HARBOR DIVERSIFIED, INC.

Item 1A. Risk Factors

Our short- and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict or beyond our control. As a result, investing in Harbors common stock involves substantial risk. Before deciding to purchase or sell Harbors common stock, stockholders should carefully consider the risks and uncertainties described below, in addition to the other information contained in or incorporated by reference into this Quarterly Report, as well as the other information we file with the SEC from time to time. If any of these risks are realized, our business, financial condition, results of operations, liquidity and prospects could be materially and adversely affected. In that case, the value of Harbors common stock could decline, and stockholders may lose all or part of their investment. Furthermore, additional risks and uncertainties of which we are currently unaware, or which we currently consider to be immaterial, could have a material adverse effect on our business, in particular as we navigate the uncertainty associated with the strategic rerealignment of Air Wisconsin's operations resulting from the termination of the American capacity purchase agreement.

Certain statements made in this section constitute forward-looking statements, which are subject to numerous risks and uncertainties including those described in this section. For additional information, please refer to Cautionary Note Regarding Forward-Looking Statements in this Quarterly Report.

Risks Related to Our Business

If we are unable to successfully identify and implement the strategic realignment of Air Wisconsins businesrevenue generating activities, Air Wisconsin may not be able to replace the flying or the revenues that will bere lost upon termination of the American capacity purchase agreement and our financial condition, results of operations, liquidity and prospects will be negatively affected.

Since March For the two years prior to April 3, 20235, Air Wisconsin has derived nearly all of its operating revenues from the American capacity purchase agreement. On January 3, 2025 American delivered to Air Wisconsin notice ofThat agreement termination of that agreement, effectiveed on April 3, 2025. On that date,, and all ofremaining Air Wisconsins aircraft will be wcovered by that agreement were withdrawn from service for Americanunder the agreement. Given

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the current state of the airline

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industry, including the decision by multiple major airlines to eliminate from their fleets single class 50-seat aircraft, it is unlikely that Air Wisconsin will be able to enter into a new capacity purchase agreement with a major airline to provide regional airline service, which has been the focus of Air Wisconsins operations since its inception.

In response to the termination of the American capacity purchase agreement, on January 10, 2025, Air Wisconsin announced a strategic realignment of its business strategyies. As part of that realignment, Air Wisconsin isbegan exploring various business opportunities, including (i) expanding its charter operations, which commenced in the fourth quarter of 2024; (ii) bidding on certain federally subsidized Essential Air Service (EAS) markets; and (iii) transitioning its relationship with American to a codeshare and interline relationship, although these efforts have not yet led to positive results. However, stockholders should be aware that transitioning our existing business operations into new markets will be complex, costly and time-consuming, our management will have to devote substantial time and resources to such efforts, and there are considerable risks and uncertainties associated with the timing and implementation of each of these new business strategies. In light of recent changes in the airline industry landscape, Air Wisconsin is still inevaluating the early stages viability of implementing each of these strategies, and there is no guarantee it will be successful in executing any of them. Even if Air Wisconsin is successful in executing thison any of these strategic realignmentes, it is unlikely, even in a best case scenario, that the revenues generated from these strategies will be sufficient to offset revenues that will be llost upon termination of the American capacity purchase agreement. If Air Wisconsin is unable to generate sufficient revenues from the implementation of any of these strategic realignmentes, or if it is unable to identify or implement other revenue generating activities or to conform its cost structure to the size and scope of its business operations, it wouldill have a material adverse effect on our business, financial condition, and results of operations, and Air Wisconsin may be required to pursue alternative strategies or revenue generating activities, sell or lease certainits assets, raise additional equity or debt financing, or cease its business operations entirely.

In connection with Air Wisconsins sevolving business strategic realignmentes, we commenced a reseries of reductions in Air Wisconsins workforce and the closure of certain operational facilities. These initiatives are intended to align with the evolving needs of our business, reduce operating expenses, improve cost efficiencies, and further preserve our cash and cash equivalents balance. However, they may not result in the anticipated benefits, and they may result in unexpected difficulties, disruptions or costs that could make it more difficult to implement our business plans and achieve our strategic objectives. For example, we may fail to accurately estimate the level of expenses or future cost savings associated with our initiatives, in which case our future operating results may be worse than expected. Further, we may not be successful in implementing improvements to our cost structure sufficient to offset the significant reduction in flying we anticipate under our business strategyies. Finally, our workforce reduction and facilities closures may be disruptive to our business and have unanticipated consequences, such as attrition beyond planned staff reductions, reduced employee morale, and decreased operational capabilities. These initiatives could also harm our ability to attract and r, recall, or retain qualified personnel, reduce the strategic alternatives available to us, or limit our opportunities for future growth, any of which could adversely affect our business and results of operations.

Each of our proposed new business strategies has significant risks and uncertainties, and, if we are unable to respond adequately to these risks, Air Wisconsin may be unable to achieve or sustain profitability or generate positive cash flows from operations, which would have an adverse impact on our financial condition and results of operations.

The business opportunities Air Wisconsin has identified as part of its stoperategicional realignment have risks due to factors specific to each of those markets. We may be unable to foresee all of the risks upon entering these markets or to respond adequately to these risks, and our business and the execution of our strategicthis realignment may suffer as a result. If Air Wisconsin is unable to achieve or sustain profitable operations in new and existing markets, or to generate positive cash flows from operations, our business, financial condition and results of operations will be materially adversely affected. In that case, Air Wisconsin may be required to implement further changes to its business strategy, raise aies, sell or lease its assets, raise additional equity or debt financing to fund ongoing operations, or cease its business operations.

Although Air Wisconsin has already commenced charter operations, it is a new entrant in that market and its operations are relatively small. Air Wisconsin faces numerous challenges in the charter segment, such as:

Competition from exclusively charter airlines as well as traditional scheduled-service airlines, both ultra-low cost carriers and legacy carriers, that operate charters as a secondary line of business; these competitors may choose to commence or expand their existing charter operations, which could adversely impact Air Wisconsins ability to obtain or renew charter contracts, limiting its ability to increase its market share and generate profitable operations; many of these competitors have greater financial resources than Air Wisconsin, are larger in terms of number of aircraft and pilots, and are more fully developed in their corporate infrastructure, which could negatively affect Air Wisconsins ability to compete in this market; and

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Our current charter flying is predominantly for collegiate sports teams, which is seasonal in nature with flying concentrated in the fall, winter and spring with little flying in the summer.

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As of the date of filing of this Quarterly Report, while Air Wisconsin has submitted to the DOT bids for several federally subsidized EAS markets and is contemplating submitting additional bids, it has not been awarded any bid for any EAS market, and there is no guarantee it will be granted any such awards. Air Wisconsin faces numerous challenges in pursuing this EAS strategy, such as:

There are a limited number of EAS markets, and there is significant competition among air carriers already participating in these markets; those air carriers have more experience in providing this service than does Air Wisconsin which may influence the DOT in the bidding process; Air Wisconsin may not be awarded any bids or it may only be awarded a limited number of bids that would generate insufficient revenue to make this a viable business opportunity;

The DOT administers the EAS program and awards EAS subsidies through a competitive bidding process; the DOT reserves the right to modify, change or cancel the program in the future, including to cancel EAS arrangements if it determines that the communities served by such arrangements are no longer essential;

EAS revenue awards generally have a term of two years, during which time, a carrier is paid a subsidy amount in accordance with the maximum allowances stipulated in the EAS revenue award and is paid monthly in arrears on a per-flight-completed basis; there can be no assurance that current EAS legislation will remain unchanged, or that Congress will continue to provide funding for the EAS program at any particular level or at all; and

Air Wisconsin will need to create the infrastructure to support this flying, such as scheduling, reservations and arranging for airport facilities, which had previously been provided by Air Wisconsins major airline partners under its prior capacity purchase agreements;.

