Henry (Jack) & Associates

Supply chain and procurement · Supplier operation and dependance

We rely on a limited number of third-party service providers that provide significant portions of our hosting and technology infrastructure. While we have selected these third-party service providers carefully and conduct ongoing diligence and monitoring, we do not control their actions or operations. Any disruption, capacity constraints, interference, failure, cybersecurity incident, service degradation, or other interruption of these services by a third-party service provider could result in degraded performance, data loss, or prolonged outages.

Human capital and workforce · Talent acquisition and retention

The loss of key associates and difficulties in hiring and retaining associates could adversely affect our business. We depend on the contributions and abilities of our senior management and other key associates, particularly for highly specialized technical personnel with expertise in cybersecurity, artificial intelligence, machine learning, and data science.

Human capital and workforce · Talent acquisition and retention

We continue to face a competitive market for hiring and retaining skilled associates, especially highly specialized technical personnel. Competition for these professionals has led to wage inflation in the technology sector. Difficulties in hiring and retaining skilled associates may restrict our ability to adequately support our business needs and/or result in increased personnel costs.

Human capital and workforce · Key personnel dependence and succession

Our Company has grown significantly in recent years and our management remains concentrated in a small number of highly qualified individuals. If we lose one or more of our key associates, we could suffer a loss of managerial experience, and management resources would have to be diverted from other activities to compensate for this loss. We do not have employment agreements with any of our executive officers.

Human capital and workforce · Workforce management and productivity

These challenges are further compounded by the fact that a substantial portion of our workforce operate in hybrid or fully remote arrangements, which introduces additional complexities related to employee engagement, collaboration, training, and the preservation of corporate culture.

Core operations · Operational disruption and business continuity

Damage or destruction that interrupts our outsourcing operations could cause delays and failures in processing which could hurt our relationship with clients, damage our reputation, expose us to damage claims, and cause us to incur substantial additional expenses to relocate operations and repair or replace damaged equipment.

Economic and market conditions · Consumer spending and confidence

In addition, a growing portion of our revenue is derived from transaction processing fees, which depend heavily on levels of consumer and business spending. Deterioration in general economic conditions could negatively impact consumer confidence and spending, resulting in reduced transaction volumes and our related revenues.

Market position and competition · Industry consolidation and market concentration

Consolidation and failures of financial institutions will continue to reduce the number of our clients and potential clients. Our primary market consists of approximately 4,300 commercial and savings banks and approximately 4,400 credit unions. The number of commercial banks and credit unions in the United States has experienced a steady decrease over recent decades due to mergers and acquisitions and financial failures and we expect this trend to continue as more consolidation occurs.

Strategic execution · Merger acquisition and divestiture risks

Any transactions we pursue subject us to operational, financial, and integration risks. Strategic transactions are difficult to evaluate, and our due diligence may not identify all potential liabilities or valuation issues. We may also be subject to risks related to cybersecurity incidents or vulnerabilities of the acquired company and the acquired systems.

Innovation and product development · Intellectual property protection and infringement

Our failure to protect our intellectual property and proprietary rights may adversely affect our competitive position. Our success and ability to compete depend in part upon protecting our proprietary systems and technology. Unauthorized parties may attempt to copy or access systems or technology that we consider proprietary.

Customer and revenue · Changing customer preferences and behavior

If we are unable to adapt our products and services to these developments in a timely and cost-effective manner, our competitive position, revenues, growth prospects, and results of operations could be adversely affected. In addition, increased adoption of specialized point solutions may reduce demand for broader integrated offerings and result in the replacement of components of our existing product suite.

Cybersecurity and data protection · Insider threats and access controls

We are also subject to the risk that our associates may, unintentionally or with malicious intent, intercept and transmit unauthorized confidential or proprietary information or that corporate-owned devices used by associates are stolen, or client data media is lost in shipment.

Digital transformation and innovation · Technology obsolescence and evolution

If we are unable to adapt our products and services to these developments in a timely and cost-effective manner, our competitive position, revenues, growth prospects, and results of operations could be adversely affected. Emerging technologies, evolving payment methods, and changing client preferences may alter how financial services products and services are delivered and consumed and could reduce demand for certain existing solutions or displace portions of traditional technology and payment processing models.

Technology infrastructure · Technology systems and infrastructure failure

Failure to maintain sufficient technological infrastructure or an operational failure in our outsourcing facilities could expose us to damage claims, increase regulatory scrutiny, and cause us to lose clients. Our products and services require substantial investments in technological infrastructure, and we continue to grow in the number of users, transactions, and data that our technological infrastructure supports.

Legal and litigation · Intellectual property disputes

We also use certain open-source software in our products, which may subject us to suits by persons claiming ownership of what we believe to be open-source software. Our use of open-source software with permissive licenses may subject us to compliance claims or operational liabilities.

Tax and financial reporting · Tax compliance and changes in tax law

Unfavorable resolution of tax contingencies or unfavorable future tax law changes could adversely affect our tax expense. Our income tax positions result in a significant net deferred income tax liability on our consolidated balance sheet. Unfavorable future tax law changes, including increasing U.S. corporate tax rates, could increase this net liability and negatively impact our provision for income taxes, net income, and cash flow.

Corporate governance · Internal controls and risk management

A material weakness in our internal controls could have a material adverse effect on us. Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to mitigate risk of fraud. If material weaknesses in our internal controls are discovered or occur in the future, our consolidated financial statements may contain material misstatements.

Market and investment · Asset valuation and impairment

The impairment of a significant portion of our goodwill and intangible assets would adversely affect our results of operations. Our balance sheet includes goodwill and intangible assets that represent a significant portion of our total assets as of June 30, 2026. On an annual basis, and whenever circumstances require, we review our goodwill and intangible assets for impairment.

Market and investment · Interest rate and yield curve risk

Changes in interest rates could increase our borrowing costs or result in decreased interest income. Our current credit facilities bear interest at variable rates, which expose us to interest rate risk. We may require additional or increased borrowings in the future under existing or new debt facilities to support operations, finance selective strategic transactions, or fund stock repurchases.

Credit and liquidity · Credit risk and customer defaults

Expansion of services to non-traditional clients could expose us to new risks. We have expanded our services to business lines that are marketed outside our traditional, regulated, and litigation-averse base of financial institution clients. These non-regulated clients may entail greater operational, credit, and litigation risks than we have faced before and could result in increases in bad debts and litigation costs.