**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

**FORM 10-Q**

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

**Forthe quarterly period ended June 30, 2007**

**or**

**o TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 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

Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Exchange Act during the past 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes x   No o

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-2 ofthe Exchange Act. (Check one):

| Large accelerated filer o |   | Accelerated  filer o |   | Non-accelerated  filer 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

Asof August 14, 2007, 16,800,000 shares of the registrant’s common stock, parvalue $0.001 per share, were outstanding.

 

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**HARBORACQUISITION CORP.**

**Table ofContents**
| PART I — FINANCIAL  INFORMATION                                                                     |   |   |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Item 1.  Financial Statements                                                                       |   | 3      |   |
| Condensed  Balance Sheets                                                                                |   | 3      |   |
| Condensed Statement of Operations                                                                        |   | 4      |   |
| Condensed Statement of Stockholders’ Equity                                                         |   | 5      |   |
| Condensed Statement of Cash Flows                                                                        |   | 6      |   |
| Notes to Condensed Financial Statements                                                                  |   | 7      |   |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   | 10     |   |
| Item 3. Quantitative and Qualitative Disclosures  about Market Risk                                 |   | 13     |   |
| Item 4. Controls and Procedures                                                                     |   | 14     |   |
| PART  II — OTHER INFORMATION                                                                        |   | 14     |   |
| Item 1.  Legal Proceedings                                                                          |   | 14     |   |
| Item 1A.  Risk Factors                                                                              |   | 14     |   |
| Item 2. Unregistered Sales of Equity Securities  and Use of Proceeds                                |   | 14     |   |
| Item 3. Defaults upon Senior Securities                                                                  |   | 15     |   |
| Item 4. Submission of Matters to a Vote of the  Securities Holders                                       |   | 15     |   |
| Item 5.  Other Information                                                                          |   | 15     |   |
| Item 6.  Exhibits                                                                                   |   | 15     |   |
| SIGNATURES                                                                                               |   |   |   |
| INDEX  TO EXHIBITS                                                                                       |   |   |   |
| Certification by  Principal Executive Officer Pursuant to Section 302                                    |   |   |   |
| Certification by  Principal Financial Officer Pursuant to Section 302                                    |   |   |   |
| Certification by Principal Executive Officer and Principal Financial  Officer Pursuant to Section 906    |   |   |   |

 

2

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**PART I — FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**HarborAcquisition Corporation and Subsidiary**

**(ADevelopment Stage Company)**

**CondensedBalance Sheets**
| ** **                                                                                                                                                                                                                                   | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                                                   | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                                                                                                   |       |                    |       |                        |       |
| **Current:**                                                                                                                                                                                                                                 |       |                    |       |                        |       |
| Cash                                                                                                                                                                                                                                         |       | $                       | 188,313    |                        | $          | 534,970 |   |
| Investments held in  trust                                                                                                                                                                                                                   |       | 78,865,905              |       | 77,840,000                  |       |
| Investments held in  trust from Underwriter                                                                                                                                                                                                  |       | 1,620,000               |       | 1,620,000                   |       |
| Investment income not  subject to trust                                                                                                                                                                                                      |       | —                  |       | 213,364                     |       |
| Prepaid Expense                                                                                                                                                                                                                              |       | 73,035                  |       | 66,000                      |       |
| ***Total  current assets***                                                                                                                                                                                                                  |       | 80,747,253              |       | 80,274,334                  |       |
| Deferred acquisition  costs                                                                                                                                                                                                                  |       | 1,126,017               |       | 643,592                     |       |
| Deferred tax asset                                                                                                                                                                                                                           |       | 337,448                 |       | 146,362                     |       |
| **Total Assets**                                                                                                                                                                                                                             |       | $                       | 82,210,718 |                        | $          | 81,064,288 |   |
|                                                                                                                                                                                                                                         |       |                    |       |                        |       |
| **Liabilities And Stockholders’  Equity**                                                                                                                                                                                               |       |                    |       |                        |       |
|                                                                                                                                                                                                                                         |       |                    |       |                        |       |
| **Current Liabilities**                                                                                                                                                                                                                      |       |                    |       |                        |       |
| Accrued Expenses                                                                                                                                                                                                                             |       | $                       | 465,490    |                        | $          | 305,434 |   |
| Due to Underwriter                                                                                                                                                                                                                           |       | 1,620,000               |       | 1,620,000                   |       |
| Deferred Interest  Income                                                                                                                                                                                                                    |       | 205,000                 |       | —                      |       |
| Income Taxes Payable                                                                                                                                                                                                                         |       | —                  |       | 111,043                     |       |
| **Total Liabilities**                                                                                                                                                                                                                        |       | 2,290,490               |       | 2,036,477                   |       |
|                                                                                                                                                                                                                                         |       |                    |       |                        |       |
| Common stock subject to  possible conversion, 2,758,620 shares at conversion value                                                                                                                                                           |       | 15,560,216              |       | 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 June 30, 2007 and December 31, 2006 respectively |       | 1,680                   |       | 1,680                       |       |
| Additional Paid in  Capital                                                                                                                                                                                                                  |       | 62,104,087              |       | 62,104,087                  |       |
| Earnings (Deficit)  Accumulated during the development stage                                                                                                                                                                                 |       | 2,254,245               |       | 1,361,828                   |       |
| **Total Stockholders’ Equity**                                                                                                                                                                                                          |       | 64,360,012              |       | 63,467,595                  |       |
| **Total Liabilities and Stockholders’ Equity**                                                                                                                                                                                          |       | $                       | 82,210,718 |                        | $          | 81,064,288 |   |

 

See notes tocondensed financial statements

3

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**HarborAcquisition Corporation and Subsidiary**

