HARBOR DIVERSIFIED, INC.

Harbor Diversified, Inc. is a non-operating holding company that, until January 9, 2026, was the parent of a consolidated group of subsidiaries whose principal operating business was Air Wisconsin Airlines LLC, a regional air carrier that operated primarily as a feeder for major airlines under capacity purchase agreements. From March 2023 until April 3, 2025, Air Wisconsin provided regional airline services for American Airlines, Inc. under the American capacity purchase agreement entered into in August 2022, and for the year ended December 31, 2025 a substantial portion of operating revenue was derived from operations associated with that agreement even though it terminated in April 2025. The regional airline industry is highly competitive, and while Air Wisconsin operated under capacity purchase agreements its primary competition were U.S. regional airlines that had or competed for capacity purchase agreements with major airlines, including CommuteAir; Endeavor, Inc. (owned by Delta); Envoy Air, Inc., PSA Airlines, Inc. and Piedmont Airlines, Inc. (owned by American); GoJet Airlines, LLC; Horizon Air Industries, Inc. (owned by Alaska Air Group, Inc.); Republic Airways Holdings Inc. (and, prior to November 2025, Mesa Airlines, Inc., which merged with Republic Airways in November 2025); and SkyWest Inc. Major airlines typically selected regional airline partners based on aircraft type, ability to fly proposed schedules, availability of labor resources including pilots, economic terms, aircraft and engine resources, financial resources, operational reliability, reputation, and customer service levels. A defining structural force reshaping the industry is the decision by multiple major airlines to eliminate single-class 50-seat aircraft from their fleets; Delta Airlines has phased out all of the CRJ-200 regional jets formerly in its fleet, and American has announced that it intends to eliminate all 50-seat aircraft from its operations by 2030 ¹. This trend made it unlikely Air Wisconsin would be able to enter into a new capacity purchase agreement with a major airline, caused it to seek alternative uses for its aircraft, and contributed to the decision to pursue the Aviation Disposition. In the new markets Air Wisconsin explored entering, including charter operations and Essential Air Service Program markets, other competitors were larger, had more experience and had significantly greater financial and other resources than Air Wisconsin, which contributed to the difficulties Air Wisconsin faced in seeking to enter into these markets. After giving effect to the Aviation Disposition, the Company does not expect to face the competitive dynamics of the airline industry.

The Company's core business model historically centered on providing regional airline services under capacity purchase agreements with major airlines, supplemented by on-demand charter service and certain other supplemental operations. Under the American capacity purchase agreement, Air Wisconsin was entitled to receive payments based on the number of aircraft covered under the agreement, block hours, departures and certain performance metrics, was eligible to receive bonus compensation and was required to pay rebates upon the achievement of, or failure to achieve, certain pre-established performance criteria. Air Wisconsin was responsible for certain customary costs relating to flight operation and maintenance of the covered aircraft along with other customary controllable expenses, including expenses associated with flight crews, line maintenance and overhead, while American reimbursed Air Wisconsin for certain customary costs and expenses including fuel, landing and air traffic control, changes to livery and branding, aircraft and passenger liability insurance, property taxes and systems support. American had the right to schedule all covered aircraft, determine route selection and frequency, determine and publish fares, establish seat inventories, overbooking levels and allocation of seats among fare categories, and provided all ground handling services; American also had the right to all revenues resulting from the sale of passenger tickets associated with the covered aircraft and all other sources of revenue associated with the operation of the covered aircraft, including revenues relating to baggage charges, food and beverage sales and ticket change fees. The agreement protected Air Wisconsin, to an extent, from many of the elements that typically cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in the number of passengers, but it also prevented Air Wisconsin from benefiting from certain factors such as reductions in fuel prices, increases in ticket prices and increases in passenger demand. In the fourth quarter of 2024, Air Wisconsin began offering on-demand charter service within the contiguous United States, a service that was seasonal in nature with a significant portion of charter flights provided to collegiate athletic teams whose seasons typically end late spring or early summer and do not resume until fall; under this service Air Wisconsin negotiated a fare calculated based on anticipated costs including fuel and oil, landing fees and passenger screening fees, with the performance obligation met and revenue recognized upon completion of the flight. Following the Aviation Disposition, the Company has no material operating assets, is not engaged in any operating business, and does not have any source of revenue from operations; its remaining assets are predominantly cash and cash equivalents, restricted cash and marketable securities, and its primary source of earnings for the foreseeable future is expected to be investment income generated from those Liquid Assets.

