**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

**FORM 10-Q**

 

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

**                                   Forthe quarterly period ended March 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 ofregistrant as specified in its charter)

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

**(617) 624-8409**Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.Yes o No x

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

Large accelerated filer o               Accelerated filer o               Non-accelerated filer x

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

As of June 6, 2006, 16,800,000 shares of the registrant’s commonstock, par value $0.001 per share, were outstanding.

 

 

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**HARBORACQUISITION CORPORATIONTable of Contents**
|                                                                                                                  | ** ** | **Page** |
|------------------------------------------------------------------------------------------------------------------|------------|----------|
| PART I — FINANCIAL  INFORMATION                                                                        |       |     |
| Item 1.  Condensed Financial Statements                                                                     |       | 3        |
| Condensed Balance Sheets                                                                                         |       | 3        |
| Condensed Statements of Operations                                                                               |       | 4        |
| Condensed Statements of Stockholders’ Equity                                                                |       | 5        |
| Condensed Statements of Cash Flows                                                                               |       | 6        |
| Notes to Condensed Financial Statements                                                                          |       | 7        |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations         |       | 11       |
| 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 6.  Exhibits                                                                                           |       | 16       |
| SIGNATURES                                                                                                       |       | 17       |
| 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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**Item 1.Financial Statements**

**Harbor AcquisitionCorporation(A Development Stage Company)Condensed Balance Sheets**
| ** **                                                                                                                     | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                     | ** ** | **(unaudited)**              | ** ** | ** **                      | ** ** |
| **Assets**                                                                                                                     | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Cash                                                                                                                           |       | $                            | 2,824      |                            | $          | 6,654 |   |
| Deferred  offering costs                                                                                                       |       | 630,848                      |       | 303,509                         |       |
| **Total  Assets**                                                                                                              |       | $                            | 633,672    |                            | $          | 310,163 |   |
|                                                                                                                           |       |                         |       |                            |       |
| **Liabilities And Stockholders’  Equity**                                                                                 | ** ** | ** **                   | ** ** | ** **                      | ** ** |
|                                                                                                                           |       |                         |       |                            |       |
| **Current Liabilities**                                                                                                        | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Accrued Offering  Expenses                                                                                                     |       | $                            | 530,000    |                            | $          | 210,000 |   |
| Accrued Expenses                                                                                                               |       | 5,000                        |       | 5,000                           |       |
| Notes Payable,  Stockholders                                                                                                   |       | 75,000                       |       | 75,000                          |       |
| Advance due to  stockholder                                                                                                    |       | 5,000                        |       | —                          |       |
| **Total  Liabilites**                                                                                                          |       | 615,000                      |       | 290,000                         |       |
| ** **                                                                                                                     | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| 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;  3,000,000 shares issued and outstanding at March 31, 2006 |       | 300                          |       | 300                             |       |
| Additional Paid  in Capital                                                                                                    |       | 24,700                       |       | 24,700                          |       |
| Deficit  Accumulated during the development stage                                                                              |       | (6,328                       | )          | (4,837                          | )          |
| **Total  Stockholders’ Equity**                                                                                           |       | 18,672                       |       | 20,163                          |       |
| ** **                                                                                                                     | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| **Total  Liabilities and Stockholders’ Equity**                                                                           |       | $                            | 633,672    |                            | $          | 310,163 |   |

 

See notes to condensedfinancial statements

 