**(ADevelopment Stage Company)**

**Condensed Statements of Operations**

**(Unaudited)**
| ** **                                | ** ** | **For the  three months  ended** | ** ** | **For the  six months**      | ** ** | **For the  six months**      | ** ** | **For the period from  June 20, 2005  (inception)  to June 30, 2007** | ** ** |
|-------------------------------------------|------------|--------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **June 30, 2007**                | ** ** | **ended June 30, 2007** | ** ** | **ended June 30, 2006** | ** ** | **(cumulative)**                                                                                              | ** ** |
| ** **                                | ** ** | ** **                                 | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                                                                                    | ** ** |
| Interest income                           |       | $                                          | 758,530    |                                   | $          | 1,729,194                              |       | $                                                                                                             | 638,984    |   | $ | 4,329,178 |   |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| **Operating  Expenses**                   |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| General &  Administrative             |       | 228,156                                    |       | 348,940                                |       | 100,382                                |       | 842,415                                                                                                       |       |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| Net Income  before income taxes           |       | 530,374                                    |       | 1,380,254                              |       | 538,602                                |       | 3,486,763                                                                                                     |       |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| Income tax  expense                       |       | 188,624                                    |       | 487,837                                |       | 200,000                                |       | 1,232,518                                                                                                     |       |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| **Net  Income**                           |       | $                                          | 341,750    |                                   | $          | 892,417                                |       | $                                                                                                             | 338,602    |   | $ | 2,254,245 |   |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| Weighted Average  number of common shares |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| outstanding -  basic and diluted          |       | 16,800,000                                 |       | 16,800,000                             |       | 8,032,044                              |       | 11,067,118                                                                                                    |       |
|                                      |       |                                       |       |                                   |       |                                   |       |                                                                                                          |       |
| **Income per Share - basic and  diluted** |       | $                                          | 0.02       |                                   | $          | 0.05                                   |       | $                                                                                                             | 0.04       |   | $ | 0.20 |   |

 

See notes tocondensed financial statements

4

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**HarborAcquisition Corporation and Subsidiary**

**(ADevelopment Stage Company)**

**CondensedStatement of Stockholders’ Equity**
| ** **                                                                                                                                     | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                       | ** ** | **Earnings  (Deficit)  Accumulated** | ** ** | ** **  | ** **    |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|----------------------------------|------------|--------------------------------------|------------|-------------|---------------|
| ** **                                                                                                                                     | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | **During the  Development** | ** ** | ** **                           | ** ** |
| ** **                                                                                                                                     | ** ** | **Shares**            | ** ** | **Amount**     | ** ** | **Paid-in-Capital**              | ** ** | **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** | ** ** |
| **Unaudited:**                                                                                                                                 | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** **  | ** **    |
|                                                                                                                                           | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** **  | ** **    |
| 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** | ** ** |
| **Unaudited:**                                                                                                                                 | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** **  | ** **    |
| Net Income                                                                                                                                     |       | —                |       | —         |       | —                           |       | 892,417                              |       | 892,417     |          |
|                                                                                                                                           | ** ** | ** **            | ** ** | ** **     | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** **  | ** **    |
| **Balance at June 30, 2007**                                                                                                                   | ** ** | **16,800,000**        | ** ** | **$**          | **1,680**  | ** **                       | **$**      | **62,104,087**                       | ** ** | **$**       | **2,254,245** | ** ** | **$** | **64,360,012** | ** ** |

 

See notes tocondensed financial statements

5

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**HarborAcquisition Corporation and Subsidiary**

**(ADevelopment Stage Company)**

**Condensed Statements of Cash Flows**

**(Unaudited)**
| ** **                                                                        | ** ** | ** **                        | ** **  | ** **                        | ** ** | **For the period  from**       | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------------------|-------------|-----------------------------------|------------|------------------------------------------|------------|
| ** **                                                                        | ** ** | **For the  six months** | ** **  | **For the  six months** | ** ** | **June 22, 2005  (inception)** | ** ** |
| ** **                                                                        | ** ** | **ended**                         | ** **  | **ended**                         | ** ** | **to June 30, 2007**      | ** ** |
| ** **                                                                        | ** ** | **June 30, 2007**       | ** **  | **June 30, 2006**       | ** ** | **(cumulative)**                         | ** ** |
|                                                                              |       |                              |        |                              |       |                                     |       |
| ***Cash  Flows From Operating Activities***                                       |       |                              |        |                              |       |                                     |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| Net Income                                                                        |       | $                                 | 892,417     |                              | $          | 338,602                                  |       | $ | 2,254,245 |   |
| Adjustment to  reconcile net income to net cash provided by operating activities: |       |                              |        |                              |       |                                     |       |
| Changes in  operating assets and liabilities:                                     |       |                              |        |                              |       |                                     |       |
| Increase in  Prepaid expenses                                                     |       | (7,035                            | )           | (3,000                            | )          | (73,035                                  | )          |
| Increase in  value of investments held in trust                                   |       | (1,930,442                        | )           | (638,335                          | )          | (4,523,306                               | )          |
| Increase in  Deferred tax asset                                                   |       | (191,086                          | )           | —                            |       | (337,448                                 | )          |
| (Decrease)  increase in Income taxes payable                                      |       | (111,043                          | )           | 200,000                           |       | —                                   |       |
| Increase in  Deferred Interest Income                                             |       | 205,000                           |        | —                            |       | 205,000                                  |       |
| Increase in  Accrued expenses                                                     |       | 69,257                            |        | 58,936                            |       | 170,117                                  |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| **Net  Cash used in Operating Activities**                                        |       | (1,072,932                        | )           | (43,797                           | )          | (2,304,427                               | )          |
|                                                                              |       |                              |        |                              |       |                                     |       |
| ***Cash  Flows From Investing Activities***                                       |       |                              |        |                              |       |                                     |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| Payment of  deferred acquisition costs                                            |       | (391,626                          | )           | —                            |       | (830,644                                 | )          |
| Disbursements  from Trust                                                         |       | 1,117,901                         |        | 579,500                           |       | 3,497,401                                |       |
| Cash held in  Trust Account                                                       |       | —                            |        | (79,460,000                       | )          | (79,460,000                              | )          |
|                                                                              |       |                              |        |                              |       |                                     |       |
| **Net  Cash used in Investing Activities**                                        |       | 726,275                           |        | (78,880,500                       | )          | (76,793,243                              | )          |
|                                                                              |       |                              |        |                              |       |                                     |       |
| ***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                                   |       |
| Proceeds from  notes payable, Stockholders                                        |       | —                            |        | 150,000                           |       | 225,000                                  |       |
| Payments of  notes payable, Stockholders                                          |       | —                            |        | (75,000                           | )          | (225,000                                 | )          |
| Payment of  advances due to Stockholders                                          |       | —                            |        | —                            |       | (5,000                                   | )          |
| Payment of  offering costs                                                        |       | —                            |        | (4,699,799                        | )          | (4,834,117                               | )          |
|                                                                              |       |                              |        |                              |       |                                     |       |
| **Net  Cash provided by Financing Activities**                                    |       | —                            |        | 79,475,301                        |       | 79,285,983                               |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| Net (decrease)  increase in Cash                                                  |       | (346,657                          | )           | 551,004                           |       | 188,313                                  |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| Cash at  beginning of period                                                      |       | 534,970                           |        | 6,654                             |       | —                                   |       |
|                                                                              |       |                              |        |                              |       |                                     |       |
| **Cash at  end of period**                                                        | ** ** | **$**                             | **188,313** | ** **                        | **$**      | **557,658**                              | ** ** | **$** | **188,313** | ** ** |
| ** **                                                                        | ** ** | ** **                        | ** **  | ** **                        | ** ** | ** **                               | ** ** |
| 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  |                                     | $          | 1,620,000 |   |
|                                                                              |       |                              |        |                              |       |                                     |       |
| Supplemental  schedule of non-cash investing activities:                          |       |                              |        |                              |       |                                     |       |
| Accrual of deferred  acquisition costs                                            |       | $                                 | 295,373     |                              | —     |                                     | $          | 295,373 |   |