As of the date of filing of this Quarterly Report, Air Wisconsin has not yet commenced any flying relating to the existing interline agreement with American. Air Wisconsin faces numerous challenges in pursuing this business opportunity, such as:

As with the strategy of pursuing EAS markets, Air Wisconsin will be required to create the infrastructure to support these flights;

Air Wisconsin will need to accurately forecast demand for flights on selected routes; and

Air Wisconsin will need to accurately price flights to cover all expenses, not just those non-pass-through costs for which it had been responsible under its prior capacity purchase agreements.

Our ability to grow Air Wisconsins charter operations and to successfully implement the provision of service to EAS markets and pursuant to the interline agreement is an important aspect of our strategic realignment. We maWe may devote significant financial and other resources in attempting to implement this stoperategicional realignment, but we may be unsuccessful. Any failure to do so could result in Air Wisconsin being required to implement further changes to its business strategy, ies, sell or lease its assets, or cease its business operations entirely, eitherany of which would have a material adverse effect on our business, financial condition and results of operations. In addition, even if we are successful in implementing these strategies, there is no guarantee we will be able to operate Air Wisconsins business in a manner that will allow us to achieve and maintain profitability or positive cash flows from operations.

Air Wisconsin may experience difficulty hiring and retaining a sufficient number of qualified pilots, mechanics and flight attendants, which may negatively affect Air Wisconsins business and operations.

As a result of the termination of the American capacity purchase agreement, on April 3, 2025, Air Wisconsin will ceased all flying for American. Although it expects to continue to fly a limited number of charter flights, depending on the success of Air Wisconsins strategic realignment, for tfor the next several months, and perhaps indefinitely, we expect Air Wisconsins flying to be drastically reduced from the level of its flying before the termination of the American capacity purchase agreement. As noted above, in anticipation of that reduced flying, Air Wisconsin furloughed a significant number of its pilots and has taken other actions to reduce the number of active mechanics and flight attendants and other staff on its payroll. If Air Wisconsin is successful in execuimplementing any of its sbusiness strategic realignmentes, its level of flying is expected tomay increase and it will need to bring back furloughed pilots, rehire or otherwise recall furloughed pilots, mechanics, and flight attendants and then retain those employees to service the increased flying. If Air Wisconsin is

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unable to employ a sufficient number of pilots, mechanics

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and flight attendants, it could have a material adverse impact on Air Wisconsins business and operations as well as its ability to implement its strategic realignment. In addition, if future pilot, mechanic or flight attendant attrition rates outpace Air Wisconsins ability to hire and retain qualified pilots, mechanics and flight attendants, Air Wisconsin may need to continue to increase its labor costs, which would negatively impact Air Wisconsins operations and our financial condition.

The loss of key personnel upon whom Air Wisconsin depends to operate its business or the inability to attract additional qualified personnel could adversely affect our business.

In light of the termination of the American capacity purchase agreement, our future success depends on our ability to retain or attract highly qualified management, technical and other personnel with the skills necessary to successfully execute a strategic rerealignment of Air Wisconsins operations. We may not be successful in retaining key personnel or in attracting other highly qualified personnel, especially as a result of the significant risks and uncertainties associated with executing  a realignment of Air Wisconsins st's operategic realignmentions, some of which are described above. Any inability to attract or retain qualified management personnel and other employees, or any significant increases in the costs associated with recruiting or retaining qualified employees, could have a material adverse effect on our business, results of operations and financial condition.

Disagreements regarding the interpretation of our material agreements could have an adverse effect on our operating results and financial condition.

Agreements, such as ouAir Wisconsin's prior capacity purchase agreements and any agreements weit may enter into in connection with the strategica realignment of ourits operations, are subject to interpretation, and disputes may arise if the parties apply different interpretations to such agreements. For example, prior to its termination, a dispute arose under the United capacity purchase agreement. Air Wisconsin claimed United owed it certain amounts under the agreement. United denied that it owed those amounts and claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owed it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. The arbitrators issued their decision and award in February 2024 (the "United Arbitration Award"). The arbitrators denied Air Wisconsins claims that United owed it amounts under the United capacity purchase agreement, and they denied Uniteds claim that Air Wisconsin breached the agreement by terminating it and its claim that Air Wisconsin owed it damages. As a result, neither party owed to the other party any amounts claimed in the arbitration. However, we determined that certain revenue relating to our claims against United had been incorrectly recorded in certain of our previously issued consolidated financial statements, which required us to restate our consolidated financial statements as of and for the year ended December 31, 2022, and our interim financial consolidated financial statements as of and for the first three quarters of the years ended December 31, 2022 and 2023. The dispute required us to expend valuable management time and financial resources both in connection with the arbitration and the financial restatement.

Maintenance costs and delays may increase further as Air Wisconsin's fleet continues to age, and out-of-service periods may result in aircraft being unavailable for flying.

Most of Air Wisconsins CRJ-200 regional jets were manufactured between 1999 and 2004. As Air Wisconsins fleet continues to age, its maintenance costs may increase, both on an absolute basis and as a percentage of its operating expenses. Maintenance issues may result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying. There are also industry-wide supply chain issues and parts shortages that have lengthened the time to complete required maintenance. These industry-wide issues could increase Air Wisconsins costs for maintenance and parts and possibly require it to renegotiate contracts with third-party providers to ensure their continued support of our programs. Air Wisconsin has increased its labor costs to attract and retain qualified mechanics. As a result, Air Wisconsin has experienced, and may continue to experience, delays and increased costs in obtaining both in-house and third-party maintenance services. Any continued increase in Air Wisconsins maintenance costs or decreased revenues or delays resulting in out-of-service periods could have a further adverse effect on our financial condition and operating results.

Air Wisconsin has entered into agreements with third-party service providers to provide various services required for its operations, including airframe, engine and component maintenance and telecommunications and IT services, and it expects to enter into additional similar agreements in the future. If its third-party service providers terminate their contracts, or do not provide timely or consistently sufficient parts or high-quality maintenance and support services, Air Wisconsin may not be able to replace them in a cost-efficient manner or in a manner timely enough to support its operational needs, which could have a material adverse effect on our business, financial condition, and results of operations.

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Major airlines decision to eliminate from their fleets single class 50-seat aircraft may make it difficult for Air Wisconsin to enter into a capacity purchase agreement with another major airline to replace the terminating American capacity purchase agreement and may limit its opportunities for growth.