3

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**Harbor AcquisitionCorporation(A Development Stage Company)Condensed Statements of Operations(Unaudited)**
| ** **                                            | ** ** | ** **                             | ** ** | **For the period from**   | ** ** |
|-------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------|------------|
| ** **                                            | ** ** | **For the period from** | ** ** | **June 20, 2005  (inception)** | ** ** |
| ** **                                            | ** ** | **January 1, 2006 to**  | ** ** | **to March 31, 2006**     | ** ** |
| ** **                                            | ** ** | **March 31, 2006**           | ** ** | **(cumulative)**                         | ** ** |
|                                                  |       |                                   |       |                                     |       |
| Interest income                                       |       | $                                      | 25         |                                     | $          | 188 |   |
|                                                  |       |                                   |       |                                     |       |
| **Operating Expenses**                                | ** ** | ** **                             | ** ** | ** **                               | ** ** |
|                                                  |       |                                   |       |                                     |       |
| General &  Administrative                    |       | 1,516                                  |       | 6,516                                    |       |
|                                                  |       |                                   |       |                                     |       |
| **Net Loss**                                          |       | $                                      | (1,491     | )                                        | $          | (6,328 | ) |
|                                                  |       |                                   |       |                                     |       |
|                                                  |       |                                   |       |                                     |       |
| Weighted Average  number of common shares outstanding |       | 3,000,000                              |       | 3,000,000                                |       |
|                                                  |       |                                   |       |                                     |       |
| **Loss per Share**                                    | ** ** | $                                      | (0.00      | )                                        | $          | (0.00 | ) |

 

See notes to condensedfinancial statements

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**Harbor AcquisitionCorporation(A Development Stage Company)Condensed Statements of Stockholders’ Equity**
| ** **                                          | ** ** | ** **            | ** ** | ** **     | ** ** | ** **          | ** ** | **Deficit Accumulated** | ** ** | ** ** | ** ** |
|-----------------------------------------------------|------------|-----------------------|------------|----------------|------------|---------------------|------------|------------------------------|------------|------------|------------|
| ** **                                          | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | **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** |   |
| **Unaudited:**                                      |       | ** **            | ** ** | ** **     | ** ** | ** **          | ** ** | ** **                   | ** ** | ** ** |       |
| Net Loss                                            |       | —                |       | —         |       | —              |       | (1,491                       | )          | (1,491     | )          |
| **Balance at March 31,  2006**                 | ** ** | **3,000,000**         | ** ** | **$**          | **300**    | ** **          | **$**      | **24,700**                   | ** ** | **$**      | **(6,328** | **)** | **$** | **18,672** |   |

 

See notes to condensed financial statements

5

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**HarborAcquisition Corporation(A Development Stage Company)Condensed Statements of Cash Flows(Unaudited)**
| ** **                                                                   | ** **   | ** **                             | ** **   | **For the period from**       | ** **   |
|------------------------------------------------------------------------------|--------------|----------------------------------------|--------------|----------------------------------------------|--------------|
| ** **                                                                   | ** **   | **For the period from** | ** **   | **June 20, 2005 (inception)** | ** **   |
| ** **                                                                   | ** **   | **January 1, 2006**          | ** **   | **to March 31, 2006**         | ** **   |
| ** **                                                                   | ** **   | **to March 31, 2006**   | ** **   | **(cumulative)**                             | ** **   |
|                                                                         |         |                                   |         |                                         |         |
| *Cash Flows From Operating  Activities*                                      | *** *** | *** ***                           | *** *** | *** ***                                 | *** *** |
|                                                                         |         |                                   |         |                                         |         |
| Net Loss                                                                     |         | $                                      | (1,491       | )                                            | $            | (6,328 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |         |                                   |         |                                         |         |
| Change in Accrued  Expenses                                                  |         | —                                 |         | 5,000                                        |         |
| **Net Cash used in Operating  Activities**                                   |         | (1,491                                 | )            | (1,328                                       | )            |
| * *                                                                     | *** *** | *** ***                           | *** *** | *** ***                                 | *** *** |
| *Cash Flows From Financing  Activites*                                       | *** *** | *** ***                           | *** *** | *** ***                                 | *** *** |
|                                                                         |         |                                   |         |                                         |         |
| Proceeds from sale of  stock                                                 |         | —                                 |         | 25,000                                       |         |
| Proceeds from notes  payable, Stockholders                                   |         | —                                 |         | 75,000                                       |         |
| Payment of offering  costs                                                   |         | (2,339                                 | )            | (95,848                                      | )            |
| **Net Cash (used in) provided by  Financing Activities**                     |         | (2,339                                 | )            | 4,152                                        |         |
|                                                                         |         |                                   |         |                                         |         |
| Net increase (decrease)  in Cash                                             |         | (3,830                                 | )            | 2,824                                        |         |
|                                                                         |         |                                   |         |                                         |         |
| Cash at beginning of  period                                                 |         | 6,654                                  |         | —                                       |         |
| ** **                                                                   | ** **   | ** **                             | ** **   | ** **                                   | ** **   |
| **Cash at end of period**                                                    | ** **   | **$**                                  | **2,824**    | ** **                                   | **$**        | **2,824** | ** ** |
|                                                                         |         |                                   |         |                                         |         |
| Supplemental schedule  of non-cash financing activities:                     |         |                                   |         |                                         |         |
| Accrual of Public  Offering costs                                            |         | $                                      | 320,000      |                                         | $            | 530,000 |   |
| Advance due to Stockholder for Public Offerring costs                        |         | $                                      | 5,000        |                                         | $            | 5,000 |   |