 

See notes tocondensed financial statements

6

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**Harbor Acquisition Corporation andSubsidiary(A Development Stage Company)**

**Notes toCondensed Financial Statements**

**1. Basis of Presentation**

The financial statements at June 30, 2007 and for the period ended June30, 2007 are unaudited. The condensed financial statements include the accountsof Harbor Acquisition Corporation and its wholly owned subsidiary HarborAcquisition Security Corporation (collectively referred to as the “Company”).All significant intercompany transactions and balances have been eliminated. Inthe opinion of management, all adjustments (consisting of normal accruals) havebeen made that are necessary to present fairly the financial position of theCompany as of June 30, 2007 and the results of its operations and its cash flowsfor the three and six months then ended, and for the period from June 20, 2005(inception) through June 30, 2007. Operating results for the interim periodspresented are not necessarily indicative of the results to be expected for afull year.

The statements and related notes have been prepared pursuant to the rulesand regulations of the U.S. Securities and Exchange Commission. Accordingly,certain information and footnote disclosures normally included in financialstatements prepared in accordance with generally accepted accounting principleshave been omitted pursuant to such rules and regulations.

**2. Organization and BusinessOperations**

The Company wasincorporated in Delaware on June 20, 2005 as a blank check company whoseobjective is to acquire an operating business. At June 30, 2007 the Company hadneither engaged in any operations nor generated significant operating revenueto date. The Company is considered to be in the development stage and issubject to the risks associated with activities of development stage companies.

All activitythrough June 30, 2007, relates to the Company’s formation, its initial publicoffering described below, and thereafter, pursuing potential acquisitions oftarget businesses.

The registrationstatement for the Company’s initial public offering (the “Public Offering”) (asdescribed in Note 4) was declared effective April 25, 2006. The Companyconsummated the Public Offering on May 1, 2006, and preceding theconsummation of the Public Offering on May 1, 2006 certain officers,directors, and initial shareholders of the Company purchased an aggregate of2,000,000 warrants at $.65 per warrant from the Company in a private placement(the “Private Placement”). The warrants sold in the Private Placement wereidentical to the warrants sold in the Public Offering. The Company received netproceeds from the Private Placement and the Public Offering of approximately$77,640,883 (Note 3).

The Company’smanagement has broad discretion with respect to the specific application of thenet proceeds of the Public Offering, although substantially all of the netproceeds of this Public Offering are intended to be generally applied towardconsummating a business combination with an operating business (“BusinessCombination”), which may not constitute a business combination for accountingpurposes.

Furthermore, thereis no assurance that the Company will be able to successfully effect a BusinessCombination. Upon the closing of the Public Offering, $79,460,000, including$1,620,000 of deferred underwriting fees described in Note 3, is being held ina trust 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 up to $1,850,000 of interest 

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earned on theTrust Fund, may be used to pay for business, legal and accounting due diligenceon prospective acquisitions and continuing general and administrative expenses.The Company, after signing a definitive agreement for the acquisition of atarget business, will submit such transaction for stockholder approval. Underthe Company’s Certificate of Incorporation, the Business Combination must beapproved by a majority of the votes cast at the stockholders meeting by holdersof record of the Company’s common stock on the record date. All of the Company’sstockholders prior to the Public Offering, including all of the officers anddirectors of the Company (“Initial Stockholders”), have agreed to vote their3,000,000 founding shares of common stock, as well as any shares of commonstock acquired in connection with or following the Public Offering, inaccordance with the vote of the majority in interest of all other stockholdersof the Company (“Public Stockholders”) with respect to any BusinessCombination. After consummation of a Business Combination, these votingprovisions will no longer be applicable. In addition, in the event thatstockholders owning 20% or more of the shares issued in the Public Offeringvote against the Business Combination and exercise their conversion rightsdescribed below, the Business Combination will not be consummated.

