Happen (HAPN) risk factors, FY2025 10-K

RISKS RELATED TO REGULATION, SUPERVISION AND COMPLIANCE

1. 01We operate in a highly regulated environment that affects virtually all aspects of our operations, and the need to comply with applicable laws, regulations and supervisory expectations can materially impact our business, financial condition and results of operations
2. 02Failure to comply with applicable laws, regulations or commitments, or to satisfy our regulators’ supervisory expectations, could subject us to, among other things, supervisory or enforcement action, which could adversely affect our business, financial condition and results of operations
3. 03Changes in the legal, regulatory or political environment could adversely affect our business, financial condition, and results of operations59% rewritten
4. 04Our allowance for loan losses may not be adequate to cover actual losses68% rewritten
5. 05control, may require an increase in the allowance for loan losses. We may also underestimate expected lifetime losses and therefore take additional allowance to account for such losses and/or fail to hold a sufficient allowance for such lossesNew
6. 06We are subject to stringent capital and liquidity regulations and requirements
7. 07Our business may be adversely affected if our risk management framework does not effectively identify, assess and mitigate risk
8. 08Participation by non-U.S. residents on our marketplace bank platform may result in non-compliance with foreign laws

RISKS RELATED TO OPERATING OUR BUSINESS

1. 09Holding loans on our balance sheet exposes us to credit, default and liquidity risks, which may adversely affect our financial performance36% rewritten
2. 10From time to time, we also sponsor the sale of loans through Structured Program transactions, and we may be required to and/or otherwise decide to retain a portion of the interests in these securitization transactions (Securitization Interests)61% rewritten
3. 11If investors on our marketplace bank platform pause or cease their participation or exert influence over us, our business, financial condition and results of operations may be harmed30% rewritten
4. 12If we do not maintain or continue to increase loan originations, or expand our marketplace bank to new markets, we may not succeed in maintaining and/or growing our business, and as a result our business and results of operations could be adversely affected
5. 13We may not be able to maintain our deposit base
6. 14If we are unable to develop and commercialize new products and services and enhancements to existing products and services, our business may suffer22% rewritten
7. 15An inability to maintain adequate liquidity could jeopardize our business and financial condition47% rewritten
8. 16Any inability to maintain an adequate liquidity position could adversely affect our operations, our compliance with applicable regulations and the performance of our businessNew
9. 17We are regularly subject to litigation, and government and regulatory investigations, inquiries and requests
10. 18Any significant disruption in our technology systems, including events beyond our control, or failure in our technology initiatives could have a material adverse effect on our operations
11. 19Failure to maintain, protect and promote our brand may harm our business56% rewritten
12. 20Fraudulent activity associated with our marketplace bank could negatively impact our operating results, brand and reputation and cause the use of our products and services to decrease and our fraud losses to increase
13. 21If we are unable to accurately forecast demand for loans, our business could be harmed
14. 22Our acquisitions and other strategic transactions may not yield the intended benefits
15. 23In addition, we cannot assure you that any acquisition of new businesses or technology will lead to the successful development of new or enhanced products and services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable
16. 24If we are unable to offer marketplace investors a satisfactory breadth and volume of investment opportunities, our business and results of operations may be materially harmed
17. 25Any challenge to or adverse consequence from our prior use of the issuing bank partnership model (or litigation or legislation aimed at thwarting certain transactions based on this model) may harm our business
18. 26If we breach representations or warranties in connection with our marketplace investor transactions, including whole loan sales, structured products or securitization transactions, or if we suffer a direct or indirect loss in our retained interests in these transactions, our financial condition could be harmed
19. 27Indebtedness could adversely affect our business and financial results