 

See notes to condensed financial statements

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**Harbor AcquisitionCorporation(A Development Stage Company)Notes to Condensed Financial Statements**

**1. Basis of Presentation**

The financial statements at March 31, 2006 andfor the periods ended March 31, 2006 are unaudited. The condensedfinancial statements include the accounts of Harbor Acquisition Corporation (the“Company”). In the opinion of management, all adjustments (consisting of normalaccruals) have been made that are necessary to present fairly the financialposition of the Company as of March 31, 2006 and the results of itsoperations and its cash flows for the three months then ended and for theperiod from June 20, 2005 (inception) through March 31, 2006.Operating results for the interim period presented are not necessarilyindicative of the results to be expected for a full year. The December 31,2005 balance sheet has been derived from the audited financial statementsincluded in the Company’s Registration Statement on Form S-1.

The statements and related notes have been preparedpursuant to the rules and regulations of the U.S. Securities and ExchangeCommission. Accordingly, certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with generally acceptedaccounting principles have been omitted pursuant to such rules andregulations.

**2. Organization and BusinessOperations**

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

All activity through March 31, 2006 relates tothe Company’s formation and initial public offering described below. TheCompany has selected December 31 as its fiscal year-end.

The Company’s ability to commence operation wascontingent upon obtaining adequate financial resources through a proposedpublic offering which was declared effective April 25, 2006 and isdiscussed in Note 3. 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, but thepurchasers in the Private Placement have waived their rights to receive anydistribution on liquidation in the event the Company does not complete abusiness combination (as described below). The Company received net proceedsfrom the Private Placement and the Offering of approximately $77,500,000 (Note3).

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.

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Furthermore, there is no assurance that the Companywill be able to successfully effect a Business Combination. Upon the closing ofthe Offering, $79,460,000 is being held in a trust account (“Trust Fund”) andcommencing May 2, 2006, will be invested in government securities untilthe earlier of (i) the consummation of its first Business Combination and (ii) thedistribution of the Trust Fund as described below. The placing of funds in theTrust Fund may not protect those funds from third party claims against theCompany. Although the Company will seek to have all vendors, prospective targetbusinesses or other entities it engages, execute agreements with the Companywaiving any right, title, interest or claim of any kind in or to any moniesheld in the Trust Fund, there is no guarantee that they will execute suchagreements. Certain of the Company’s directors have severally agreed that theywill be personally liable under certain circumstances to ensure that theproceeds in the Trust Fund are not reduced by the claims of target businessesor vendors or other entities that are owed money by the Company for servicesrendered, contracted for or products sold to the Company. However, there can beno assurance that the directors will be able to satisfy those obligations. Theremaining proceeds (not held in the Trust Fund), along with interest earned onthe Trust Fund, may be used to pay for business, legal and accounting duediligence on prospective acquisitions and continuing general and administrativeexpenses. The Company, after signing a definitive agreement for the acquisitionof a target business, will submit such transaction for stockholder approval. Inthe event that stockholders owning 20% or more of the shares issued in theOffering vote against the Business Combination and exercise their conversionrights described below, the Business Combination will not be consummated. Allof the Company’s stockholders prior to the Offering, including all of theofficers and directors of the Company (“Initial Stockholders”), have agreed tovote their 3,000,000 founding shares of common stock, as well as any shares ofcommon stock acquired in connection with or following the 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 votingsafeguards 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.