With respect to aBusiness Combination which is approved and consummated, any Public Stockholderwho voted against the Business Combination may demand that the Company converthis or her shares. The per share conversion price will equal the amount in theTrust Fund, calculated as of two business days prior to the consummation of theproposed Business Combination, divided by the number of shares of common stocksold in the Public Offering. Accordingly, Public Stockholders holding 19.99% ofthe aggregate number of shares owned by all Public Stockholders may seekconversion of their shares in the event of a Business Combination. Such PublicStockholders are entitled to receive their per share interest in the Trust Fundcomputed without regard to the shares acquired by Initial Stockholders prior tothe Public Offering. Accordingly, a portion of the net proceeds from the PublicOffering (19.99% of the amount held in the Trust Fund, excluding the deferredportion of the underwriters’ non-accountable expense allowance) has beenclassified as common stock subject to possible conversion on the accompanyingJune 30, 2007 balance sheet. 19.99% of the interest earned on the TrustAccount, net of the $1,850,000 maximum amount of distributions allowed from theTrust Account for working capital purposes (see Note 4) and income taxesrelated to the earnings, has been recorded as deferred interest in theaccompanying June 30, 2007 balance sheet. In addition, such stockholderswould also be entitled to a portion of the deferred portion of the underwriters’non-accountable expense allowance held in trust (see Note 3). As of June30, 2007, the estimated per share conversion price is $5.83.

The Company’sCertificate of Incorporation provides for mandatory liquidation of the Companyin the event that the Company does not consummate a Business Combination within18 months from the date of the consummation of the Public Offering, or 24months from the consummation of the Public Offering if certain extensioncriteria have been satisfied. In the event of liquidation, it is likely thatthe per share value of the residual assets remaining available for distribution(including Trust Fund assets) will be less than the initial offering price pershare in the Public Offering (assuming no value is attributed to the Warrantscontained in the Units sold in the Public Offering discussed in Note 3).

The Company mayface mandatory liquidation by May 1, 2008 if a business combination is notconsummated, which raises substantial doubt about its ability to continue as agoing concern. The financial statements do not include any adjustments thatmight result from the outcome of this uncertainty.

On May 1, 2006,the Company formed a wholly owned subsidiary, Harbor Acquisition SecurityCorporation, for tax planning purposes. The Company assigned the rights to theinvestments in the Trust Fund to this subsidiary.

On October 17,2006, the Company entered into a Stock Purchase Agreement with ElmetTechnologies, Inc (“Elmet”) and the holders of all of the outstanding sharesand warrants of Elmet. Subject to the terms and conditions of the StockPurchase Agreement, the Company has agreed to acquire all of the outstandingElmet shares and all of its outstanding warrants. The acquisition is expectedto be consummated during the third quarter of 2007, after the required approvalby the Company’s stockholders and the fulfillment of certain other conditions. Thepending transaction is further described in the Company’s current report filedwith the U.S. Securities and Exchange Commission on Form 8-K on October 17,2006 and amended on February 12, 2007 and July 24, 2007.

**3. Initial Public Offering**

On May 1,2006, the Company sold 13,800,000 units (“Units”), including 1,800,000 inconnection with the Underwriter’s over-allotment option, in the Public Offeringat a price of $6.00 per Unit. Each Unit consists of one share of the Company’scommon stock, $.0001 par value, and two Redeemable Common Stock PurchaseWarrants (“Warrants”). Each Warrant entitles the holder to purchase from theCompany one share of common stock at an exercise price of $5.00 commencing thelater of the completion of a Business Combination or one year from theeffective date of the Public Offering and expiring five years from theeffective date of the Public Offering. The Company may redeem the Warrants at aprice of $.01 per Warrant upon 30 days’ notice after the Warrants becomeexercisable, only in the event that the last sale price of the common stock isat least $8.50 per share for any 20 trading days within a 30 trading day periodending on the third day prior to the date on which notice of redemption isgiven. If the Company calls the Warrants, the holder will either have to exercisethe Warrants by purchasing the common stock from the Company for $5.00 pershare or allow the Company to redeem the Warrants at a price of $.01 perwarrant.

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In connection withthe Public Offering, the Company paid the underwriters of the Public Offering(collectively, the “Underwriter”) an underwriting discount of 5.0% of the grossproceeds of the Public Offering ($4,140,000). In addition, a non-accountableexpense allowance of 2.25% of the gross proceeds of the Public Offering,excluding the over-allotment option, is due to the Underwriter, who has agreedto deposit the non-accountable expense allowance ($1,620,000) into the TrustFund until the earlier of the completion of a Business Combination or theliquidation of the Trust Fund. The Underwriter has further agreed to forfeitany rights to or claims against such proceeds unless the Company successfullycompletes a Business Combination. If a Business Combination is approved andcompleted, public stockholders who voted against the combination and haveexercised their conversion rights will be entitled to their pro rata share ofthe deferred non-accountable expense allowance.

Preceding theconsummation of the Public Offering on May 1, 2006, certain of the InitialStockholders purchased 2,000,000 warrants at a purchase price of $.65 perwarrant in a private placement. The proceeds of $1,300,000 were deposited intothe Trust Fund, and the Initial Stockholders will not have any claim on thisamount if the Trust Fund is liquidated.

The InitialStockholders are entitled to registration rights with respect to their foundingshares and private placement warrants pursuant to agreements dated April 25,2006. The holders of the majority of these shares and warrants are entitled tomake up to two demands that the Company register these shares. In addition, theInitial Stockholders have “piggy-back” registration rights on certainregistration statements filed subsequent to the consummation of a BusinessCombination.

