Health In Tech Inc(HIT) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section cautions that forward-looking statements are based on current expectations and projections, subject to risks and uncertainties, and actual results may differ materially - Forward-looking statements are identified by terms such as 'believes,' 'estimates,' 'anticipates,' 'expects,' 'intends,' 'plans,' 'may,' 'will,' 'potential,' 'projects,' 'predicts,' 'continue,' or 'should,' or their negative variations[9] - These statements are based on current expectations and projections about future events and trends that may affect financial condition, results of operations, business strategy, and financial needs[10] - They are subject to known and unknown risks, uncertainties, and assumptions, including those described in the 'Risk Factors' section, and actual results may differ materially and adversely[10] - Specific areas covered include financial performance, funding, system development, sales/marketing, personnel, customer attraction, product development, competition, cybersecurity, AI risks, regulatory compliance, intellectual property rights, and future stock prices[11][15] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Health In Tech, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, along with accompanying notes - The financial statements are unaudited and prepared in accordance with GAAP and SEC rules for interim financial information[35] - The section includes Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows[7] - Notes to the financial statements provide context on the company's organization, significant accounting policies, loans receivable, stockholders' equity, commitments and contingencies, income taxes, and stock-based compensation[7][32] Condensed Consolidated Balance Sheets Key Balance Sheet Data | Metric | June 30, 2025 | December 31, 2024 | Change | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :----- | :--------- | | Total assets | $22,178,250 | $15,768,489 | +$6,409,761 | +40.65% | | Total liabilities | $5,754,647 | $2,599,461 | +$3,155,186 | +121.38% | | Total stockholders' equity | $16,423,603 | $13,169,028 | +$3,254,575 | +24.71% | | Cash and cash equivalents | $8,138,166 | $7,849,248 | +$288,918 | +3.68% | | Accounts receivable, net | $1,281,131 | $1,647,103 | -$365,972 | -22.22% | | Other receivables | $3,854,834 | $500,252 | +$3,354,582 | +670.58% | | Software | $5,519,110 | $3,962,461 | +$1,556,649 | +39.29% | | Accounts payable and accrued expenses | $4,327,475 | $1,858,840 | +$2,468,635 | +132.86% | | Other current liabilities | $955,743 | — | +$955,743 | N/A | - The increase in total assets was mainly driven by a significant rise in other receivables due to the purchase of Deferred Administrative Surplus and increased software capitalization[177][178] - Total liabilities increased substantially, primarily due to a payable related to the Deferred Administrative Surplus purchase and higher accounts payable reflecting business expansion[179] Condensed Consolidated Statements of Operations Key Statements of Operations Data | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $9,313,849 | $5,002,490 | $17,328,833 | $10,127,421 | | Cost of revenues | $3,003,979 | $974,727 | $5,663,564 | $1,964,638 | | Gross profit | $6,309,870 | $4,027,763 | $11,665,269 | $8,162,783 | | Total operating expenses | $5,584,800 | $3,492,827 | $10,459,541 | $7,295,425 | | Net income | $630,631 | $338,007 | $1,129,223 | $438,543 | | Basic EPS | $0.01 | $0.01 | $0.02 | $0.01 | | Diluted EPS | $0.01 | $0.01 | $0.02 | $0.01 | - Total revenues increased by 86.2% for the three months ended June 30, 2025, and 71.1% for the six months ended June 30, 2025, compared to the respective prior periods[181][196] - Net income increased by 86.6% for the three months ended June 30, 2025, and 157.5% for the six months ended June 30, 2025, compared to the respective prior periods[23] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' Equity Changes | Metric | As of Dec 31, 2024 | As of June 30, 2025 | | :-------------------------- | :----------------- | :----------------- | | Total stockholders' equity | $13,169,028 | $16,423,603 | | Class A Common Stock Shares | 42,914,870 | 44,679,664 | | Class B Common Stock Shares | 11,700,000 | 11,700,000 | - Total stockholders' equity increased by $3,254,575 from December 31, 2024, to June 30, 2025, primarily due to net income and stock-based compensation[180] - A 1.5-for-1 stock split was effected on June 4, 2024, with all share and per share data retroactively adjusted[19][107] Condensed Consolidated Statements of Cash Flows Key Cash Flow Data | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $2,008,629 | $586,329 | | Investing activities | $(1,613,372) | $(227,356) | | Financing activities | $(106,339) | $(612,120) | | Increase (decrease) in cash | $288,918 | $(253,147) | | Cash and cash equivalents, end of period | $8,138,166 | $2,163,203 | - Net cash provided by