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 theconsummation of the Offering, or 24 months from the consummation of theOffering if certain extension criteria have been satisfied. In the event ofliquidation, it is likely that the per share value of the residual assetsremaining available for distribution (including Trust Fund assets) will be lessthan the initial public offering price per share in the Offering (assuming novalue is attributed to the Warrants contained in the Units sold in the Offeringdiscussed in Note 3).

On May 1, 2005, theCompany 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.

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**3. Initial Public Offering**

On May 1, 2006, the Company sold 13,800,000 units(“Units”) 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 ending on the third day prior to the date onwhich notice of redemption is given. If the Company calls the Warrants, theholder will either have to redeem the Warrants by purchasing the common stock fromthe Company for $5.00 per share or allow the Company to redeem the Warrants ata price of $.01 per warrant.

In connection with the Public Offering, the Companypaid the underwriters of the Public Offering (collectively, the “Underwriter”)an underwriting 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.

The Underwriter’s over-allotment of 1,800,000 Unitswas exercised and the 13,800,000 units sold at the closing of the PublicOffering include the over-allotment.

On May 30, 2006, Ferris, Baker Watts,Incorporated, the lead underwriter in the Public Offering, allowed holders ofthe Company’s Units to separately trade the common stock and warrants includedin the Units.

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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 pursuant to an agreement signed onMay 1, 2006. The holders of the majority of these shares are entitled tomake up to two demands that the Company register these shares at any timecommencing three months prior to the third anniversary of the effective date ofthe Proposed Offering. In addition, the Initial Stockholders have certain “piggy-back”registration rights on registration statements filed subsequent to the thirdanniversary of the effective date of the Public Offering.

In connection with this Offering, the Company issuedan option, for $100, to the Underwriter to purchase 600,000 Units at anexercise price of $7.50 per Unit, exercisable the later of April 25, 2007or the consummation of a business combination. The option has a life of fiveyears from the effective date. 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 acashless exercise provision. The Company has accounted for the fair value ofthe option, inclusive of the receipt of the $100 cash payment, as an expense ofthe Public Offering resulting in a charge directly to stockholder’s equity. TheCompany estimated, using the Black-Scholes method, the fair value of the optiongranted to the underwriter as of the date of grant was approximately $1,516,000using the following assumptions: (1) expected volatility of 49.3%, (2) risk-freeinterest rate of 4.635% and (3) expected life of five years. In order toestimate the volatility, the Company considered the historic volatilities of 22publicly traded companies that operate within the consumer and industrialproducts sectors.

**4. 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 will bearinterest at 4% per annum and will be paid from the interest earned on theamounts in the Trust Fund. Due to the short term nature of the notes, the fairvalue of the notes approximates its carrying amount.

**5. Commitments and Related PartyTransactions**

The Company presently occupies office space providedby an affiliate of several of the Initial Stockholders. Such affiliate hasagreed that, until the Company consummates a Business Combination, it will makesuch office space, as well as certain office and secretarial services,available to the Company, as may be required by the Company from time to time.The Company has agreed to pay such affiliate $7,500 per month for such servicescommencing on the effective date of the Proposed Offering.

Pursuant to letter agreements dated June 22, 2005with the Company and the Representative, the Initial Stockholders have waivedtheir right to receive distributions with respect to their founding shares uponthe Company’s liquidation.

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** **

**6. Common Stock**

On April 14, 2006, the Company’s majoritystockholders approved an amendment to the Company’s Certificate ofIncorporation to increase the number of authorized shares of common stock to70,000,000. All references in the accompanying financial statements to thenumber of shares of stock have been retroactively restated to reflect thistransaction.