In connection withthe Public Offering, the Company issued an option, for $100, to the Underwriterto purchase 600,000 Units at an exercise price of $7.50 per Unit, which isfirst exercisable on the date of consummation of a Business Combination. Theoption expires April 25, 2011. The Units that would be issued upon exercise ofthis option are identical to those offered in the Public Offering, except thateach of the warrants underlying the option entitles the holder to purchase oneshare of the Company’s common stock at a price of $6.25 and will have a cashlessexercise provision. The Company has accounted for the fair value of the option,inclusive of the receipt of the $100 cash payment, as an expense of the PublicOffering resulting in a charge directly to stockholder’s equity. The Companyestimated, using the Black-Scholes method, the fair value of the option grantedto the underwriter as of the date of grant was approximately $1,516,000 usingthe following assumptions: (1) expected volatility of 49.3%,(2) risk-free interest rate of 4.635% and (3) expected life of fiveyears. In order to estimate the volatility, the Company considered the historicvolatilities of 22 publicly traded companies that operate within the consumerand industrial products sectors.

**4. Limited Distributions of Income from Trust Fund**

Upon writtenrequest from the Company, which may be given not more than once in any calendarmonth, the trustee shall distribute to the Company by wire transfer from theTrust Fund an amount computed and certified by the Company to be equal to thecollected and undistributed income earned on the original amount deposited inthe Trust Fund for the preceding month. The maximum amount of distributions,net of taxes, that the Company may request and the trustee shall distribute is$1,850,000. The Company has received distributions, net of taxes, of $1,850,000through June 30, 2007. These funds will be used for working capital purposesassociated with identifying and consummating a Business Combination.

If there is anyincome tax obligation relating to the income of the property in the TrustAccount, then, at the written instruction of the Company, the Trustee shalldisburse to the Company by wire transfer, out of the property in the TrustAccount, the amount indicated by the Company as required to pay income taxes. Suchdisbursements amounted to $1,616,001 through June 30, 2007.

**5. Deferred Offering Costs**

Deferred offeringcosts consisted of legal, accounting, printing, and other fees incurred priorto the Public Offering which were directly related to the Public Offering.These costs were charged to stockholders’ equity upon completion of the PublicOffering.

**6. Deferred Acquisition Costs**

Deferredacquisition costs consist principally of legal fees directly associated withthe negotiation and execution of the Stock Purchase Agreement with Elmet. Thesecosts will be treated as part of the purchase price upon the closing of thetransaction.

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**7. Note Payable, Stockholders**

The Company issuedan aggregate of $75,000 in unsecured promissory notes to two of its InitialStockholders on June 22, 2005. The notes were non-interest bearing andwere payable on the earlier of June 15, 2006 or the consummation of thePublic Offering. Accordingly, the Company paid off the notes on May 1,2006. Separately, upon the consummation of the Public Offering, a shareholderloaned the Company $150,000. The loan and all related interest was paid in fullon July 5, 2006. The loan bore interest at 4% per annum and was paid from theinterest earned on the amounts in the Trust Fund. Due to the short term natureof the notes, the fair value of the notes approximated their carrying amount.

**8. Commitments and Related PartyTransactions**

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 $45,000 for thesix months ended June 30, 2007.

Pursuant to letteragreements dated June 22, 2005 with the Company and the representative ofthe Underwriters, the Initial Stockholders have waived their right to receivedistributions with respect to their founding shares upon the Company’sliquidation.

**9. Common Stock**

On April 14,2006, the Company’s 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 Company’s Board of Directors approved a stock split to be effected asa stock dividend immediately prior to the closing of the Public Offering. Thestock split was executed, and a stock dividend of one share for every 5 shareswas issued to the Initial Stockholders.

**10. Preferred Stock**

The Company isauthorized to issue 1,000,000 shares of preferred stock with such designations,voting and other rights and preferences as may be determined from time to timeby its Board of Directors.

**11. Reserved Common Stock**

At June 30, 2007,30,800,000 shares of common stock were reserved for issuance upon exercise ofredeemable warrants and the Underwriter’s purchase option.

**12. Trust Fund**

For tax planningpurposes, the Company assigned its rights to the cash in the Trust Fund toHarbor Acquisition Security Corporation, a wholly-owned Massachusettssubsidiary qualifying as a “security corporation” entitled to a reduced statecorporate tax rate.

**Item 2.****                          Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

The following Management’s Discussion and Analysis ofFinancial Condition and Results of Operations should be read in conjunctionwith our financial statements and the related notes and schedules thereto.

We area “blank check” company organized under the laws of the State of Delaware onJune 20, 2005 for the purpose of acquiring, through a merger, capitalstock exchange, asset acquisition, stock purchase or other similar businesscombination with an operating business in the consumer and industrial productssectors. Our initial business combination must be with a target business whosefair market value is at least equal to 80% of our net assets (excluding the deferrednon-accountable expense allowance of the 

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underwriters held in trust) at the time of suchacquisition. We intend to use cash derived from the net proceeds of our publicoffering which was completed on May 1, 2006 and our concurrent privateplacement of warrants, together with borrowings under our proposed seniorsecured credit facilities, to effect such business combination.

OnMay 1, 2006, we consummated our initial public offering of 13,800,000units, including 1,800,000 units attributable to the full exercise of theunderwriters’ over-allotment option (see “Liquidity and Capital Resources”below). Since our initial public offering, we have been actively searching fora suitable business combination candidate. We have met with target companies, serviceprofessionals and other intermediaries to discuss our company, the backgroundof our management and our combination preferences. In the course of thesediscussions, we have also spent time explaining the capital structure of theinitial public offering, the combination approval process and the timelinewithin which we must either enter into a letter of intent or definitiveagreement for a business combination or return the net proceeds of the offeringheld in trust to investors. On October 17, 2006, we entered into adefinitive stock purchase agreement to acquire Elmet, and we currentlyanticipate we will close such acquisition during the third quarter of 2007. Thetransaction is described in our current report filed with the Securities andExchange Commission on Form 8-K on October 17, 2006, as amended onFebruary 12, 2007 and July 24, 2007. However, we cannot assure investors thatwe will be able to close the Elmet acquisition or, in the event we do notcomplete such acquisition, find and close a suitable alternative businesscombination in the time permitted by our certificate of incorporation.