The Company's historical operations were conducted through a single reportable segment managed on a consolidated basis, providing on-demand charter service and scheduled flight services for American under the American capacity purchase agreement, all within the contiguous United States and Canada. For the year ended December 31, 2025, total operating revenues were $66.677 million ², of which Contract Revenues were $66.227 million ³ and Contract Services and Other was $450 thousand ⁴. Contract revenues from American decreased by $145.7 million, or 72.8%, to $54.5 million ⁵ for the year ended December 31, 2025 compared to $200.2 million ⁶ for the year ended December 31, 2024, primarily as a result of the termination of the agreement on April 3, 2025. Total contract revenues for the year ended December 31, 2025 included $4.2 million ⁷ of contract revenues that were previously deferred under the American capacity purchase agreement, compared to $2.9 million ⁸ of contract revenues recognized during the year ended December 31, 2024. Charter services revenues increased $9.6 million to $11.8 million ⁹ for the year ended December 31, 2025, compared to $2.2 million ¹⁰ for the year ended December 31, 2024, or 437.6% ¹¹, and charter revenues were 17.6% ¹² and 1.1% ¹³ of total operating revenues for the years ended December 31, 2025 and December 31, 2024, respectively. Contract services and other revenue primarily consisted of maintenance services on two aircraft that were sold during 2025, aircraft rental revenue, and the sale of parts; service revenue was $0.4 million ¹⁴ compared to no service revenue during the year ended December 31, 2024.

The Company's historical cost structure was dominated by payroll and related costs, aircraft maintenance, materials and repairs, and depreciation, amortization and obsolescence. Payroll and related costs were $54.636 million ¹⁵ for the year ended December 31, 2025, compared to $122.102 million ¹⁶ for the year ended December 31, 2024. Aircraft maintenance, materials and repairs were $14.241 million ¹⁷ for the year ended December 31, 2025, compared to $58.476 million ¹⁸ for the year ended December 31, 2024. Depreciation, amortization and obsolescence were $8.916 million ¹⁹ for the year ended December 31, 2025, compared to $26.051 million ²⁰ for the year ended December 31, 2024. Aircraft fuel and oil costs were $1.064 million ²¹ for the year ended December 31, 2025, compared to $340 thousand ²² for the year ended December 31, 2024, with substantially all fuel costs incurred under the American capacity purchase agreement directly paid to suppliers by American. Other rents were $3.259 million ²³ for the year ended December 31, 2025, compared to $6.698 million ²⁴ for the year ended December 31, 2024, and purchased services and other expense was $14.247 million ²⁵ for the year ended December 31, 2025, compared to $13.567 million ²⁶ for the year ended December 31, 2024. Total operating expenses were $81.426 million ²⁷ for the year ended December 31, 2025, compared to $226.586 million ²⁸ for the year ended December 31, 2024, a decrease of $145.160 million ²⁹, or 64.1% ³⁰.

