Harbor BioSciences (HRBR) Risk Analysis

Securities class action litigation may be instituted against companies following periods of volatility in the overall market and in the price of a company's securities. As a result of our compliance 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.

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 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 Wisconsin's 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. 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 airline industry is highly competitive. Air Wisconsin competes primarily with other regional airlines, some of which are owned or operated by major airlines. The airline industry has undergone substantial consolidation, including the mergers between Alaska Airlines and Virgin America, American Airlines and US Airways, Southwest and AirTran Airways, United and Continental Airlines, and Delta and Northwest Airlines. Any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential airline partners with whom Air Wisconsin could enter into commercial agreements. In addition, any further consolidation activity involving American, reduction in the size of its network or decision to accelerate the implementation of its long-term fleet strategy to eliminate single class 50-seat aircraft such as the CRJ-200 regional jet, could alter its business strategy or its perception of the value of its relationship with Air Wisconsin, which could result in the termination of the American capacity purchase agreement and limit opportunities for Air Wisconsin to continue to provide service to American. Similarly, any further consolidation or restructuring of any major air carrier's regional jet programs could negatively impact Air Wisconsin's future growth opportunities.

The airline business is affected by numerous factors, many of which are beyond Air Wisconsin's 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. Because Air Wisconsin's revenues depend to a large extent on Air Wisconsin's completion of flights and certain service factors, any of these factors could have a material adverse effect on our business, results of operations and financial condition. In addition to the factors noted above, Air Wisconsin's operations and our financial condition are currently affected, and may in the future be affected, by many other factors and conditions beyond Air Wisconsin's control, including, among others: - the acute on-going shortage of qualified pilots and mechanics, and resulting increases in compensation and the continuing pressure to significantly increase wages in the industry;- 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 the competitive environment due to pricing, industry consolidation, or other factors;- labor disputes, strikes, work stoppages, or similar matters impacting employees;- although the FAA and the telecommunications industry have reached an interim agreement with respect to 5G deployment, interference with aviation equipment from the deployment of 5G wireless telecommunications systems remains a risk and additional review will be required once the interim agreement expires; and - 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. The occurrence of any or all of such factors or conditions could materially and adversely affect its operations and our financial condition.

Prior to March 2023, we derived nearly all of our operating revenues from the United capacity purchase agreement because United was Air Wisconsin's sole airline partner. Air Wisconsin ceased flying for United in early June 2023. Since then, we have derived nearly all of our operating revenues from the American capacity purchase agreement as American is currently Air Wisconsin's sole airline partner. Pursuant to the American capacity purchase agreement, American is permitted to terminate the agreement or remove aircraft that would otherwise be covered under the agreement prior to the expiration of its term in certain circumstances, including upon Air Wisconsin's material breach of the agreement, Air Wisconsin's inability to operate a certain number of aircraft, Air Wisconsin's failure to meet certain operating performance benchmarks for specified periods and certain changes of control of Air Wisconsin. In addition, American and Air Wisconsin each have the right to terminate the agreement for any reason after a certain date prior to the specified termination date. If American terminates the American capacity purchase agreement, our business, financial condition, results of operations and liquidity would be significantly negatively impacted, and we would need to implement significant changes to our business strategy. We depend on American electing to contract with us instead of operating its own regional jets or operating through its wholly owned regional subsidiaries, Envoy Air, PSA Airlines and Piedmont Airlines. We have no guarantee that American will choose to enter into new contracts with us, or renew or extend the American capacity purchase agreement, instead of operating its own regional jets, allocating flying to its wholly-owned regional airlines, or contracting with competing regional airlines. A decision by American to phase out or limit the aircraft covered by the American capacity purchase agreement, to terminate the agreement, or to enter into similar agreements with our competitors would have a material adverse effect on our business, financial condition and results of operations. Any events that negatively impact the financial or operating performance of American could have a material adverse effect on our business, financial condition and results of operations. American could be materially and adversely impacted, directly or indirectly, by new variants of COVID-19 or other infectious diseases, worldwide political or economic changes or instability, including those associated with the outbreak of war or hostilities, government sanctions, travel restrictions, rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates and inflation. If American were to experience significant financial difficulties as a result of these or other reasons, it could negatively impact American's ability to meet its financial obligations under the American capacity purchase agreement or alter its business strategy as it applies to regional airlines. Further, if American were to become bankrupt, the American capacity purchase agreement may not be assumed in bankruptcy and could be terminated, and such termination would have a material adverse effect on our business, financial condition and results of operations.

The performance and reliability of Air Wisconsin's, American's, and third-party service providers' technology is critical to Air Wisconsin's 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 Wisconsin's IT Systems (including American systems or those 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 Wisconsin's, American's, 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 Wisconsin's 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 expect such incidents to continue in varying degrees. While to date no incidents have had a material impact on Air Wisconsin's operations or our financial results, we cannot guarantee that material incidents will not occur in the future. Any cybersecurity incident or other adverse impact to the availability, integrity or confidentiality of Air Wisconsin's 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 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.