American has a, United and Delta Airlines have all either announced that its long-term fleet strategy involves eliminatinge intention to remove or significantly reduce, or have actually removed, from itstheir fleet by 2030 all s single class 50-seat aircraft, which includes the CRJ-200 regional jet comprising the Air Wisconsin fleet. United Airlines has also announced that it intends to significantly reduce the number of single class 50-seat aircraft in its fleet, and Delta Airlines has retired all of the single class 50-seat aircraft in its fleet. As a resAs a result of this industry shift, Air Wisconsin may not be able to enter into substitute arrangements with other airlines, and any arrangements it is able to secure may not be as favorable to us Air Wisconsin as the Americanits prior capacity purchase agreements. Since our primary business strategy has traditionally involved flying single class 50-seat aircraft for a major airline partner, the publicly announced fleet strategy changes by several major carriers, in combination with the termination of the American capacity purchase agreement, represent a substantial risk to our business.

Interruptions or disruptions in service at an airport served by Air Wisconsin could result in a severe disruption of our business.

A significant interruption or disruption in service at any airport serviced by Air Wisconsin resulting from factors such as air traffic control (ATC) delays, weather conditions, natural disasters, growth constraints, relations with third-party vendors, failure of computer systems, facility disruptions, labor relations, power supplies, fuel supplies, terrorist activities, or otherwise could result in a severe disruption of our business, which would cause an adverse impact on our results of operations and financial condition.

The amounts Air Wisconsin receives under any new flying agreements may be less than the corresponding costs Air Wisconsin incurs.

Historically, Air Wisconsins capacity purchase agreements have provided that certain significant operating costs, such as fuel, insurance, landing fees and certain taxes, were passed through to, and paid by, the major airline, while other costs were Air Wisconsins responsibility. Any new agreements Air Wisconsin enters into may not provide for the reimbursement by the other party of any pass-through costs and may not provide for any escalation in compensation to cover any unanticipated increase in costs. As a result Air Wisconsin would bear the entire economic risk of all increased costs of operations, not just those increases related to the expenses for which it has traditionally been responsible under its capacity purchase agreements.

A significant majority of Air Wisconsins workforce is represented by labor unions, and the terms of Air Wisconsins collective bargaining agreements may increase our operating expenses and negatively impact our financial results.

A significant majority of Air Wisconsins employees are represented by labor unions, including the Air Line Pilots Association, International (ALPA), the Association of Flight Attendants (AFA), the International Association of Machinists and Aerospace Workers AFL-CIO (IAMAW), and the Transport Workers Union of America (TWU). Air Wisconsin's ability to renegotiate terms of these labor agreements in light of American's decision tothe terminate ion of the American capacity purchase agreement and the uncertainty with respect to Air Wisconsin's future business opportunities will be critical to Air Wisconsin's near- and long-term success in any such business opportunities. Any future agreements reached in collective bargaining may increase our operating expenses and negatively impact our financial results. If Air Wisconsin is unable to reach agreement with any of its unionized work groups in current or future negotiations regarding the terms of their collective bargaining agreements, it may be subject to work interruptions, stoppages or shortages, any of which could have an adverse impact on our financial condition and results of operations.

Air Wisconsin currently operates only one aircraft type, and relies on one aircraft manufacturer and one engine manufacturer, and any operating restrictions or safety concerns applicable to this aircraft or engine type, or any failure to receive sufficient maintenance and support services from these manufacturers, would negatively impact our business and financial condition.

Air Wisconsin currently relies on a single aircraft type, the CRJ-200 regional jet, and a single engine type, the General Electric (GE) CF34-3B1 engine. The issuance of FAA or manufacturer directives restricting or prohibiting the use of this aircraft type or engine type, or Air Wisconsins inability to obtain necessary parts and services related to this aircraft type or engine type, would negatively impact our business and financial results. In addition, any concerns raised regarding the safety or reliability of the CRJ-200 regional jet or the GE CF34-3B1 engine, whether or not directly

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associated with Air Wisconsins fleet, could result in concerns about Air Wisconsins fleet that could negatively impact our business.

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The CRJ-200 regional jet is no longer in production. Air Wisconsin has been highly dependent upon Bombardier, as the sole manufacturer of Air Wisconsins aircraft, and GE, as the sole manufacturer of Air Wisconsins aircraft engines, to provide sufficient parts and related maintenance and support services to it in a timely manner. In June 2020, Bombardier consummated an agreement with Mitsubishi Heavy Industries, Ltd. (Mitsubishi), pursuant to which Mitsubishi purchased Bombardiers regional jet program, including all aspects of the CRJ-200 regional jet, such as type certificates, maintenance, support, refurbishment, marketing and sales activities. Air Wisconsins operations could be materially and adversely affected by the failure or inability of Mitsubishi or GE to provide required maintenance or support services, or as a result of unscheduled or unanticipated maintenance requirements for Air Wisconsins aircraft or engines.

The residual value of our aircraft, engines and parts may be less than estimated in our depreciation policies.

In accounting for long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets and operating cash flow losses associated with the use of the long-lived assets. For example, any of the following circumstances could cause us to reduce our estimates as to the useful life, residual value or cash flow potential of our aircraft or engines, which could require an impairment charge:

the termination of the American capacity purchase agreement or any anticipated chanany changes in our business strategyies cause us to permanently retire some aircraft;

we add a new aircraft type to our fleet and reduce the number of our operating CRJ-200 aircraft; or

a lack of demand for our aircraft or engine types reduces the proceeds we receive on disposition to less than we estimated.

If any of these circumstances were to occur, or if there are other indications of impairment, Air Wisconsin would likely need to conductwe determine through quantitative tests for impairment ofing the CRJ-200 fleet and related assets. If tat the estimated residual value of any of our aircraft, engines or parts is determined to be lower than the residual value assumptions used in our depreciation policies, the aircraft, engines or parts may be impaired and may result in a material reduction in their book value, or we may need to prospectively modify our depreciation policies. An impairment on any of the aircraft, engines or parts or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results.

Air Wisconsin may not be able to achieve positive cash flows from operations and may need to seek to obtain additional financing.

Historically, our principal sources of liquidity have been our cash, cash equivalents and marketable securities balances, and Air Wisconsins cash flows from operations. In December 2023, Air Wisconsin prepaid at a discount all of its outstanding third-party secured debt that had been incurred in connection with the acquisition of aircraft, which had the effect of reducing our liquidity. In addition, our business has experienced significant volatility over the past couple years relative to historical levels, which has impacted our financial performance and cash flows from operations.

On JanuaryApril 3, 2025, American delivered notice to Air Wisconsin of its intent to terminate tthe American capacity purchase agreement effective April 3, 2025terminated. Approximately 100% of the Companys operating revenues for the three and six months ended March 31June 30, 2024 were derived from operations associated with the agreement. As a result of the termination, there is considerable uncertainty regarding our ability to achieve and maintain positive cash flows from operations going forward.

Notwithstanding the termination of the American capacity purchase agreement, we currently believe our existing sources of liquidity will be sufficient to meet our requirements for at least the next 12 months from the date of this filing. However, in order to achieve our long-term strategic objectives, we will ultimately need to achieve and maintain profitability and positive cash flows from operations. If Air Wisconsin fails to generate sufficient cash flows from operations in future periods, it may need to obtain financing to fund its operations, implement further changes to its business strategyies, sell or lease its assets, or cease its business operations.