Significant operational developments during the period centered on the wind-down and disposition of the aviation business. On January 3, 2025, American gave notice to Air Wisconsin of the termination of the American capacity purchase agreement, effective April 3, 2025 ³¹, at which point all of Air Wisconsin's aircraft were removed from service for American. On January 10, 2025, Air Wisconsin announced a strategic realignment of its business strategies, exploring expansion of charter operations, a focus on Essential Air Service Program markets, and transitioning its relationship with American to a codeshare and interline relationship; these efforts did not lead to sustainable operations or positive financial results. Air Wisconsin implemented a series of workforce reductions: on March 14, 2025, it notified approximately 240 employees ³², consisting of 123 management employees ³³, 100 pilots ³⁴, and 13 dispatchers ³⁵, that they would be furloughed or terminated effective March 31, 2025 or within a short period thereafter, and on April 10, 2025 it announced additional workforce reductions affecting approximately 400 additional employees ³⁶ effective June 9, 2025 or a short period thereafter. Air Wisconsin sold six aircraft that resulted in a gain of $11.2 million ³⁷, sold four engines resulting in a gain of $2.2 million ³⁸, and sold miscellaneous rotable parts resulting in a gain of $0.9 million ³⁹, for a total gain on disposal of fixed assets of $14.937 million ⁴⁰ in 2025. On January 9, 2026, Harbor completed the last in a series of transactions pursuant to which it disposed of all of its aviation assets, including its membership interests in Air Wisconsin, with aggregate consideration received of approximately $125.9 million ⁴¹, consisting of $14.8 million ⁴² for asset dispositions occurring during 2025 and $111.1 million ⁴³ in January 2026, subject to certain customary purchase price adjustments and the impact of required tax obligations estimated to be approximately $(0.2) million ⁴⁴ and $9.9 million ⁴⁵, respectively. In January 2026, upon the closing of the Aviation Disposition, the Company paid transaction bonuses to certain officers and employees totaling, in the aggregate, approximately $4.3 million ⁴⁶. On September 1, 2025, Gregg Garvey was appointed to serve as Air Wisconsin's Senior Vice President, Chief Financial Officer, and Treasurer, following the resignation of Liam Mackay effective September 5, 2025.

The Company's headline financial performance for the year ended December 31, 2025 reflects the dramatic contraction of the airline operation. Total operating revenues were $66.677 million , a 67.1% ⁴⁷ decrease compared to $202.383 million ⁴⁸ for the year ended December 31, 2024. The Company had an operating loss of $14.7 million ⁴⁹ for the year ended December 31, 2025, compared to an operating loss of $24.2 million ⁵⁰ for the year ended December 31, 2024. Net income for the year ended December 31, 2025 was $0.03 million ⁵¹, or net income of $0.00 ⁵² per basic and diluted share, compared to net loss of $17.2 million ⁵³, or net loss of $(0.36) ⁵⁴ per basic and diluted share, for the year ended December 31, 2024. The net income for 2025, when compared to the net loss for 2024, was largely driven by the improved economics of Amendment No. 4 to the American capacity purchase agreement in November 2024, offset by the expense necessary to maintain the infrastructure of a regional airline as strategic alternatives were considered, revenue from on-demand charter flights throughout the first half of 2025, and gains on the sales of aircraft and engines in the second half of 2025. As a result of the Aviation Disposition, the Company reversed its federal valuation allowances on deferred tax assets and partially reversed its valuation allowances on state deferred tax assets, resulting in an increased income tax benefit of $5.6 million ⁵⁵ when comparing 2025 to 2024. The Company recorded an income tax benefit of $6.8 million ⁵⁶ and $1.2 million ⁵⁷ for the years ended December 31, 2025 and December 31, 2024, respectively, with an effective tax rate of 100.4% ⁵⁸ in 2025 compared to 6.4% ⁵⁹ in 2024. Net cash used in operating activities was $32.299 million ⁶⁰ for the year ended December 31, 2025, compared to net cash provided by operating activities of $13.285 million ⁶¹ for the year ended December 31, 2024. As of December 31, 2025, the Cash and cash equivalents balance was $13.5 million ⁶² and the Company held $37.0 million ⁶³ of Marketable securities, compared to Cash and cash equivalents of $15.0 million ⁶⁴ and Marketable securities of $97.0 million ⁶⁵ as of December 31, 2024, with a Due from broker receivable of $49.9 million ⁶⁶ established as of December 31, 2025 as a result of the sale of certain marketable securities on December 31, 2025.

Following the Aviation Disposition, the Company's primary sources of liquidity consist of its Liquid Assets, and since it is no longer engaged in any operating business and does not have any source of revenue from operations, its primary source of earnings for the foreseeable future is expected to be investment income generated from those assets. The Company believes the Liquid Assets are sufficient to meet its liquidity requirements for at least the next 12 months from the date of the filing. The Company is currently in the process of evaluating potential strategic alternatives, which may include investments in, or acquisitions of, one or more businesses, assets, technologies, joint ventures, or other strategic opportunities; any such transactions could involve one or multiple investments or acquisitions, be in any number of industries or lines of business (which may or may not include the airline industry), and involve the use of cash, equity securities, or a combination thereof. In addition, the Company may pursue other strategic alternatives, which could include, without limitation, the issuance of one or more cash dividends, share repurchases, tender offers, registering as an investment company, a liquidation, or other potential transactions. No decision has been made regarding the pursuit of any particular strategic alternative, and the Company cannot predict when a decision will be made.