operating activities increased by $1.4 million (242%) to $2.0 million for the six months ended June 30, 2025, compared to $0.6 million in the prior year, driven by revenue growth and AR system automation[214] - Cash used in investing activities increased by $1.4 million (592%) to $1.6 million for the six months ended June 30, 2025, primarily due to increased investment in internal-use software development[216] - Cash used in financing activities decreased by $0.5 million (82.6%) to $0.1 million for the six months ended June 30, 2025, mainly due to lower payments of deferred offering costs[217] Notes to Condensed Consolidated Financial Statements - The notes provide detailed information on the company's organization, significant accounting policies, and specific financial items, including revenue recognition, stock-based compensation, and recent accounting pronouncements[32] - The company completed its Initial Public Offering (IPO) on December 24, 2024, issuing 2,300,000 shares of Class A common stock at $4.00 per share, receiving net proceeds of $8,214,000[34] - The company manages its business activities as a single operating and reportable segment[38] 1. Organization - Health in Tech, Inc. (HIT) was incorporated in November 2021 in Nevada, consolidating three subsidiaries: Stone Mountain Risk, LLC (SMR), Health Intelligence Card, LLC (Hi Card), and International Captive Exchange, LLC (ICE)[33] - The company completed its Initial Public Offering (IPO) on December 24, 2024, issuing 2,300,000 shares of Class A common stock at $4.00 per share, with net proceeds of $8,214,000[34] 2. Summary of Significant Accounting Policies - The company's financial statements are prepared in accordance with GAAP and SEC rules for interim financial information, with certain disclosures condensed or omitted[35] - Revenue recognition follows ASC 606, with revenue generally recognized over the defined contractual term as performance obligations are satisfied[68][80] - For the six months ended June 30, 2025, one stop-loss insurance carrier (Carrier A) represented 28.3% of total revenues and 32.8% of accounts receivable[42] - Software development costs for internal-use software (Hi-Card, eDIYBS) are capitalized and amortized over an expected three-year period; $1,828,615 was capitalized in the six months ended June 30, 2025[63] - A refund liability of $955,743 was recorded as of June 30, 2025, related to estimated contra revenue from a variable consideration clause with one carrier, assessed based on updated information from policies completing their run-out stage[88] 3. Loans Receivable, Net - The company has an unsecured Promissory Note Agreement with Kang Youle Limited for $800,000 principal, bearing 8% interest per annum, maturing October 10, 2026[105] - Accrued interest due and receivable was $47,993 as of June 30, 2025[105] - The loan is considered a strategic investment to maximize risk-adjusted return and promote shareholder wealth, provided to an independent third party with access to international insurance sectors[106] 4. Stockholders' Equity - A 1.5-for-1 stock split of common stock was effected on June 4, 2024, with all share and per share information retroactively adjusted[107] - On August 9, 2024, 10,800,000 shares of Class B Common Stock were converted into Class A Common Stock on a one-to-one basis[107] - The company completed its IPO on December 24, 2024, issuing 2,300,000 shares of Class A Common Stock at $4.00 per share, generating net proceeds of $8,214,000[108] - As of June 30, 2025, 44,679,664 shares of Class A Common Stock and 11,700,000 shares of Class B Common Stock were issued and outstanding[115] - Holders of Class B Common Stock are entitled to ten votes per share, while Class A Common Stock holders are entitled to one vote per share[116] 5. Commitments and Contingencies - The company is not currently a party to any legal proceedings that would have a material adverse effect on its business or financial condition[118] - The principal commitments consist of obligations under a five-year operating lease for its corporate headquarters, commencing November 2022[119] Undiscounted Lease Liabilities (as of June 30, 2025) | Period | Amount | | :--- | :--- | | Less than 1 year | $85,046 | | 1 – 3 years | $109,657 | | Total undiscounted lease liabilities | $194,703 | 6. Income Taxes Income Tax Provision | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $202,637 | $63,268 | $388,468 | $154,466 | - The effective tax rate for the six months ended June 30, 2025, was 25.60%, differing from the U.S. federal statutory rate of 21% primarily due to state taxes (net of federal benefit) and permanent differences[126] - Net deferred tax liabilities were $262,129 as of June 30, 2025, compared to $328,676 as of December 31, 2024[124] 7. Stock-Based Compensation - The company has two equity incentive plans: the 2022 Plan (governing 1,145,182 restricted stock and 2,320,505 options outstanding as of June 