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To the extent Air Wisconsin finances its operations or its pursuit of new business opportunities with debt, it would become subject to debt service obligations, as well as covenants that may restrict its ability to pursue its business strategyies or otherwise constrain its growth and operations. Air Wisconsins ability to pay any future debt service obligations, in addition to the high level of fixed costs associated with operating an airline, will depend on its operating performance, cash flows from operations and ability to secure adequate financing, which will in turn depend on, among other things, the success of the implementation of its new business strategyies, its future operating performance and financial condition, the

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availability and cost of financing, as well as general economic and political conditions, and other factors some of which may be beyond its control. We cannot be certain Air Wisconsins working capital and cash flows from operations will continue to be sufficient to make required payments under its existing contractual arrangements or any new debt financing arrangements it enters into in the future. In addition, we cannot guarantee that financing will be available to Air Wisconsin on acceptable terms or at all, primarily as a result of the termination of the American capacity purchase agreement and the significant risks and uncertainties associated with a realignment of Air Wisconsins strategic realignmentoperations.

If Air Wisconsin is unable to pay its debts as they come due or fails to comply with its obligations under any future agreements governing secured debt and is unable to obtain waivers of such defaults, its secured lender could foreclose on any of Air Wisconsins assets securing such debt. Additionally, a failure to pay Air Wisconsins property leases, future debt or other fixed cost obligations, or a breach of its other contractual obligations, could result in a variety of further adverse consequences. In such a situation, Air Wisconsin may not be able to cure its breach, fulfill its contractual obligations, make required lease payments or otherwise cover its fixed costs, which could have a material adverse effect on our business, results of operations and financial condition.

Information technology security breaches, hardware or software failures, or other information technology infrastructure disruptions may negatively impact Air Wisconsins business, operations and financial condition.

The performance and reliability of Air Wisconsins and third-party service providers technology is critical to Air Wisconsins ability to compete effectively. Any internal technological error, failure or large-scale external interruption in the information systems, networks, hardware, software and technological infrastructure Air Wisconsin depends on, such as U.S. air traffic control systems, power, telecommunications or the internet (collectively, IT Systems), may disrupt Air Wisconsin's internal network, impact its ability to conduct its business and safely operate its flights, lower its utilization of aircraft, and result in increased costs or penalties. Air Wisconsins IT Systems (including systems provided by third parties) may be vulnerable to a variety of sources of interruption due to events beyond its control, including natural disasters, terrorist attacks, telecommunications or IT System failures, computer viruses, cyber criminals and other security issues.

In addition, Air Wisconsin faces numerous and evolving cybersecurity risks that threaten the security, confidentiality, integrity and availability of its IT Systems, including from diverse threat actors such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, security breaches, malfeasance by insiders, human or technological error, computer viruses, malicious or destructive code, misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into Air Wisconsins or third-party service providers IT Systems, products or services, malware (including ransomware) and other attacks, including through fraud or other means of deception. The methods used to obtain unauthorized access, disable or degrade service or attack or sabotage systems are constantly evolving, and threat actors are becoming increasingly sophisticated in using techniques and tools including artificial intelligence that circumvent security controls, evade detection and remove forensic evidence. As a result Air Wisconsin may be unable to anticipate or to detect, investigate, remediate or recover from attacks or incidents for long periods of time. Further, Air Wisconsin may not be able to prevent all data breaches, misuses of data or other cybersecurity incidents.

There can be no assurance that our cybersecurity risk management program and processes, including Air Wisconsins policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems. Because Air Wisconsin relies on third-party vendors and service providers for functions critical to its business, including information technology infrastructure and services, successful cyberattacks that disrupt or result in unauthorized access to third-party IT Systems can materially impact its operations and financial results. Remote and hybrid working arrangements at Air Wisconsin (and at many third-party service providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks.

Certain Air Wisconsin third-party service providers have experienced cybersecurity incidents, and Air Wisconsin expects such incidents to continue in varying degrees. While to date no incidents have had a material impact on Air Wisconsins operations or our financial results, we cannot guarantee that material incidents will not occur in the future.

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Any cybersecurity incident or other adverse impact to the availability, integrity or confidentiality of Air Wisconsins IT Systems could compromise our ability to operate flights or technology systems, result in legal claims or proceedings, regulatory investigations and enforcement actions, liability or regulatory penalties, disruption to its operations, damage to

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its reputation, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could adversely affect our business, results of operations and financial condition.

Laws, regulations and other requirements relating to the privacy, security and handling of information about individuals, and the application and interpretation of those requirements, are constantly evolving. There has been heightened legal and regulatory focus on data privacy and security, including in relation to cybersecurity incidents, and it is possible that new laws or regulations or interpretations may require us to incur significant costs, implement new processes or change our handling of information and business operations. Any failure or perceived failure to comply with laws, regulations and other requirements relating to the privacy, security and handling of information could result in legal claims or proceedings, regulatory investigations or enforcement actions. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.

Risks Related to Our Industry

The airline industry is often negatively impacted by numerous factors that could have a material adverse effect on our business, results of operations and financial condition.

The airline business is affected by numerous factors, many of which are beyond Air Wisconsins control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions, natural disasters, facility disruptions, acts of war or terrorism, increased security measures, and the outbreak of disease. Factors that cause flight delays or cancellations frustrate passengers, increase operating costs and decrease revenues, which in turn adversely affect profitability and cash flows from operations.

In addition to the factors noted above, Air Wisconsins operations and our financial condition are currently affected, and may in the future be affected, by many other factors and conditions beyond Air Wisconsins control, including:

any shortage of qualified pilots, mechanics and flight attendants, in particular as a result of the recent reduction in Air Wisconsin's workforce due to the strategic realignmente, and any increases in compensation and the continuing pressure to significantly increase wages in the industry;

access to airport terminals and facilities;

capital expenditures required to maintain or expand fleet operations;

regulatory changes, including those impacting funding for EAS markets;

changes in the availability of necessary parts and equipment, particularly as a result of the CRJ-200 no longer being in production;

actual or potential changes in political conditions, including wars, outbreak of hostilities, terrorism, or government sanctions;

air traffic control delays or disruptions;

changes in demand for airline travel or tourism, consumer preferences, or demographic trends;

changes in demand for the CRJ-200, or aircraft with similar capacity, including as a result of major airlines significantly reducing or retiring their use of single class 50-seat aircraft;

changes in the competitive environment due to pricing, industry consolidation, or other factors;

labor disputes, strikes, work stoppages, or similar matters impacting employees;

potential interference with aviation equipment from the deployment of 5G wireless telecommunications systems; and

actual or potential changes in economic conditions, including rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates, inflation and changes in discretionary spending and consumer confidence.

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The occurrence of any or all of such factors or conditions could materially and adversely affect Air Wisconsin's operations and our financial condition. Moreover, in light of the termination of the American capacity purchase agreement,

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and given the competitive nature of the airline industry, we believe limited opportunities exist for Air Wisconsin to enter into a new capacity purchase agreement. Air Wisconsin has announced a strategic realignment of its business strategy. IFurther, if Air Wisconsin is unable to successfully identify and implement the contemplated strevenue generategic realignmenting activities, it may be required to pursue alternative strategies, raise asell or lease its assets, raise additional equity or debt financing, or cease business operations entirely. Even if Air Wisconsin is successful in pursuing growth opportunities in the future, there is no guarantee they will allow Air Wisconsin to achieve or maintain profitable operations.