A central growth vector is the deployment of the Liquid Assets toward one or more acquisitions or investments that would establish a new operating business. The Company intends to avail itself of the one-year safe harbor exemption under the Investment Company Act for companies seeking to acquire an operating business, and in furtherance of that intention has adopted an investment policy with the primary objectives of ensuring the safety of capital and preservation of purchasing power, preserving liquidity, maintaining short-term maturities, and managing towards reasonable rates of return in light of the other investment objectives. Consistent with the investment policy, the Liquid Assets are primarily invested in deposit accounts, money market funds, government-backed securities and similar investments. The process of identifying and evaluating investment and acquisition opportunities, conducting due diligence, negotiating transaction terms, and integrating acquired businesses, assets or technologies is time-consuming and expensive and involves significant uncertainty, and the Company may face significant competition for investments or acquisition targets from other potential acquirers, some of which may have greater resources and experience. The Company may not be successful in identifying suitable acquisition targets on acceptable terms, or at all, and even if an acquisition is completed, the Company may not be able to successfully integrate the acquired business or realize the anticipated benefits of the transaction, which could result in impairment charges or other losses.

A second growth vector is the potential return of capital to stockholders through one or more cash dividends, share repurchases, tender offers, or a liquidation. The Company has a significant amount of Liquid Assets with no material indebtedness, and its board of directors adopted a stock repurchase program on March 30, 2021 pursuant to which Harbor could repurchase up to $1.0 million ⁶⁷ of shares of its common stock from time to time during the first calendar month of the program, subject to an automatic increase of $1.0 million ⁶⁸ per calendar month thereafter. From the inception of the program through December 31, 2025, Harbor purchased approximately 12.9 million shares ⁶⁹ of its common stock pursuant to the program, and acquired an aggregate of 63,925 shares ⁷⁰ during the year ended December 31, 2025, with no shares repurchased after March 31, 2025 due to the failure to timely file certain reports with the SEC. The Company is considering the implementation of various methodologies for repurchasing shares, including amendments to the stock repurchase program, the commencement of one or more tender offers, or privately negotiated repurchases. One strategic alternative that may be considered is a liquidation of the Company and distribution of its remaining assets to stockholders, in which case the amount and timing of distributions would be subject to significant uncertainty, the Company may be required to establish reserves for known and contingent liabilities, and the process of liquidating assets and winding down affairs could take a significant period of time during which expenses would continue to be incurred.

The Company's cost structure following the Aviation Disposition is expected to consist primarily of ongoing corporate expenses, including costs associated with maintaining public company status, pursuing strategic alternatives, and compensating the management team. Because the airline operations and related maintenance programs remained with Air Wisconsin after the Aviation Disposition, the Company does not anticipate incurring any airline-related operating expenses or capital expenditures going forward, and it does not expect to incur aircraft fuel costs or airline maintenance or repair costs. The Company's investment returns must be sufficient to offset these ongoing corporate expenses, and to the extent operating expenses exceed investment income over an extended period, the Company's assets would decline, reducing the capital available for strategic transactions or other strategic opportunities. The Company has incurred, and expects to continue to incur, significant direct and indirect costs, and diversion of management's 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, and compliance with certain provisions of the Sarbanes-Oxley Act of 2002.