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.

At May 1, 2006, 30,200,000 shares of common stockwere reserved for issuance upon exercise of redeemable warrants and theunderwriter’s purchase option.

**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations.**

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 were formed on June 20, 2005, for the purposeof acquiring, through a merger, capital stock exchange, asset acquisition orother similar business combination, an operating business in the consumer orindustrial products sectors. Our initial business combination must be with atarget business whose fair market value is at least equal to 80% of our netassets (excluding the deferred non-accountable expense allowance of theunderwriters held in trust) at the time of such acquisition. We intend to usecash derived from the proceeds of our recently completed public offering andconcurrent private placement, our capital stock, debt or a combination of cash,capital stock and debt, to effect such business combination.

Since our initial public offering, we have beenactively searching for a suitable business combination candidate. We currentlyhave not selected any potential target businesses. We have met with targetcompanies, service professionals and other intermediaries to discuss ourcompany, the background of our management and our combination preferences. Inthe course of these discussions, we have also spent time explaining the capitalstructure of the initial public offering, the combination approval process andthe timeline within which we must either enter into a letter of intent ordefinitive agreement for a business combination, or return the proceeds of theoffering held in trust to investors. Consistent with the disclosures in ourprospectus, we have focused our search on companies in the consumer andindustrial products sectors, which include companies engaged in themanufacture, distribution or sale of products or the provision of services forpersonal, family, household or business use. We cannot assure investors that wewill find a suitable business combination in the allotted time.

**RESULTS OF OPERATIONS**

*Net Loss*

For the three months ended March 31, 2006, we hada net loss of $1,491.  Through March 31,2006, our efforts have been limited to organizational activities and activitiesrelating to our initial public offering. We neither engaged in any operationsnor generated any revenues. We currently have no operating business and havenot selected any potential target businesses. Beginning May 1, 2006 (thedate of the consummation of our initial public offering) until our consummationof a business combination, we expect interest earned on the offering proceedsheld in our trust account to be our primary source of income.

**CHANGES IN FINANCIAL CONDITION**

*Liquidity and Capital Resources*

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*On April 25, 2006 we enteredinto an agreement with certain of our initial stockholders for the sale of2,000,000 warrants in a private placement. Each warrant entitles the holder topurchase from us one share of our common stock at an exercise price of $5.00. Thewarrants were sold at a price of $0.65 per warrant, generating net proceeds of$1,300,000.*

On May 1, 2006 we consummated our initial publicoffering of 13,800,000 units, including 1,800,000 units attributable to thefull exercise of the underwriters’ over-allotment option. Each unit consists ofone share of common stock and two warrants. Each warrant entitles the holder topurchase from us one share of our common stock at an exercise price of $5.00.Our common stock and warrants started trading separately on May 30, 2006.

The net proceeds from the private placement and thesale of our units, including the exercise of the underwriters’ over-allotmentoption, after deducting certain offering expenses of approximately $650,000 andunderwriting discounts of $4,140,000 and an underwriters non-accountableexpense allowance of $1,620,000, were approximately $76,390,000, which is beingheld in a trust account at JPMorgan Chase Bank, N.A. maintained by ContinentalStock Transfer & Trust Company, as trustee. In addition, the trustincludes the proceeds from the private placement, described above, a $150,000loan from one of our initial stockholders that will be repaid from interestearned on the trust, and the underwriters’ non-accountable expense allowance of$1,620,000, which they have agreed to defer until the consummation of abusiness combination and to forfeit if we do not consummate a businesscombination. Upon the consummation of a business combination, we will pay thedeferred non-accountable expense allowance to the underwriters, provided thatto the extent fewer that 20% of our public stockholders elect to convert theirshares to cash upon a consummation of a business combination, a pro rataportion of the deferred non-accountable expense allowance will be paid to suchstockholders. We will have no right to the deferred non-accountable expenseallowance. In total, we deposited $79,460,000 into the trust account.