The outbreak of any disease or other public health threat could result in adverse effects on our business, operating results, financial condition and liquidity.

With the onset of the COVID-19 pandemic, airlines experienced a significant decline in domestic and international demand. An outbreak of another disease or similar public health threat, or any other event that would affect consumer demand for air travel or impose travel restrictions, could have a material adverse impact on our business, operating results, financial condition and liquidity.

High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on Air Wisconsins operating results and financial condition and liquidity.

Aircraft fuel is critical to Air Wisconsins operations. Historically, Air Wisconsin's capacity purchase agreements have provided that the major airline paid third-party vendors for substantially all fuel used in Air Wisconsin's performance of the agreement. Any new agreement Air Wisconsin enters into to provide flying services upon termination of the American capacity purchase agreement may may not provide for the payment of fuel by the other contracting party, so Air Wisconsin may bear the cost of all fuel used in its operations and may become subject to the economic risk of fuel price fluctuations.

The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources as well as related service and delivery infrastructure. Air Wisconsin can neither predict nor guarantee the continued timely availability of aircraft fuel throughout Air Wisconsins system. Supplies and prices of fuel are impacted by factors, such as geopolitical events, economic growth indicators, fiscal/monetary policies, fuel tax policies, changes in regulations, environmental concerns and financial investments in energy markets. Both actual changes in these factors, as well as changes in related market expectations, have driven and may continue to drive rapid changes in fuel prices. For example, dependence on foreign imports of crude oil, limited refining capacity and the possibility of changes in government policy on fuel production, transportation and marketing make it difficult to predict the future availability of fuel. Outbreaks of hostilities or other conflicts in oil-producing areas or elsewhere, a reduction in refining capacity, including as a result of adverse weather events, or governmental limits on the production or sale of fuel could reduce the supply and increase the cost of fuel. Rising fuel prices may lead to increases in airline fares or fees that may not be sustainable, may reduce the general demand for air travel and may impact the amount of flying that Air Wisconsin can perform. Any such fuel price increases or flying reductions may impact Air Wisconsins operating results. In addition, since single class 50-seat aircraft, such as those comprising Air Wisconsins fleet, are typically less fuel efficient than larger aircraft, increased fuel costs may disproportionately impact Air Wisconsins results of operations, as well as its overall competitiveness in the industry.

The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major airline partners.

The airline industry is highly competitive. Air Wisconsin has traditionally competed primarily with other regional airlines, some of which are owned or operated by major airlines. The airline industry has undergone substantial consolidation, and new airlines have entered the market. Any additional consolidation or significant alliance activity within the airline industry, and the entrance of new competitors into the market, could further limit our growth opportunities. Similarly, any further consolidation or restructuring of any major air carriers regional jet programs, including as a result of long-term fleet strategy changes announced by several major carriers, could negatively impact Air Wisconsins future growth opportunities, the result of which would have a material adverse effect on our business, financial condition and results of operations.

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Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.

The terrorist attacks of September 11, 2001 and their aftermath negatively impacted the airline industry in general. If additional terrorist attacks are launched, there may be lasting consequences, which may include loss of life, property damage, increased security measures, higher insurance costs, increased concerns about future terrorist attacks and additional government regulation, among other factors. Additional terrorist attacks, and warnings that such attacks may

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occur, could negatively impact the airline industry and result in decreased passenger traffic, increased flight delays or cancellations, as well as increased security, fuel and other costs and whether or not involving Air Wisconsins aircraft, could have a material adverse impact on our business and operations. Increased global political instability, including the outbreak of war and hostilities, could result in an increased risk of terrorist activities.

The occurrence of an aviation accident or incident involving Air Wisconsin or its aircraft or engine type could negatively impact our business, financial condition and operating results.

An accident or incident involving Air Wisconsins aircraft could result in significant potential claims of injured passengers and others, as well as negative impacts on its operations resulting from the repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. If substantial claims resulting from an accident are made in excess of our related liability insurance coverage, then our operational and financial results would be harmed. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that Air Wisconsins operations are less safe or reliable than other airlines, which could negatively impact our business, financial condition and operating results.

Given that Air Wisconsin currently operates a single aircraft and engine type, any accident or incident involving the CRJ-200 regional jet aircraft type or the GE CF-34 engine type, whether or not operated by Air Wisconsin, may result in Air Wisconsin temporarily or permanently suspending service on all or a large portion of its fleet. Any grounding of Air Wisconsins aircraft could have an adverse impact on Air Wisconsins operations and our financial results.

Further, any accident or incident involving a CRJ-200 regional jet, regardless of the operator or geographic location of the incident, could cause a public perception that the aircraft type is less safe and reliable than other aircraft types, which could negatively impact our business, financial condition and operating results. Any such accident or incident could result in an acceleration of the implementation of fleet strategy changes by major air carriers that would reduce or eliminate the use of 50-seat aircraft, including the CRJ-200 regional jet.

Air Wisconsin is subject to significant governmental regulation and potential regulatory changes.

All air carriers, including Air Wisconsin, are subject to regulation by the DOT, the FAA and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements. In addition, airports and municipalities enact rules and regulations that affect Air Wisconsins operations. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of Air Wisconsins aircraft for any reason may have a material adverse effect on Air Wisconsins operations and our financial condition. Further, Air Wisconsins business may be subject to additional costs as a result of potential regulatory changes, which additional costs could have an adverse effect on our operating results.

Air Wisconsin is subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.

Air Wisconsin is subject to federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. Certain legislative bodies and regulatory authorities are increasingly focused on climate change and have taken actions to implement additional laws, regulations, and programs intended to protect the environment. For example, the federal government, as well as several state and local governments, have implemented legislative and regulatory proposals and voluntary measures intended to reduce greenhouse gas emissions. Compliance with laws, regulations, and other programs intended to reduce emissions or otherwise protect the environment may require Air Wisconsin to reduce its emissions, secure carbon offset credits or otherwise pay for emissions, or make capital investments to modify certain

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aspects of its operations to reduce emissions. Future policy, legal, and regulatory developments relating to the protection of the environment could have a direct effect on Air Wisconsins operations (or an indirect effect through its third-party providers of parts or services or airport facilities at which it operates) and increase its costs and have a material adverse effect on its operations. Any such developments could have an adverse impact on our business, results of operations and financial condition.

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Air Wisconsin is also subject to environmental laws and regulations that require it to investigate and remediate soil or groundwater contamination to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict and joint and several, meaning that Air Wisconsin could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of contamination directly attributable to it, which liability could have an adverse impact on our results of operations and financial condition.

The requirement that Air Wisconsin remain a citizen of the United States limits the potential purchasers of Harbors common stock.

