split to be effected as a stock dividend immediately prior tothe closing of the Public Offering. The stock split was executed, and a stockdividend of one share for every 5 shares was issued to the initialstockholders.

**12.   Preferred Stock**

The Company is authorized to issue 1,000,000 shares ofpreferred stock with such designations, voting and other rights and preferencesas may be determined from time to time by the Board of Directors.

**13.   Reserved CommonStock**

At December 31, 2006, 31,400,000 shares of commonstock were reserved for issuance upon exercise of redeemable warrants and theunderwriter’s purchase option.

**14.   Trust Fund**

For tax planning purposes, the Company assigned itsrights to the cash in the Trust Fund to Harbor Acquisition SecurityCorporation, a wholly-owned Massachusetts subsidiary qualifying as a “securitycorporation” entitled to a reduced state corporate tax rate.

**15.   Going Concern**

TheCompany has not commenced any operations as of December 31, 2006, but hasentered into a Stock Purchase Agreement with Elmet Technologies, Inc (“Elmet”)and the holders of all the outstanding shares and warrants of Elmet (see Note2). This proposed acquisition would fulfill the conditions of a BusinessCombination required to release the funds held in the Trust Account to the Company(see Note 

F-12

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4). If this Business Combination is not completed, theCompany intends to immediately resume the search for another suitable BusinessCombination; however, there is no assurance that such a suitable BusinessCombination would be identified and consummated within the requisite timeperiods. In the event one is not, the Company would be required to distributethe funds held in the Trust Account to the Public Stockholders.

Managementbelieves that the Company’s existing cash resources, including cash on hand,will be sufficient to cover operating costs and expenses until the proposed acquisitionis consummated. However, the Company would be required to obtain additionalfinancing to continue its search for another suitable Business Combination andcontinue as a going concern if the proposed acquisition is not consummated.

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