The Company's operational posture following the Aviation Disposition is that of a non-operating holding company with a small number of employees, executive officers and advisors who manage day-to-day affairs, oversee remaining assets and obligations, evaluate strategic alternatives and execute any transaction it may pursue. Following the Aviation Disposition, the Company engaged a third-party to manage its IT services, including the critical function of end-point protection and overall cybersecurity strategy. The Company retained certain non-operating assets from or related to its historical airline operations, which primarily relate to lease payments for a single aircraft, insurance claims, and state and federal tax refunds, and it maintains a single lease for office space located in Appleton, Wisconsin covering approximately 1,000 square feet ⁷¹. As of December 31, 2025, Air Wisconsin had a total of approximately 233 employees ⁷², of which 139 ⁷³ were represented by unions, but because the unionized workforce and related labor agreements remained with Air Wisconsin following the Aviation Disposition, labor relations and collective bargaining agreements are no longer relevant to the Company.

The Company's capital allocation priorities are shaped by the material cash requirements it has incurred in connection with the Aviation Disposition. The Company estimates that federal and state income taxes resulting from the Aviation Disposition will be approximately $9.9 million , of which $5.5 million ⁷⁴ had been paid as of the date of the filing, with the remainder expected to be paid in connection with 2026 estimated tax payments and income tax returns. In January 2026, upon the closing of the Aviation Disposition, the Company paid transaction bonuses to certain officers and employees totaling, in the aggregate, approximately $4.3 million . During the year ended December 31, 2025, the Company incurred $0.5 million ⁷⁵ in capital expenditures primarily related to purchases of rotable parts, and because the airline operations and related maintenance programs remained with Air Wisconsin after the Aviation Disposition, the Company does not anticipate incurring any airline-related operating expenses or capital expenditures going forward. Harbor has not historically paid any cash dividends on shares of its common stock and does not expect to pay dividends in the foreseeable future, although the Company is evaluating potential strategic alternatives which could include the issuance of one or more cash dividends.

The Company faces structural headwinds and constraints tied to its investment company status and its limited operating infrastructure. Because the remaining assets are predominantly comprised of Liquid Assets, the Company could potentially be deemed an investment company pursuant to the Investment Company Act, and becoming an investment company would impose additional regulatory and disclosure requirements, compliance with which could be expensive and time-consuming. The Company is currently relying on the transient investment company exemption under Rule 3a-2 of the Investment Company Act, which provides only temporary relief and is subject to significant conditions and limitations, allowing a transient investment company a grace period of one year from the earlier of the date on which the company owns securities and/or cash having a value exceeding 50% of its total assets on either a consolidated or unconsolidated basis and the date on which it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis. The exemption may only be relied upon once during any three-year period, and if the Company is unable to complete a qualifying transaction within the Transient Period, it would no longer be able to rely on the exemption and would need to either register as an investment company, qualify for another exemption from registration, restructure its assets and business to avoid meeting the definition of an investment company, or liquidate. Reliance on the exemption may constrain flexibility to make investments, pursue acquisitions or engage in joint ventures that involve securities, as such actions could affect investment asset ratios and jeopardize the ability to meet the exemption's conditions.

The Company also faces execution constraints arising from its limited personnel and resources. After giving effect to the Aviation Disposition, the Company has only a small number of employees, executive officers and advisors, and the loss of any of these key individuals could impair its ability to operate effectively and pursue its strategic objectives. The limited personnel and resources may also limit the scope of opportunities the Company is able to evaluate and pursue, and the execution or oversight of strategic transactions may result in the diversion of management's time and attention away from other aspects of the business. Additionally, potential acquisition targets or business partners may have concerns about the Company's limited operational infrastructure and personnel, which could make it more difficult to consummate strategic transactions. The Company has identified a material weakness in its internal control over financial reporting as of December 31, 2025, and there is significant risk that its disclosure controls and procedures and internal control over financial reporting will not be effective in future periods, which could inhibit its ability to accurately and timely report its financial condition or operating results and could prevent it from completing acquisitions or entering into other strategic alternatives.