**Resultsof Operations**

*Net Income and Loss*

Wehave neither engaged in any business operations nor generated any operatingrevenues to date. Our only activities since inception have been organizationalactivities and those necessary to prepare for our public offering, andthereafter, pursuing potential acquisitions of target businesses. We will notgenerate any operating revenues until after completion of a businesscombination. We have generated non-operating income in the form of interestincome on our cash and cash equivalents and short-term investments which areheld in the trust account we established upon completion of our initial publicoffering.

Net incomeof $341,750 for the three months ended June 30, 2007 consists of interestincome primarily on the trust fund investment of $757,322, along with $1,208 ofother interest income, reduced by $228,156 of general and administrativeexpenses and an income tax expense of $188,624. Net income of $340,093 for thethree months ended June 30, 2006 consists of interest income primarily on thetrust fund investment of $638,335 along with $624 of other interest incomes,reduced by $98,866 of general and administrative expenses and an income taxexpense of $200,000.

Netincome of $892,417 for the six months ended June 30, 2007 consists of interestincome primarily on the trust fund investment of $1,725,442, along with $3,752of other interest income, reduced by $348,940 of general and administrativeexpenses and an income tax expense of $487,837. Net income of $338,602 for thesix months ended June 30, 2006 consists of interest income primarily on thetrust fund investment of $638,335 along with $649 of other interest incomes,reduced by $100,382 of general and administrative expenses and an income taxexpense of $200,000.

Netincome of $2,254,245 for the period from June 20, 2005 (inception) to June30, 2007 (cumulative) consists of interest income primarily on the trust fundinvestment of $4,318,306 along with $10,872 of other interest income, reducedby $842,415 of general and administrative expenses and an income tax expense of$1,232,518.

**Liquidityand Capital Resources**

OnApril 25, 2006, we entered into an agreement with certain of our initialstockholders for the sale of 2,000,000 warrants in a private placement. Eachwarrant entitles the holder to purchase from us one share of our common stockat an exercise price of $5.00. The warrants were sold at a price of $0.65 perwarrant, generating net proceeds of $1,300,000.

OnMay 1, 2006, we consummated our initial public offering of 13,800,000units, including 1,800,000 units attributable to the full exercise of theunderwriters’ over-allotment option. Each unit consists of one share of commonstock and two warrants. Each warrant entitles the holder to purchase from usone share of our common stock at an exercise price of $5.00.

Thenet proceeds from the private placement of warrants and the public offering ofour units, including the exercise of the underwriters’ over-allotment option,after deducting certain offering expenses of approximately $690,000,underwriting discounts of $4,140,000 and an underwriters’ non-accountableexpense allowance of $1,620,000, were approximately $77,650,000. The netproceeds (including an additional $40,000, representing the difference betweenestimated offering expenses of $650,000 and actual offering expenses of $690,000)are being held in a trust account at JPMorgan Chase Bank, N.A. maintained byContinental Stock Transfer & Trust Company, as trustee. In addition,we deposited into the trust account the proceeds from a $150,000 loan to usfrom 

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an affiliate of two of our directors (which we repaidon July 5, 2006, with interest at an annual rate of 4%, from interestearned on the trust account), and the underwriters’ non-accountable expenseallowance of $1,620,000. In total, we deposited $79,460,000 into the trust account.As of June 30, 2007, there was a total of $80,485,905 held in the trustaccount, which includes interest earned in excess of the $1,850,000 which wewere permitted to withdraw from the trust account to pay our expenses. Theunderwriters have agreed to defer payment of the allowance until theconsummation of a business combination and to forfeit the allowance if we donot consummate a business combination. Upon the consummation of a businesscombination, we will pay the deferred non-accountable expense allowance to theunderwriters, provided that to the extent fewer than 20% of our publicstockholders elect to convert their shares to cash upon such consummation, a *pro rata* portion of such allowance will bepaid to such stockholders rather than to the underwriters. We will have noright to the deferred non-accountable expense allowance.

OnOctober 17, 2006, we entered into a commitment letter for proposed newsenior secured credit facilities consisting of a $50 million term loanfacility and a $20 million revolving loan facility. Subject to negotiationof a credit agreement satisfactory to us and our prospective lenders, weanticipate such facilities will become effective upon the closing of ouracquisition of Elmet. In addition to the funds now in the trust account andcertain of the interest earned thereon, we will borrow the term loan at theclosing of the acquisition to pay a portion of the acquisition price and to paythe public stockholders who vote against the business combination and elect toexercise their conversion rights.

We will use up to $1,850,000 of the interest earned onthe trust account to repay the $150,000 loan described above (which we repaidin full, with interest at an annual rate of 4%, on July 5, 2006) and tofinance our expenses prior to consummating a business combination. During theperiod from the completion of our initial public offering on May 1, 2006through June 30, 2007, we incurred a total of $1,963,432 of such expenses. Wecurrently anticipate that, by the closing of the Elmet acquisition (assumingthe acquisition is closed in the third quarter of 2007), we will have incurredapproximately $2,150,000 of expenses for the following purposes:

·       costs incurred to identify the Elmet acquisitionand other potential target companies for which negotiations were abandoned;

·       due diligence and investigation of Elmet andother prospective target businesses;

·       legal and accounting fees relating to our SECreporting obligations and general corporate matters;

·               structuring and preparing documentationfor the Elmet acquisition (including, among other documents, the stock purchaseagreement and the proxy statement);

·               payment of $127,500 in administrativefees due to an affiliate of two of our directors;

·               repayment of the $150,000 loan (withinterest at an annual rate of 4%) as described above from an affiliate of twoof our directors; and

·               miscellaneous expenses.