30, 2025) and the 2024 Plan (adopted December 2024, with 1,288,000 unrestricted stock and 933,954 restricted stock awards granted as of June 30, 2025)[129][130] - Stock-based compensation expense recognition began upon the completion of the IPO on December 24, 2024, as the IPO was a key vesting condition for many awards[94][132] - As of June 30, 2025, unrecognized compensation cost for non-vested service-based RSAs was $482,998 (expected to be recognized over 0.8 years), and for non-vested service-based stock options was $110,262 (expected over 0.9 years)[135][138] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Health In Tech's business, recent developments, key performance drivers, and a detailed analysis of its financial results for the three and six months ended June 30, 2025, compared to 2024 - Health in Tech is an insurance technology platform company that simplifies sales, service processes, and reduces sales cycle time for third-party administrators and brokers[140] - As of June 30, 2025, the company had clients in 41 states, with services utilized by 520 brokers, 10 TPAs, and 248 additional third-party agencies, serving 942 business clients with 24,839 employees[144] - The company achieved 71% year-over-year revenue growth in the first half of 2025 while maintaining healthy profitability[144] - Recent developments include strategic partnerships with Verdegard Administrators, Unified Health Plans, HILB Group, and Baily Insurance, and the appointment of former U.S. Ambassador Edward T. McMullen Jr. to its advisory board[147][148][149][150][151] Overview - Health in Tech (HIT) is an insurance technology platform that aims to improve healthcare industry processes through vertical integration, simplification, and automation, streamlining underwriting, sales, and service for insurance companies, brokers, and TPAs[140] - The marketplace offers customizable self-funded benefits plans and stop-loss insurance, enabling quick medical underwriting and bindable quotes, typically within two minutes[141][142] - The platform aims to deliver meaningful cost savings for low-risk, small employers and time savings for employers, brokers, TPAs, and carriers through digital medical underwriting and technology leverage[143] Recent Developments - Partnerships include Verdegard Administrators (MedImpact) to reduce costs for small businesses, Unified Health Plans to bring healthcare insurance solutions to Kansas businesses, HILB Group to co-develop and distribute self-funded health benefit solutions, and Baily Insurance for faster underwriting, administration, and scalability[147][148][149][150] - Edward T. McMullen Jr., former U.S. Ambassador, was appointed to the advisory board on April 30, 2025, to support efforts in modernizing healthcare insurance infrastructure and advocating for efficient solutions[151] Key Factors Affecting our Performance - The company's success depends on its ability to retain and expand its network of brokers, TPAs, MGUs, and other third-party agents by providing innovation, client experience, competitive pricing, and quality providers[152] - Business growth is reliant on collaborating with diverse insurance carriers to expand product and service offerings and introduce innovative insurance products[153] - Accurate underwriting procedures are critical to avoid increased costs, pricing, and reputational harm to the eDIYBS platform[154][155] - Continuous investment in technology and innovation is crucial for driving advancements in automation and enhancing operational efficiency[156] Seasonality - The business is generally affected by seasonal patterns of enrollment and medical expenses, with underwriting and quoting platform usage peaking around December and January due to health plan renewals[157] - Rapid growth has made seasonal fluctuations less detectable, but they may become more pronounced if the growth rate slows[157] Key Financial and Operating Performance Metrics - The company monitors revenues, cost of revenues, operating expenses, and the number of enrolled employees (EEs) billed as key performance metrics[158][159] Number of Enrolled Employees (EEs) Billed | Metric | June 30, 2025 | June 30, 2024 | Period-to-Period Change | Percentage Change | | :-------------------------- | :-------------- | :-------------- | :---------------------- | :---------------- | | Number of EEs billed (End of period) | 24,839 | 19,101 | 5,738 | 30% | - Adjusted EBITDA is utilized as a non-GAAP measure, calculated as net income before net interest expense, taxes, depreciation, amortization, and stock-based compensation, to provide a clearer view of underlying operational performance[162] Components of Operating Results - Revenue is primarily generated from service fees (SMR and HI Card) and underwriting fees (ICE), with SMR and ICE services being interdependent[163] - SMR (Stone Mountain Risk) acts as a program manager for customized self-funded benefits programs for small businesses, generating