Under DOT regulations and federal law, Air Wisconsin must be owned and controlled by citizens of the United States as that term is defined in the Federal Aviation Act and interpreted by the DOT. The restrictions imposed by federal law and regulations limit who can purchase Air Wisconsins equity securities in the following ways:

at least 75% of Air Wisconsins voting equity securities must be owned and controlled, directly and indirectly, by persons or entities who are citizens of the United States;

at least 51% of Air Wisconsins total outstanding equity securities must be owned and controlled by U.S. citizens and no more than 49% of Air Wisconsins equity securities may be held, directly or indirectly, by persons or entities who are not U.S. citizens and are from countries that have entered into open skies air transport agreements with the U.S. which allow unrestricted access on air service routes between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country; and

citizens of foreign countries that have not entered into open skies air transport agreements with the U.S. may hold no more than 25% of Air Wisconsins total outstanding equity securities.

The restrictions on foreign ownership of Air Wisconsins equity securities may impair or prevent a sale of common stock by a stockholder of Harbor and may adversely affect the trading price or trading volume of Harbors common stock.

General Risk Factors

Because the trading market for Harbors common stock is limited, the common stock may continue to be illiquid.

Harbor has not listed, and does not currently intend to list, its common stock for trading on any national securities exchange. Although Harbors common stock is traded under the symbol HRBR on the OTC Market, the trading volume for the common stock has historically been limited. Trading on the OTC Market has been further limited recently due to the fact that Harbor is not currently in compliance with its reporting obligations under Section 15(d) of the Exchange Act because it has not timely filed all required periodic reports with the SEC. As a result of these and other factors, we expect Harbor's common stock to continue to be highly illiquid for the foreseeable future.

Investors should be aware that an active trading market for the common stock may never develop or be sustained, and that the delay in filing certain required periodic reports with the SEC could have a prolonged negative impact on the trading volume of the common stock. The absence of an active trading market for the common stock could result in additional volatility with respect to, and a further decline in, the trading price of the common stock. Investors should also be aware that they may lose all or part of their investment.

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The trading price of Harbors common stock has been and may continue to be volatile.

The trading price of Harbors common stock has been, and may continue to be, volatile. We believe Harbors stock price will be subject to wide fluctuations in response to a variety of factors, including the following:

the termination of the American capacity purchase agreement and the resulting wind-down of flying operations for American, and o our ability to enter into new arrangements to replace the flying opportunities and revenues that will bere lost upon that termination;

our ability to successfully develop and implement Air Wisconsins evolving business strategies and to achieve and maintain profitability and positive cash flows from operations as a result of those strategies;

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the effect of the United Arbitration Award and our determination to restate our financial statements for the affected periods;

future announcements regarding fleet strategy changes by major air carriers, including any decision to reduce or eliminate single class 50-seat aircraft;

actual or anticipated fluctuations in our financial and operating results from period to period;

actual or potential changes in economic conditions, including rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates, inflation, changes in discretionary spending and consumer confidence, and recessionary concerns;

the impact of pandemics and widespread outbreaks of communicable diseases on passenger demand for air travel, consumer behavior and tourism;

our actual or perceived need for additional capital and the terms of any future debt financing or leasing arrangement;

market perceptions about our financial stability, in particular as a result of the termination of the American capacity purchase agreement and the restatement of our previously issued consolidated financial statements;

market perceptions regarding Air Wisconsins operating performance, reliability and customer service, and the operating performance, reliability and customer service of its business partners and competitors;

factors impacting new businesses, markets or geographic areas we may seek to pursue as part of a realignment of Air Wisconsins stoperategic realignmentions;

factors and perceptions impacting the airline industry generally, including future passenger demand for air travel;

announcements of significant contracts, acquisitions or divestitures by us or Air Wisconsins competitors;

bankruptcies or other financial issues impacting Air Wisconsins business partners or competitors;

threatened or actual litigation, including as a result of the restatement of our previously issued consolidated financial statements, and government investigations;

changes in the regulatory environment impacting Air Wisconsins business and industry, in particular as we seek to pursue new markets as part of Air Wisconsins strategic realignmentnd business opportunities;

purchases or sales of shares of Harbors common stock pursuant to Harbors publicly announced stock repurchase program or otherwise;

the illiquidity of Harbors common stock;

speculative trading practices of Harbors stockholders and other market participants;

perceptions about securities that are traded on the OTC Market;

the impact of the application of accounting guidance; and

actual or potential changes in political conditions, including wars, outbreak of hostilities, terrorism, or government sanctions.

In recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by companies across industries. These changes may occur without regard to the financial condition or operating performance of the affected companies. Accordingly, the price of

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Harbors common stock could fluctuate based upon factors that have little or nothing to do with Harbor, and these fluctuations could materially reduce the trading price and trading volume of Harbors common stock.

The concentration of ownership of Harbors common stock among a small number of stockholders could allow such stockholders to exert significant influence over the Companys business plans and strategic objectives, control all matters submitted to Harbors stockholders for approval, or deter a change in control transaction, any of which could negatively affect the trading price or trading volume of its common stock.

As of February 28March 31, 2025 Harbor had 58,435,71129,836 shares of common stock outstanding. As of the same date, Amun LLC (Amun) held 20,000,000 shares of Harbors common stock, representing approximately 34.2% of outstanding shares of Harbor's common stock, and Southshore Aircraft Holdings, LLC, through its affiliates (together, Southshore), held 16,500,000 shares of common stock, representing approximately 28.2% of the outstanding shares of Harbor's common

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stock. As a result, Amun and Southshore collectively control a majority of the voting power of Harbors outstanding capital stock and, therefore, are able to exercise significant influence over the establishment and implementation of the Companys business plans and strategic objectives, as well as to control all matters submitted to Harbors stockholders for approval. These stockholders may manage the Companys business in ways with which certain investors may disagree and may be adverse to their interests. This concentration of ownership may also have the effect of delaying, deterring or preventing a change in control transaction, depriving Harbors stockholders of an opportunity to receive a premium for their investment, or otherwise negatively affecting the trading price or trading volume of Harbors common stock.

Mr. Bartlett, one of Harbors directors, may be deemed to be the beneficial owner of the shares of Harbors common stock held by Amun due to his status as a member of the board of managers of Amun and his ownership of equity interests in Amun. In addition, Mr. Bartlett may be deemed to be the beneficial owner of the shares of Harbor's common stock held by Southshore due to his status as a member of the board of managers of Southshore and his ownership of equity interests in Southshore. Accordingly, Mr. Bartlett may be able to exercise influence over decisions involving the voting or disposition of shares of Harbors capital stock. However, Mr. Bartlett does not control voting or investment decisions made by either Amun or Southshore.

Harbor may suspend its obligation to comply with SEC filing requirements in future periods and thereby cease filing reports and other information with the SEC, which could have the effect of reducing the trading volume and trading price of Harbors common stock.

In February 2012, Harbors predecessor, Harbor Biosciences, Inc., filed a Form 15 with the SEC to deregister its common stock pursuant to Section 12(g) of the Exchange Act. The filing of the Form 15 had the effect of suspending Harbors obligation, pursuant to Section 15(d) of the Exchange Act, to file reports and other information with the SEC. As a result, prior to the filing of our Annual Report on Form 10-K for the year ended December 31, 2019, the last periodic report filed by Harbor was the Annual Report on Form 10-K for the year ended December 31, 2011. As of January 1, 2020, Harbor no longer met the eligibility criteria under Rule 12h-3 of the Exchange Act to suspend its reporting obligations under Section 15(d) of the Exchange Act, requiring Harbor to resume filing reports and other information with the SEC pursuant to the Exchange Act.