To the extent we incur expenses prior to thecompletion of a business combination in excess of the $1,850,000 available tous from the interest earned on the trust account, we intend to pay such excessfrom working capital available to us following the consummation of a businesscombination. If we do not complete a business combination, certain of ourofficers and directors have agreed to indemnify us against any claims by anyvendor, prospective target business, or other entities that are owed money fromus for services rendered or products sold to us that would reduce the amount ofthe funds in the trust account.

Beginningon May 1, 2006 and ending upon the acquisition of a target business, webegan incurring a fee of $7,500 per month for office space and certainadministrative, technical and secretarial services from Grand Cru Management,LLC, an affiliate of Robert J. Hanks, our chief executive officer andtreasurer, and David A.R. Dullum, our president and secretary. In addition, in2005, Messrs. Hanks and Dullum advanced an aggregate of $75,000 to us forpayment of offering expenses on our behalf. These advances were repaid from theproceeds of the initial public offering that were allocated to pay offeringexpenses.

If weare unable to close an acquisition and thereafter fail to find and acquireanother suitable target business by October 31, 2007 (or April 30,2008 if a letter of intent, agreement in principle or a definitive agreementhas been executed by October 31, 2007), we will be forced to liquidate. Ifwe are forced to liquidate, the per share liquidation amount will be less thanthe initial per unit public offering price because of the underwritingcommissions and expenses related to our initial public offering and because ofthe value of the warrants in the per unit offering price. Additionally, ifthird parties make claims against us, the offering proceeds held in the trustaccount could be subject to those claims, resulting in a further reduction tothe per share liquidation price. Under Delaware law, our 

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stockholders who have received distributions from usmay be held liable for claims by third parties to the extent such claims havenot been paid by us. Furthermore, our warrants will expire worthless if weliquidate before the completion of a business combination.

It ispossible that, if we are unable to close the Elmet acquisition, we could use aportion of the interest on the funds in the trust account which we havereceived to make a deposit, down payment or fund a “no-shop” provision withrespect to a particular other proposed business combination. In the event we wereultimately required to forfeit such funds (whether as a result of our breach ofagreement relating to such payment or otherwise), we may not have a sufficientamount of working capital available to pay expenses related to finding anothersuitable business combination without securing additional financing. If we wereunable to secure additional financing, we would most likely fail to consummatea business combination in the permitted time and would be forced to liquidate.

*Off-BalanceSheet Arrangements*

Otherthan contractual obligations incurred in the normal course of business, we donot have any off-balance sheet financing arrangements or liabilities, guaranteecontracts, retained or contingent interests in transferred assets or anyobligation arising out of a material variable interest in an unconsolidatedentity. The securities held in the trust account are in the name of ourwholly-owned subsidiary, Harbor Acquisition Security Corporation, which wasformed on May 1, 2006 specifically for such purpose.

*ContractualObligations*

Inconnection with our initial public offering, we agreed to pay the underwritersa deferred non-accountable expense allowance of $1,620,000 upon theconsummation of our initial business combination (which amount is subject toreduction in proportion to the percentage of our public stockholders who voteagainst the combination and exercise their conversion rights). We expect thatsuch allowance will be paid out of the funds in the trust account. Other thancontractual obligations incurred in the ordinary course of business, we do nothave any other long-term contractual obligations.

**Forward-Looking Statements**

This Quarterly Report on Form 10-Q includesforward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended (the “Securities Act”), and Section 21Eof the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Wehave based these forward-looking statements on our current expectations andprojections about future events, and we assume no obligation to update any suchforward-looking statements. These forward-looking statements are subject toknown and unknown risks, uncertainties and assumptions about us that may causeour actual results to be materially different from any future results expressedor implied by such forward-looking statements. In some cases, you can identifyforward-looking statements by terminology such as “may,” “should,” “could,” “would,”“expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negativeof such terms or other similar expressions. Factors that might cause our futureresults to differ from those statements include, but are not limited to, thosedescribed in the section entitled “Risk Factors” of the prospectus filed withthe Securities and Exchange Commission (the “SEC”) in connection with ourinitial public offering. The following discussion should be read in conjunctionwith our condensed financial statements and related notes thereto includedelsewhere in this report and with the section entitled “Risk Factors” containedin our 2006 Annual Report on Form 10-K filed with the SEC on April 2, 2007.

**Item 3.    Quantitative and Qualitative Disclosures About Market Risk.**

Market risk is a broad term for the risk of economicloss due to adverse changes in the fair value of a financial instrument. Thesechanges may be the result of various factors, including interest rates, foreignexchange rates, commodity prices and/or equity prices. Our exposure to marketrisk is limited to interest income sensitivity with respect to the funds placedin the trust account. However, the funds held in our trust account have beeninvested only in U.S. “government securities,” defined as any Treasury Billissued by the United States having a maturity of one hundred and eighty days orless or in money market funds meeting certain conditions under Rule 2a-7under the Investment Company Act of 1940, so we are not deemed to be aninvestment company under the Investment Company Act. Thus, we are subject tomarket risk primarily through the effect of changes in interest rates ongovernment securities. The effect of other changes, such as foreign exchangerates, commodity prices and/or equity prices, does not pose significant marketrisk to us.

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**Item 4.   Controls andProcedures.**

Based on their evaluation as of the end of the periodcovered by this Quarterly Report on Form 10-Q, our principal executive officerand principal financial and accounting officer have concluded that ourdisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) were effective as of the end of the periodcovered by this report.

There were no changes in our internal controls overfinancial reporting in connection with the evaluation required byRule 13a-15(d) under the Exchange Act that occurred during the periodcovered by this Quarterly Report on Form 10-Q that have materially affected, orare reasonably likely to materially affect, our internal controls overfinancial reporting.

We believe that a control system, no matter how welldesigned and operated, cannot provide absolute assurance that the objectives ofthe control system are met, and no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within acompany have been detected. Our disclosure controls and procedures are designedto provide reasonable assurance of achieving their objectives, and ourprincipal executive officer and our principal financial officer have concludedthat these controls and procedures are effective at the reasonable assurancelevel.