The most material and specific risks to Harbor center on its post-Aviation Disposition status as a non-operating entity whose primary assets consist of Liquid Assets. If Harbor is deemed an investment company under the Investment Company Act and cannot avail itself of an exemption, it would need to register and become subject to substantial regulatory requirements, and the Company is currently relying on the transient investment company exemption under Rule 3a-2, which provides only a one-year grace period, may only be relied upon once during any three-year period, and is subject to significant conditions including a bona fide intent to engage in a non-investment company business within one year. The Company has no material operating assets, no operating business, and no source of revenue from operations, and its investment returns must be sufficient to offset ongoing corporate expenses; if expenses exceed investment returns over an extended period, the value of the Liquid Assets will decline, reducing capital available for strategic transactions, dividends or share repurchases. Harbor is not current with its reporting obligations under Section 15(d) of the Exchange Act, having failed to timely file its Annual Report on Form 10-K for the year ended December 31, 2024, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025 and September 30, 2025, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026, and management identified a material weakness in internal control over financial reporting as of December 31, 2025. The failure to timely file has already severely limited the Company's ability to utilize its repurchase program, with no shares repurchased after March 31, 2025, and could result in SEC enforcement actions, civil litigation, and continued reduction in trading volume. Ownership is highly concentrated: as of October 1, 2026, Harbor had 58,429,836 shares ⁷⁶ of common stock outstanding, with Amun LLC holding 20,000,000 shares ⁷⁷, representing approximately 34.2% ⁷⁸ of outstanding shares, and Southshore Aircraft Holdings, LLC, through its affiliates, holding 16,500,000 shares ⁷⁹, representing approximately 28.2% ⁸⁰ of outstanding shares, collectively controlling a majority of the voting power and able to control all matters submitted to stockholders, including a sale of the Company, registration as an investment company, liquidation, or a significant acquisition. The Company also faces the risk that it may not be able to identify or successfully complete a suitable acquisition or other strategic transaction, given significant competition for targets from acquirers with greater resources and experience, and that any acquisition could result in dilution, reduced liquidity, incurrence of indebtedness, assumption of operating losses and liabilities, or impairment charges.

Management's message to shareholders is dominated by the completion of the Aviation Disposition and the transition of Harbor into a non-operating holding company whose remaining assets are predominantly cash and cash equivalents, restricted cash and marketable securities, with no material indebtedness. Management emphasizes that after giving effect to the Aviation Disposition, neither Harbor nor any of its remaining subsidiaries has any material operating assets or infrastructure to support an airline, that the Company is not engaged in any operating business, and that it does not have any source of revenue from operations. The tone is candid about the failure of the alternative strategies pursued after the American capacity purchase agreement termination: the efforts to expand charter operations, focus on Essential Air Service Program markets, and transition the relationship with American to a codeshare and interline relationship did not lead to sustainable operations or positive financial results, and Air Wisconsin concluded that it was unlikely to be successful in executing on any of the strategies it was exploring. Management's strategic priorities for the period ahead are threefold. First, the evaluation of potential strategic alternatives, which may include investments in, or acquisitions of, one or more businesses, assets, technologies, joint ventures, or other strategic opportunities, and which could involve one or multiple investments or acquisitions, be in any number of industries or lines of business (which may or may not include the airline industry), and involve the use of cash, equity securities, or a combination thereof. Second, the preservation of capital and liquidity through an investment policy with the primary objectives of ensuring the safety of capital and preservation of purchasing power, preserving liquidity, maintaining short-term maturities, and managing towards reasonable rates of return in light of the other investment objectives, with Liquid Assets primarily invested in deposit accounts, money market funds, government-backed securities and similar investments. Third, the maintenance of compliance with the Investment Company Act exemption regime, specifically the transient investment company exemption under Rule 3a-2, for which Harbor's board of directors has adopted a resolution confirming its intention to rely on the exemption and confirming that the Company has met the requirements of the exemption. Management states that it believes the Liquid Assets are sufficient to meet liquidity requirements for at least the next 12 months from the date of the filing, and it discloses that the Company estimates federal and state income taxes resulting from the Aviation Disposition will be approximately $9.9 million , of which $5.5 million had been paid as of the date of the filing, and that it paid transaction bonuses to certain officers and employees totaling, in the aggregate, approximately $4.3 million in January 2026 upon the closing of the Aviation Disposition. Management also acknowledges that no decision has been made regarding the pursuit of any particular strategic alternative, that it cannot predict when a decision will be made, and that there can be no assurance the Company will be successful in identifying, pursuing or executing any particular strategic transaction or alternative, or that any such action will result in enhanced stockholder value.