The Company has incurred, and expects to continue to incur, significant direct and indirect costs, and diversion of managements time and resources, as a result of the requirement to comply with certain reporting obligations under the Exchange Act, including those incurred in connection with the preparation and filing of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, the audit of the consolidated financial statements contained in its Annual Reports in accordance with SEC rules and Public Company Accounting Oversight Board (United States) standards, and compliance with certain provisions of the Sarbanes-Oxley Act of 2002 (SOX). The Company has incurred and may continue to incur significant additional costs as a result of the restatement of its previously issued consolidated financial statements provided in the 2023 Annual Report, as well as the ongoing litigation relating to the restatement.

Harbor would again become eligible to suspend its public reporting obligations if it: (i) determines in accordance with applicable SEC rules it has fewer than 300 stockholders of record as of certain points in time, (ii) does not file registration statements pursuant to the Securities Act (which it does not currently intend to do), and (iii) meets certain other requirements under applicable SEC rules. If Harbor becomes eligible to suspend its public reporting obligations in future periods, it may elect to take the actions necessary to suspend those obligations, which would result in Harbor no longer being required to file SEC reports. If Harbor ceases filing reports and other information with the SEC, it would

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significantly reduce the amount of publicly available information about the Company and its business and operations, which could have the effect of reducing the trading volume and price of Harbors common stock.

Further, notwithstanding that Harbor is currently required to file certain reports and information with the SEC pursuant to Section 15(d) of the Exchange Act, Harbor does not have a class of securities registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act. As a result, Harbor is not required to comply with, and does not intend to follow, certain disclosure requirements typically applicable to public reporting companies, including the requirement to file proxy statements, information statements, tender offer disclosures, and beneficial ownership filings. Accordingly, there may be significantly less information available about the Company, including its governance policies and ownership structure, than is available for other public reporting companies, which could have the effect of further limiting the trading volume, and further reducing the trading price, of Harbors common stock.

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As a result of the delay in filing the 2023 Annual Report due to the restatement of the previously issued consolidated financial statements for certain periods, and the corresponding delay in filing this Quarterly Report, Harbor is not currently in compliance with its reporting obligations under Section 15(d) of the Exchange Act because it did not timely file all required periodic reports with the SEC. While Harbor currently intends to file all required periodic reports with the SEC and regain compliance with its reporting obligations, there can be no assurance as to the timing of making these required filings. Harbors failure to timely file all required periodic reports with the SEC, or to regain compliance with its reporting obligations, could cause reputational harm. In addition, as discussed above, Harbors failure to timely file all required periodic reports has resulted in a significant reduction in the trading volume of Harbors common stock, which may have contributed to a decline in the trading price of the common stock.

Provisions in Harbors governing documents might deter acquisition bids, which could adversely affect the value of Harbors common stock.

Harbors amended and restated  certificate of incorporation, as amended, and amended and restated  and bylaws, as amended, contain provisions that, among other things:

prohibit the transfer of any shares of Harbors capital stock that would result in: (i) any person or entity becoming a Five-Percent Stockholder (as defined under Treasury Regulation Section 1.382-T(g)) of Harbors then-outstanding capital stock, or (ii) an increase in the percentage ownership of any person or entity who is already a Five-Percent Stockholder of Harbors then-outstanding capital stock;

authorize the board of directors, without stockholder approval, to authorize and issue preferred stock with powers, preferences and rights that may be senior to Harbors common stock, that could dilute the interest of, or impair the voting power of, holders of Harbors common stock and could also have the effect of discouraging, delaying or preventing a change of control;

establish advance notice procedures that stockholders must comply with in order to nominate candidates to the board of directors and propose matters to be brought before an annual or special meeting of Harbors stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of the Company;

give the board of directors exclusive authority to set the number of directors and increase or decrease the number of directors by one or more resolutions, which may prevent stockholders from being able to fill vacancies on the board of directors;

authorize a majority of the board of directors to appoint a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which may prevent stockholders from being able to fill vacancies on the board of directors; and

restrict the ability of stockholders to call special meetings of stockholders.

These provisions may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur, or otherwise discouraging takeover attempts that some stockholders may consider beneficial, any of which could also adversely affect the trading price of Harbors common stock.

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Harbors certificate of incorporation and bylaws limit certain transfers of Harbors stock in order to preserve Harbors ability to use net operating loss carryforwards, which could adversely affect the trading price of its common stock.

To reduce the risk of a potential adverse effect on Harbors ability to use net operating loss carryforwards for federal income tax purposes, Harbors amended and restated  certificate of incorporation, as amended, and amended and restated  and bylaws, as amended, prohibit certain transfers of shares of Harbors capital stock that could result in adverse tax consequences by impairing Harbors ability to utilize net operating loss carryforwards. These transfer restrictions are subject to a number of rules and exceptions, and generally may only be repealed or amended by the affirmative vote of the holders of at least two-thirds of the outstanding shares of Harbors capital stock. These transfer restrictions apply to the beneficial owners of the shares of Harbors capital stock. The transfer restrictions contained in Harbors amended and restated certificate of incorporation, as amended, and amended and restated  and bylaws, as amended, m may limit demand for Harbors common stock, which may adversely affect the trading price. In addition, this limitation may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur, or otherwise discouraging takeover attempts that some stockholders may consider beneficial.

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Harbor currently does not intend to pay dividends on its common stock and, consequently, the only opportunity to achieve a return on an investment in Harbors common stock may be the appreciation in value of Harbors common stock.

Harbor has not historically paid dividends on shares of its common stock and does not expect to pay dividends in the foreseeable future. Any future determination by Harbor to pay dividends will be at the discretion of the board of directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and such other factors as the board of directors deems relevant. Consequently, investors should consider that their only opportunity to achieve a positive return on their investment in Harbors common stock may be the appreciation in value of the common stock. However, as a result of numerous risks and uncertainties described in this Quarterly Report, the trading price may not appreciate and may decline significantly.

As a smaller reporting company, Harbor has availed itself of reduced disclosure requirements, which may make Harbors common stock less attractive to investors.

Harbor is a smaller reporting company under applicable SEC rules and regulations, and it will continue to be a smaller reporting company for so long as either: (i) the market value of Harbors common stock held by non-affiliates as of the end of its most recently completed second quarter is less than $250 million or (ii) the market value of Harbors common stock held by non-affiliates is less than $700 million and the annual revenues of Harbor are less than $100 million during the most recently completed fiscal year. Because Amun and Southshore, both of which are affiliates of Harbor, collectively hold a significant percentage of the outstanding shares of Harbor's common stock, it would require a significant increase in the market value of the common stock for Harbor to no longer qualify as a smaller reporting company.

As a smaller reporting company, Harbor has relied on exemptions from certain disclosure requirements that are applicable to other public reporting companies. These exemptions include reduced financial disclosure and disclosure regarding executive compensation. Investors may find Harbors common stock less attractive because it relies on these exemptions, which could lead to a less active trading market for Harbors common stock and negatively impact the trading price. In addition, as previously discussed, Harbor does not have a class of securities registered pursuant to Section 12(b) or 12(g) of the Exchange Act, which further reduces its disclosure obligations.