**PART II — OTHER INFORMATION**

**Item 1.   LegalProceedings**

We are not currently subject to any material legalproceedings, nor, to our knowledge, is any material legal proceeding threatenedagainst us. From time to time, we may be a party to certain legal proceedingsincidental to the normal course of our business. While the outcome of theselegal proceedings cannot be predicted with certainty, we do not expect thatthese proceedings will have a material effect upon our financial condition orresults of operations.

**Item 1A.   Risk Factors**

An investment in our securities involves a high degreeof risk. There have been no material changes to the risk factors previouslydisclosed in our 2006 Annual Report on Form 10-K filed with the SEC on April 2,2007 as amended on May 25, 2007. You should consider carefully all of thematerial risks described in such report, before making a decision to invest inour securities. If any of the events described therein occur, our business,financial conditions and results of operations may be materially adverselyaffected. In that event, the trading price of our securities could decline, andyou could lose all or part of your investment *.*

**Item 2.   Unregistered Salesof Equity Securities and Use of Proceeds**

On April 25, 2006, we entered into a warrantplacement agreement with certain of our initial stockholders for the sale of2,000,000 warrants at a price of $0.65 per warrant, generating total grossproceeds of $1,300,000. Each warrant entitles the holder to purchase from usone share of our common stock at an exercise price of $5.00. The warrants soldwere exempt from registration under regulations promulgated by the SEC underSection 4(2) of the Securities Act. The exemption was available on thebasis that there was no general solicitation in connection with the placementand sales were only made to accredited investors.

On May 1, 2006, we consummated our initial publicoffering of 13,800,000 units, including 1,800,000 units that were attributableto the full exercise of the underwriters’ over-allotment option. Each unitconsists of one share of common stock and two warrants. Each warrant entitlesthe holder to purchase from us one share of our common stock at an exerciseprice of $5.00 (or, with respect to the warrants held by the underwriters,$6.25). Our common stock and warrants started trading separately onMay 30, 2006. The securities sold in the offering were registered underthe Securities Act on registration statements on Form S-1 (FileNo. 333-126300 and File No. 333-133589).

We paid a total of $4,140,000 in underwritingdiscounts and approximately $650,000 for costs and expenses related to theoffering. The underwriters agreed to defer their non-accountable expenseallowance of $1,620,000 until we complete a business combination. Afterdeducting the underwriting discounts and the offering expenses, the total netproceeds to us from the offering were approximately $76,390,000, which was depositedinto a trust fund. In addition, the trust fund includes the deferrednon-accountable expense allowance, the proceeds from the private placement of$1,300,000 and a loan from an initial stockholder of $150,000. We 

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have also agreed to pay the underwriters the deferrednon-accountable expense allowance upon the consummation of our initial businesscombination, less any portion payable to stockholders who convert their sharesto cash.

On May 1, 2006, we consummated the sale to Ferris,Baker Watts, Incorporated, for $100, of an option to purchase up to a total of600,000 units. The units issuable upon exercise of this option are identical tothose sold in our initial public offering except that the warrants included inthe units have an exercise price of $6.25 (125% of the exercise price of thewarrants included in the units sold in the offering and have a cashlessexercise provision). This option is first exercisable at $7.50 per unitcommencing on the date of consummation of a business combination, and expireson April 25, 2011. The purchase option is exercisable on a cashless basis.The purchase option, as well as the units issuable upon exercise of thepurchase option, the shares of common stock and warrants underlying the units,and the shares of common stock issuable upon exercise of the warrants includedin the units were registered under the Securities Act on the same registrationstatement on Form S-1 (File No. 333-126300).

For a more detailed description of the use of proceedsfrom our initial public offering and private placement, see Part I,Item 2 of this Quarterly Report on Form 10-Q.

**Item 3.   Defaults uponSenior Securities**

Not applicable.

**Item 4.   Submission ofMatters to a Vote of the Security Holders**

Not applicable.

**Item 5.   Other Information**

On May 30, 2006, Ferris, Baker Watts, Incorporated,the lead underwriter in our initial public offering, allowed holders of theCompany’s units to separately trade the common stock and warrants included insuch units as of such date. The common stock, units and warrants are quoted onthe American Stock Exchange under the symbols HAC, HAC.U and HAC.WS,respectively.

**Item 6.   Exhibits**
| Number | ** ** | **Description**                                                                                                                                                                                   |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                              |
| 31.1   |       | Certification by Principal Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                      |
|   |       |                                                                                                                                                                                              |
| 31.2   |       | Certification by Principal Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                      |
|   |       |                                                                                                                                                                                              |
| 32.1   |       | Certification by Principal Executive Officer and  Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

#####  

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#####  

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
|                        | ** ** | **HARBOR ACQUISITION CORPORATION** |
|------------------------|------------|------------------------------------|
|                   |       |                               |   |   |
| Date: August 14,  2007 |       | By:                                |   | /s/ Robert J. Hanks |
|                   | * *   | * *                           |   | *Chief Executive Officer and Treasurer* |
| * *               | * *   | * *                           |   | *(Principal Executive Officer)* |
|                   |       |                               |   |   |
|                   |       | By:                                |   | /s/ Todd A. Fitzpatrick |
|                   | * *   | * *                           |   | *Vice President* |
|                   | * *   | * *                           |   | *(Principal Financial and Accounting Officer)* |
|                   |       |                               |   |   |

 

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**INDEX TOEXHIBITS**
| Number | ** ** | **Description**                                                                                                                                                                                   |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                              |
| 31.1   |       | Certification by Principal Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                      |
|   |       |                                                                                                                                                                                              |
| 31.2   |       | Certification by Principal Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                      |
|   |       |                                                                                                                                                                                              |
| 32.1   |       | Certification by Principal Executive Officer and  Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

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