revenue from a set fee charged per enrolled employee (EE) per month (PEPM)[163] - ICE (International Captive Exchange) develops and maintains underwriting models and risk services for insurance companies (Carriers), with revenue derived as a percentage of the premium received[163] - HI Card (Health Intelligence Card) provides optional medical claims access data and claims negotiation services to SMR's program members, generating revenue from a set PEPM fee[163] Revenue Breakdown by Subsidiary | Subsidiary | 3 Months Ended June 30, 2025 | % of Revenue (2025) | 3 Months Ended June 30, 2024 | % of Revenue (2024) | 6 Months Ended June 30, 2025 | % of Revenue (2025) | 6 Months Ended June 30, 2024 | % of Revenue (2024) | | :--------- | :----------------------------- | :------------------ | :----------------------------- | :------------------ | :----------------------------- | :------------------ | :----------------------------- | :------------------ | | ICE | $2,090,576 | 22.4% | $1,639,105 | 32.8% | $4,442,560 | 25.6% | $3,423,740 | 33.8% | | SMR | $7,223,273 | 77.6% | $2,595,545 | 51.9% | $12,886,273 | 74.4% | $5,128,467 | 50.6% | | HI Card | — | —% | $767,840 | 15.3% | — | —% | $1,575,214 | 15.6% | | Total | $9,313,849 | 100.0% | $5,002,490 | 100.0% | $17,328,833 | 100.0% | $10,127,421 | 100.0% | Results of Operations Consolidated Statements of Operations Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $9,313,849 | $5,002,490 | $17,328,833 | $10,127,421 | | Gross profit | $6,309,870 | $4,027,763 | $11,665,269 | $8,162,783 | | Total operating expenses | $5,584,800 | $3,492,827 | $10,459,541 | $7,295,425 | | Net income | $630,631 | $338,007 | $1,129,223 | $438,543 | | Adjusted EBITDA | $1,569,016 | $669,723 | $2,797,227 | $1,136,932 | - Adjusted EBITDA increased significantly, reaching $1.6 million for Q2 2025 (16.8% of revenue) and $2.8 million for H1 2025 (16.1% of revenue), up from $0.7 million (13.4%) and $1.1 million (11.2%) respectively in the prior year periods[171][195][210] Comparison of Three Months Ended June 30, 2025 and 2024 - Total revenues for Q2 2025 increased by 86.2% to $9.3 million, driven by strong demand for new product offerings and a 30% increase in billable enrolled employees[181][182] - Revenues from fees (SMR) surged by 178.3% to $7.2 million, while revenues from underwriting modeling (ICE) increased by 27.5% to $2.1 million[181] - Cost of revenues increased by $2.0 million to $3.0 million, primarily due to higher captive management fees related to new products and channels[184][185] - General and administrative expenses rose by $2.0 million to $3.8 million, mainly due to $0.8 million in public company costs and $0.3 million in stock-based compensation[187][190] - Research and development expenses decreased by $0.1 million to $0.6 million, primarily due to the capitalization of development costs for eDIYBS 3.0[191][192] Comparison of Six Months Ended June 30, 2025 and 2024 - Total revenues for H1 2025 increased by 71.1% to $17.3 million, driven by strong demand for new product offerings and a 30% increase in billable enrolled employees[196][197] - Revenues from fees (SMR) surged by 151.3% to $12.9 million, while revenues from underwriting modeling (ICE) increased by 29.8% to $4.4 million[196] - Cost of revenues increased by $3.7 million to $5.7 million, primarily due to higher captive management fees related to new products and channels[199][200] - General and administrative expenses rose by $3.2 million to $7.0 million, mainly due to $1.4 million in public company costs and $0.6 million in stock-based compensation[202][205] - Research and development expenses decreased by $0.4 million to $1.1 million, primarily due to the capitalization of development costs for eDIYBS 3.0[206][207] Liquidity and Capital Resources - The company primarily funds its operations through cash from operating activities, short-term loans, and its IPO completed in December 2024[211] - Cash and cash equivalents increased to $8,138,166 as of June 30, 2025, from $7,849,248 as of December 31, 2024[175] - Net cash provided by operating activities increased by $1.4 million to $2.0 million for the six months ended June 30, 2025, driven by revenue growth and accounts receivable system automation[214] - Cash used in investing activities increased by $1.4 million to $1.6 million for the six months ended June 30, 2025, primarily due to continued investment in internal-use software development[216] - The company believes that cash generated from operating activities will allow it to continue as a going concern for at least twelve months from the report date[212] Contractual Obligations and Commitments - The company's principal commitments consist of obligations under its non-cancellable operating lease for its office[218] Contractual Obligations (as of June 30, 2025) | Type | Total | Less than 1 year | 1 – 3 years | 3 – 5 years | More than 5 years | | :------------------------ | :------ | :--------------- | :---------- | :---------- | :---------------- | | Operating lease obligations | $194,703 | $85,046 | $109,657 | — | — | Recent Accounting Pronouncements - The company is assessing the potential impact of ASU 2023-09 (Income Taxes), which enhances income tax disclosures and is applicable for the Annual Report on Form 10-K for the year ending December 31, 2025[102][220] - The company is also assessing ASU 2024-03 (Expense Disaggregation Disclosures), which calls for enhanced disclosures about income statement expense captions and is effective for fiscal years beginning after December 15, 2026[104][221] JOBS Act - As an emerging growth company (EGC) under the JOBS Act, the company has elected to use the extended transition period for complying with new or revised accounting standards[223] - The company will remain an EGC until the earlier of (1) the last day of the fiscal year following the fifth anniversary of its IPO, (2) total annual gross revenue of at least $1.235 billion, (3) being deemed a large accelerated filer, or (4) issuing more than $1.0 billion in non-convertible debt securities during the prior three-year period[224] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Health In Tech is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and is therefore not required to provide information regarding quantitative and qualitative disclosures about market risk[225] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the period - Management, including the Certifying Officers (CEO and CFO), evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025[227] - There were no changes in internal control over financial reporting during the period ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[228] Evaluation of Disclosure Controls and Procedures - Disclosure controls and procedures are designed to ensure that information required for SEC reports is recorded, processed, summarized, and reported timely[226] - Based on management's evaluation, the disclosure controls and procedures were effective as of June 30, 2025[227] Changes in Internal Control over Financial Reporting - There were no changes in the company's internal control over financial reporting during the period ended June 30, 2025, that materially affected or are reasonably likely to materially affect it[228] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings, though it may be involved in incidental litigation in the ordinary course of business - The company is not presently a party to any legal proceedings whose resolution would have a material adverse effect on its business, prospects, financial condition, liquidity, results of operation, cash flows, or capital levels[230] - The company may be involved in legal proceedings or subject to claims incidental to the ordinary course of business, which could have an adverse impact due to defense and settlement costs or diversion of resources[230] Item 1A. Risk Factors This section refers readers to the 'Risk Factors' discussed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent SEC filings - Risk factors that may affect the company's business and financial results are discussed in Item 1A 'Risk Factors' of its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent SEC filings[231] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On May 9, 2025, the company granted 1,250,000 shares of Class A Common Stock to Forza Business Development, LLC, for 24-month consulting services under its 2024 Plan, exempt from registration requirements - On May 9, 2025, the company granted 1,250,000 shares of Class A Common Stock to third-party Forza Business Development, LLC, in exchange for its non-terminable 24-month consulting services[232] - These grants were made pursuant to the company's 2024 Plan and were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act[232] - There were no proceeds from unregistered sales of equity securities and no issuer purchases of equity securities[233][234] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[235] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[236] Item 5. Other Information No other information is reported under this item - No other information is reported under this item[237] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including organizational documents, certifications of principal executive and financial officers, and Inline XBRL documents - The exhibits include the Second Amended and Restated Articles of Incorporation, Third Amended and Restated Bylaws, Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[238] Signatures The report is signed by the Chief Executive Officer (Tim Johnson) and Chief Financial Officer (LinLin Qian) of Health In Tech, Inc. on August 8, 2025 - The report is signed by Tim Johnson, Chief Executive Officer (Principal Executive Officer), and LinLin Qian, Chief Financial Officer (Principal Financial and Accounting Officer)[244] - The signing date for both officers is August 8, 2025[244]