We will receive up to $1,850,000 from interest earnedon the trust account to finance our operations prior to consummating a businesscombination. We do not believe we will need to raise additional funds in orderto meet the expenditures required to consummate a business combination before April 30,2008. However, we cannot assure you that this will be the case. Over this timeperiod, we currently anticipate incurring expenses for the following purposes:

·              costs incurred to identify one ormore potential target businesses;

·              due diligence and investigation ofprospective target businesses;

·              legal and accounting fees relatingto our SEC reporting obligations and general corporate matters;

·              structuring and negotiating abusiness combination, including the making of a down payment or the payment ofexclusivity or similar fees and expenses.

·              payment of $180,000 inadministrative fees due to an affiliate of two of our directors;

·              repayment of the $150,000 loanfrom an affiliate of two of our directors;

·              miscellaneous expenses.

Commencing on May 1, 2006 and ending upon theacquisition of a target business, we began incurring a fee of $7,500 per monthfor office space and certain administrative, technology and secretarialservices from Grand Cru Management, LLC, an affiliate of Robert J. Hanks, ourChief Executive Officer and Treasurer, and David Dullum, our President andSecretary. In addition, in 2005, Messrs. Hanks and Dullum advanced us anaggregate of $75.000 to us for payment of offering expenses on our behalf.These advances were repaid from the proceeds of the initial public offeringthat were allocated to pay offering expenses.

We may use all or substantially all of the proceedsheld in trust other than the deferred portion of the underwriters’non-accountable expense allowance and amounts used for working capital and fortaxes to acquire one or more target businesses. We may not use all of theproceeds held in the trust account in connection with a business combination,either because the consideration for the business combination is less than theproceeds in trust or because we finance a portion of the consideration withcapital stock or debt securities that we can issue. In that event, the proceedsheld in the trust account as well as any other net proceeds not expended willbe used to finance the operations of the target business or businesses. Theoperating businesses that we acquire in such business combination must have,individually or collectively, a fair market value equal to at least 80% of thebalance in the trust account (excluding deferred underwriter’s non-accountableexpense allowance of $1,620,000) at the time of 

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such acquisition. If we consummate multiple businesscombinations that collectively have a fair market value of 80% of our netassets, then we would require that such transactions are consummatedsimultaneously.

We may issue additional capital stock or debtsecurities to finance a business combination. The issuance of additionalcapital stock, including upon conversion of any convertible debt securities wemay issue, or the incurrence of debt, could have material consequences on ourbusiness and financial condition. We anticipate that we would only consummatesuch a financing simultaneously with the consummation of a businesscombination.

If we are unable to find a suitable target business byOctober 31, 2007 (or April 30, 2008 if a letter of intent, agreementin principle or a definitive agreement has been executed by October 31,2007), we will be forced to liquidate. If we are forced to liquidate, the pershare liquidation amount may be less than the initial per unit public offeringprice because of the underwriting commissions and expenses related to ourinitial public offering and because of the value of the warrants in the perunit offering price. Additionally, if third parties make claims against us, theoffering proceeds held in the trust account could be subject to those claims,resulting in a further reduction to the per share liquidation price. UnderDelaware law, our stockholders who have received distributions from us may beheld liable for claims by third parties to the extent such claims are not beenpaid by us. Furthermore, our warrants will expire worthless if we liquidatebefore the completion of a business combination.

*Off-Balance Sheet Arrangements*

Other than contractual obligations incurred in thenormal course of business, we do not have any off-balance sheet financingarrangements or liabilities, guarantee contracts, retained or contingentinterests in transferred assets or any obligation arising out of a materialvariable interest in an unconsolidated entity.  The securities held in the trust account arein the name of our wholly owned subsidiary, Harbor Acquisition SecurityCorporation, which was formed on May 1, 2006 specifically for suchpurpose.