Complying with the requirements of public reporting companies under the Exchange Act, including the requirement for management to assess our disclosure controls and procedures and internal control over financial reporting, could increase our operating costs and divert managements attention from executing our business strategyies.

We are subject to the reporting requirements of Section 15(d) of the Exchange Act, which requires, among other things, that we file annual, quarterly, and current reports with the SEC with respect to our business, financial condition and results of operations. In addition, pursuant to SOX, we are required to assess the effectiveness of our disclosure controls and procedures and our internal control over financial reporting. As a result of the determination that the previously issued consolidated financial statements for certain periods should no longer be relied upon and that such financial statements should be restated, we concluded that we had a material weakness in our internal control over financial reporting. As a result, we determined that our disclosure controls and procedures were not effective as of December 31, 2023, as further discussed below.

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Compliance with these various reporting and compliance obligations has substantially increased our legal and financial compliance costs and increased demands on our management team. Significant additional resources and management oversight may be required to maintain and, as required, enhance our disclosure controls and procedures and internal control over financial reporting, which could have an adverse impact on our business and operating results. Further, Harbors status as a public reporting company and the risks associated with being a public reporting company, could make it more difficult for us to attract and retain qualified members of the board of directors and executive officers, and it may increase the cost of their services as well as the cost of premiums for director and officer liability insurance.

The restatement of our previously issued consolidated financial statements has been time consuming and expensive and may subject us to additional risks and uncertainties, including the increased possibility of litigation, regulatory inquiries, or other actions and loss of investor confidence.

As discussed in the Explanatory Note in the 2023 Annual Report, and Note 2, Restatement of 2022 Consolidated Financial Statements, and Note 20, Restatement of Prior Quarterly 2023 and 2022 Condensed Consolidated Financial

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Statements (Unaudited), to the audited consolidated financial statements included in the 2023 Annual Report, we restated our audited consolidated financial statements as of and for the year ended December 31, 2022 and our interim unaudited consolidated financial statements contained in the Quarterly Reports on Form 10-Q as of and for the first three quarters of the years ended December 31, 2022 and December 31, 2023. As a result, we have incurred, and may continue to incur, unanticipated costs for accounting and legal fees in connection with or related to the restatement, and we may become subject to additional risks and uncertainties. For example, we are aware of the filing of several lawsuits relating to facts arising in connection with the restatement, and we could become subject to additional litigation or to regulatory inquiries in the future. Any of the foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business, both of which could harm our business and financial results.

We have identified a material weakness in our internal control over financial reporting, which could, if not effectively remediated, result in material misstatements in, and additional restatements of, our financial statements, and a failure to meet our reporting and financial obligations, each of which could adversely affect our results of operations and financial condition.

As discussed in the 2023 Annual Report, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2023, due to a material weakness. We are actively engaged in developing and implementing a remediation plan designed to address the material weakness and are committed to remediating it as promptly as possible. However, we cannot be certain that the current material weakness in internal control will be remediated and our internal control over financial reporting considered effective going forward. Because of its inherent limitations, our system of internal control over financial reporting may not prevent or detect every material misstatement. For additional information, please refer to Part I, Item 4, Controls and Procedures, in this Quarterly Report.

Our current conclusion regarding the effectiveness of our internal control over financial reporting, as well as a conclusion in any future period that our internal control over financial reporting is not effective, could cause investors to lose confidence in the accuracy and completeness of our financial reports, the trading price or trading volume of Harbor's common stock to decline, and the SEC or other regulatory authorities to investigate or sanction us. Any failure to improve, or once it is effective, maintain the effectiveness of, our internal control over financial reporting could inhibit our ability to accurately report our financial condition, operating results or liquidity, and/or restrict our future access to the capital markets. An evaluation of effectiveness is also subject to the risk that the controls may become inadequate because of changes in conditions, because the degree of compliance with policies or procedures decreases over time, or because of unanticipated circumstances or other factors.

We also face risks associated with the cost of establishing, maintaining and enhancing effective internal control over financial reporting. We have invested, and expect to continue to invest significant resources in future years, to develop and maintain the necessary documentation and testing procedures required by Section 404(a) of the Sarbanes-Oxley Act. Ensuring we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort.

Stock repurchases could increase the volatility of the trading price of Harbors common stock, and we cannot guarantee that our stock repurchase program will enhance long-term stockholder value.

The board of directors has adopted a stock repurchase program pursuant to which Harbor may repurchase shares of its common stock from time to time. From the inception of the program through February 28March 31, 2025, Harbor has purchased

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approximately 12.9 million shares of its common stock pursuant to the program. Although the board of directors has authorized the repurchase program, and Harbor has completed the purchase of shares of common stock, it does not obligate us to repurchase any additional dollar amount or number of shares, and the program may be modified, suspended or terminated at any time and for any reason. The additional number of shares to be repurchased, and the timing of any such repurchases, will depends on a number of factors, including the trading price of the common stock, the Companys financial performance and liquidity position, general market conditions, applicable legal requirements and other factors. Our ability to repurchase shares may also be limited by restrictive covenants in future borrowing arrangements or capacity purchase agreements (or similar agreements) we may enter into from time to time. Repurchases of Harbors common stock could increase the volatility of the trading price and reduce the trading volume of the common stock, either of which could have a negative impact on the trading price. Similarly, the future announcement of the termination or suspension of the repurchase program, or our decision not to utilize the full authorized repurchase amount under the repurchase program, could result in a decrease in the trading price. There can be no assurance that any repurchases we do elect to make will enhance stockholder value because the market price of Harbors common stock may decline below the levels at which we repurchased shares. We cannot guarantee that the repurchase program will enhance long-term stockholder value.

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Harbor may be at increased risk of securities class action and other litigation.

Securities class action litigation may be instituted against companies following periods of volatility in the overall market and in the price of a companys securities. As a result of the requirement to comply with Exchange Act reporting obligations, a significant amount of information regarding our business and operations, including our financial condition and operating results, is publicly available, which may result in threatened or actual litigation or other disputes with our stockholders, employees or other constituents. For example, we are aware of the filing of several lawsuits relating to facts arising in connection with the restatement of our previously issued consolidated financial statements. If such claims are successful, our business and results of operations could suffer. Even if the claims are resolved in our favor, these lawsuits could result in substantial costs and a diversion of management's attention, which could harm our business, financial condition and results of operations.

If securities or industry analysts do not publish reports about our business, or the Company does not issue press releases, an active trading market for Harbors common stock may not develop.

The extent of any trading market for Harbors common stock will depend, in part, on the content of any reports that securities or industry analysts publish about our business, as well as any press releases or other publications issued by the Company. Analyst coverage of the Company has been extremely limited, and we are not aware of any reputable analysts that cover the Company. In addition, the Company does not intend to regularly issue press releases in the future. Investors should not purchase Harbors common stock with the expectation that we will have analyst coverage or that the Company will publish press releases, and should be aware that the information available about our business may be significantly less than information about other public companies. In the absence of these reports or other publications, an active trading market for Harbors common stock may not develop or be sustained.

Moreover, as discussed above, Harbor is not current in filing certain reports with the SEC as required pursuant to Section 15(d) of the Exchange Act. Harbors failure to be timely in its SEC reporting obligations has had, and may continue to have, a material adverse impact on the trading volume and trading price of its common stock.