HARBOR DIVERSIFIED, INC. - Quarter Report: 2002 March (Form 10-Q)

000-24672 (Commission File No.)		13-3697002 (I.R.S. Employer Identification No.)

PART I		Financial Information		Page
Item 1		Financial Statements (Unaudited)		3
		Balance Sheets—March 31, 2002 and December 31, 2001		3
		Statements of Operations for the Three-Month Periods Ended March 31, 2002 and 2001 and Period from August 15, 1994 (Inception) to March 31, 2002		4
		Statements of Cash Flows for the Three-Month Periods Ended March 31, 2002 and 2001 and Period from August 15, 1994 (Inception) to March 31, 2002		5
		Notes to Financial Statements		6
Item 2		Management's Discussion and Analysis of Results of Operations and Financial Condition		6
Item 3		Quantitative and Qualitative Disclosures about Market Risk		8
PART II		Other Information
Item 1		Legal Proceedings		8
Item 2		Changes in Securities		8
Item 3		Defaults Upon Senior Securities		8
Item 4		Submission of Matters to a Vote of Security Holders		8
Item 5		Other Information		9
Item 6		Exhibits and Reports on Form 8-K		9

All numbers in thousands (except par value)		Mar. 31 2002 (Unaudited)				Dec. 31, 2001
ASSETS:
Current assets:
Cash and cash equivalents		$	25,523			$	30,567
Prepaid expenses			315				169
Deposits			109				27
Total current assets			25,947				30,763
Property and equipment, net of accumulated depreciation of $236 and $335			378				422
Other receivable from related party			280				277
Total assets		$	26,605			$	31,462
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued expenses		$	2,588			$	3,602
Total liabilities			2,588				3,602
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000 shares authorized; no shares outstanding			—				—
Common stock, $.01 par value, 50,000 shares authorized; 12,922 and 12,896 shares issued and outstanding			129				129
Paid-in capital			92,024				91,649
Deficit accumulated during development stage			(68,136	)			(63,918	)
Total stockholders’ equity			24,017				27,860
Total liabilities and stockholders’ equity		$	26,605			$	31,462

		3 months ended March 31,								Period from Inception (Aug.15,1994) to March 31 2002
		2002				2001
Operating expenses:
Research and development:
R&D operating expenses		$	2,916			$	2,716			$	41,280
R&D costs related to common stock, option, & warrant grants for collaborations			24				24				5,300
General and administrative:
G&A operating expenses			1,180				1,265				18,971
G&A costs related to common stock, option, & warrant grants			214				—				9,991
Total operating expenses			4,334				4,005				75,542
Other income (expense):
Gain / (Loss) on disposal of asset			(21	)			—				(21	)
Interest income			137				474				7,477
Interest expense			—				—				(50	)
Total other income			116				474				7,406
Net loss			(4,218	)		$	(3,531	)		$	(68,136	)
Net loss per share-basic and diluted			(0.33	)			(0.30	)
Weighted average number of common shares outstanding-basic and diluted			12,918				11,602

		3 months ended March 31,								Period from Inception (Aug. 15, 1994) to March 31, 2002
		2002				2001
Cash flows from operating activities:
Net loss		$	(4,218	)		$	(3,531	)		$	(68,136	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			32				30				367
Common stock issued for the company 401k/401m plan			137				95				296
Common stock issued as consideration for amendments to the license agreements			—				—				33
Common stock issued as consideration for termination of a finance agreement			—				—				34
Expense related to common stock issued for the purchase of technology			—				—				1,848
Common stock and options issued as consideration for license fees and services			24				24				1,894
Common stock issued as consideration for In Process R&D			—				—				2,000
Expense related to warrants issued as consideration to consultants			214				—				2,562
Expense related to warrants issued to a director for successful closure of merger			—				—				570
Expense related to stock options issued			—				—				5,140
Deferred compensation expense related to options issued			—				—				1,210
Changes in assets and liabilities:
Prepaid expenses			(146	)			(180	)			(315	)
Deposits			(82	)			—				(109	)
Loan receivable from related party			(3	)			(3	)			(280	)
Accounts payable and accrued expenses			(514	)			420				2,588
Wages payable			(500	)			(581	)			—
Disposal of assets			21				—				28
Net cash used in operating activities			(5,035	)			(3,726	)			(50,270	)
Cash flows provided by investing activities:
Purchase of property and equipment			(9	)			(43	)			(773	)
Net cash used in investing activities			(9	)			(43	)			(773	)
Cash flows from financing activities:
Contributions from stockholder			—				—				104
Net proceeds from sale of preferred stock			—				—				4,000
Net proceeds from sale of common stock			—				—				52,829
Proceeds from issuance of debt			—				—				371
Net proceeds from recapitalization			—				—				6,271
Net proceeds from warrants and options exercised			—				—				12,991
Net cash from financing activities			—				—				76,566
Net increase (decrease) in cash			(5,044	)			(3,769	)			25,523
Cash and equivalents at beginning of period			30,567				34,298				—
Cash and equivalents at end of period		$	25,523			$	30,529			$	25,523

Dated: May 14, 2002						By:		/s/    DANIEL D. BURGESS
								Daniel D. Burgess                             Chief Operating Officer/                             Chief Financial Officer                             (Principal Financial Officer)
Dated: May 14, 2002						By:		/s/    ROBERT W. WEBER
								Robert W. Weber                             Vice President-Controller/                             Chief Accounting Officer                             (Principal Accounting Officer)