*Contractual Obligations*

In connection with our initial public offering, weagreed to pay the underwriters a deferred non-accountable expense allowance of$1,620,000 upon the consummation of our initial business combination. We expectthat such allowance will be paid out of the proceeds in the trust account.Other than contractual obligations incurred in the ordinary course of business,we do not have 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 thenegative of such terms or other similar expressions. Factors that might causeour future results to differ from those statements include, but are not limitedto, those described in the section entitled “Risk Factors” of the prospectusfiled with the Securities and Exchange Commission (the “SEC”) in connectionwith our initial public offering. The following discussion should be read inconjunction with our condensed financial statements and related notes theretoincluded elsewhere in this report and with the section entitled “Risk Factors”of the prospectus filed with the SEC in connection with our initial publicoffering.

**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 

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Company Act. Thus, we are subject to market riskprimarily through the effect of changes in interest rates on governmentsecurities. The effect of other changes, such as foreign exchange rates,commodity prices and/or equity prices, does not pose significant market risk tous.

**Item 4.Controls and Procedures.**

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

There were no changes in our internal controls overfinancial reporting in connection with the evaluation required by Rule 13a-15(d) underthe Exchange Act that occurred during the period covered by this QuarterlyReport on Form 10-Q that have materially affected, or are reasonablylikely to materially affect, our internal controls over financial 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— Legal Proceedings**

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 the registration statements on Form S-1 (FileNos. 333-126300 and 333-133589)  filed in connection with our initial publicoffering. You should consider carefully all of the material risks described insuch registration statements, before making a decision to invest in oursecurities. 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 Sales of 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 under Section 4(2) ofthe Securities Act. The exemption was available on the basis that there was nogeneral solicitation in connection with the placement and sales were only madeto 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 

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stock and warrants started trading separately on May 30,2006. The securities sold in the offering were registered under the SecuritiesAct on registration statements on Form S-1 (File No. 333-126300and 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 wasdeposited into 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 have agreedto pay the underwriters the deferred non-accountable expense allowance upon theconsummation of our initial business combination, less any portion payable tostockholders who convert their shares to cash.

On May 1, 2006, we consummated the sale toFerris, Baker Watts, Incorporated, for $100, of an option to purchase up to atotal of 600,000 units. The units issuable upon exercise of this option areidentical to those sold in our initial public offering except that the warrantsincluded in the units have an exercise price of $6.25 (125% of the exerciseprice of the warrants included in the units sold in the offering and have acashless exercise provision). This option is exercisable at $7.50 per unitcommencing on the later of the consummation of a business combination and April 25,2007, and expiring on April 25, 2011. The purchase option is exercisableon a cashless basis. The purchase option, as well as the units issuable uponexercise of the purchase option, the shares of common stock and warrantsunderlying the units, and the shares of common stock issuable upon exercise ofthe warrants included in the units were registered under the Securities Act onthe same registration statement 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 upon Senior Securities**

Not applicable.

**Item 4— Submission of Matters 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 initialpublic offering, allowed holders of the Company’s units to separately trade thecommon stock and warrants included in such units as of such date. The commonstock and warrants are quoted on the American Stock Exchange under the symbolsHAC and HAC.WS, respectively.

 

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**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**

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized. 
|                         | ** ** | **HARBOR ACQUISITION CORPORATION** |
|-------------------------|------------|------------------------------------|
|                    |       |                               |   |   |
| Date: June 8, 2006 |       | By:                                |   | /s/ Robert J. Hanks |
|                    |       |                               |   | Robert J. Hanks |
|                    | * *   | * *                           |   | *Chief Executive Officer and Treasurer* |
|                    |       |                               | * * | *(Principal Executive Officer)* |
|                    |       |                               |   |   |
|                    |       | By:                                |   | /s/ Todd A. Fitzpatrick |
|                    |       |                               |   | Todd A. Fitzpatrick |
|                    | * *   | * *                           |   | *Vice President* |
|                    | * *   | * *                           |   | *(Principal Financial and Accounting Officer)* |

 

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**INDEX TO 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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