RISKS RELATED TO MACROECONOMIC CONDITIONS OR OTHER EXTERNAL FACTORS

1. 28The current economic environment, including related uncertainties, could negatively affect our business and operating results32% rewritten
2. 29Fluctuations in interest rates could negatively affect transaction volume and our net interest income85% rewritten
3. 30A decline in social and economic conditions may adversely affect our customers, which may negatively impact our business and results of operations
4. 31Similarly, any adverse impact on the ability of borrowers to make loan payments and/or material increase in prepayment rates may also have a material impact on the net interest income we earn for loans held on our balance sheet
5. 32Our business and operating results could be adversely affected by the political environment and governmental fiscal and monetary policies24% rewritten
6. 33Negative publicity and unfavorable media coverage could negatively affect our business
7. 34Our business operations may be adversely impacted by political events, terrorism, military conflict or acts of war, cyber-attacks, public health issues, natural disasters, severe weather, climate change, infrastructure failure or outages, labor disputes and other business interruptions30% rewritten

RISKS RELATED TO CREDIT AND COLLECTIONS

1. 35If collection efforts on loans are ineffective or unsuccessful, the return on investment for investors in those loans would be adversely affected and investors may not find investing through our marketplace bank platform desirable
2. 36In addition, if we experience a significant increase in the number of charged-off loans we will be unable to collect our servicing fee for such loans and our revenue could be adversely affected
3. 37Credit and other information that we receive from borrowers or third parties about a borrower may be inaccurate or may not accurately reflect the borrower’s creditworthiness, which may cause us to inaccurately price loans made through our marketplace bank platform

RISKS RELATED TO OUR INDUSTRY

1. 38The financial services and banking industry is highly competitive. We compete with financial products and companies that attract borrowers, depositors, and/or marketplace investorsNew
2. 39We could be adversely affected by the soundness of other financial institutions

RISKS RELATED TO PERSONNEL AND THIRD PARTIES

1. 40If we fail to attract and retain highly skilled employees needed to support our business, we may not be able to achieve our anticipated level of growth and our business could suffer21% rewritten
2. 41Misconduct and errors by our employees, contractors and third-party service providers could harm our business and reputation68% rewritten
3. 42In order to grow our business and effectuate our business strategy, we anticipate that we will depend in part on our ability to develop and expand our strategic relationship with third parties to offer additional products and services on our platform
4. 43A disruption or failure in services provided by third parties could materially and adversely affect our business
5. 44Our controls and procedures may be inadequate, fail or be circumvented and our business, operating results and financial condition may be adversely affectedNew

RISKS RELATED TO DATA, INTELLECTUAL PROPERTY AND PRIVACY

1. 45Security incidents, system failures, bugs in our system, and similar disruptions could impair our operations, compromise the confidential information of our borrowers and our investors, damage our reputation, and harm our business and financial performance
2. 46Cyber-attacks suffered by third parties upon which we rely could negatively affect our business
3. 47The collection, processing, storage, use, and disclosure of personal information could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights
4. 48Any failure to protect our own intellectual property rights could impair our brand, or subject us to claims for alleged infringement by third parties, which could harm our business
5. 49The development and use of artificial intelligence presents risks and challenges that could adversely impact our business, financial condition and results of operations64% rewritten
6. 50Some aspects of our platform include open-source software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business

RISKS RELATED TO TAX AND ACCOUNTING

1. 51Changes in tax laws and our ability to use our deferred tax assets to offset future taxable income could have a material adverse effect on our business, financial condition and results of operations67% rewritten
2. 52We have incurred net losses in the past and may incur net losses in the future22% rewritten
3. 53If accounting standards change or if our estimates or assumptions relating to our critical accounting policies prove to be incorrect, our results of operations and financial condition could be adversely affected

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

1. 54Our stock price has been and may continue to be volatile28% rewritten
2. 55If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our stock price and trading volume could decline
3. 56Future issuances and/or sales of common stock may result in significant dilution to our stockholders and may place downward pressure on our stock price
4. 57Our quarterly results may fluctuate significantly and may not fully reflect the longer-term underlying performance of our business
5. 58Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company
6. 59We cannot guarantee that our share repurchase and acquisition program will be fully used or that it will enhance long-term stockholder valueNew
7. 60We do not intend to pay dividends for the foreseeable future