Health In Tech, Inc.: Form 10-K for the period ended Dec 31, 2024

Our Mission

To change the non-transparent $4.5 trillion1 healthcare industry with innovation that removes friction and complexities with vertical integration, process simplification, automation, and digitalization.

Overview

Health in Tech (“HIT”) is an insurance technology platform company, which offers a marketplace that aims to improve processes in the healthcare industry through vertical integration, process simplification, and automation. By removing friction and complexities, we streamline the underwriting, sales and service process for insurance companies, licensed brokers, and TPAs.

Marketplace: We are a health insurance marketplace where insurance companies can list various stop-loss policy options for self-funded benefits plans. Licensed brokers registered on our platform can log in, upload certain required information, select policy plans, obtain a bindable quote and sell them to small businesses. Our technology enables us to medically underwrite insurance policies and usually produce bindable quotes within approximately two minutes, allowing us to deliver an integrated and seamless sales cycle.

Customizable Solutions: Beyond policy underwriting and sales, our marketplace offers customization of health benefits plans, vendors, claims, and network services. Brokers can select customized plans that suit their customers.

Accessibility and Savings: We make self-funded benefits plans and stop loss insurance accessible online for small businesses. We aim to deliver meaningful cost savings for low-risk, small employers with comparatively healthy employees through a digital medical underwriting process. We seek to deliver time savings for employers, brokers, TPAs, and carriers, by leveraging both external and internally developed technology.

HIT was founded on the belief that self-funded benefits plans and stop loss insurance should be simple and streamlined with significant transparency. With over 30 years of industry experience of our management team, we understand the complexities of the healthcare insurance market, and we know how to integrate the multifaceted aspects of the industry. Our solutions and technology platforms do exactly this through vertical integration, process simplification, automation, and digitalization.

Service Solutions

We offer a suite of service solutions designed to meet the diverse needs of our clients. Available for seamless integration or as standalone offerings, our services are delivered through the three wholly-owned subsidiaries operating on a single online marketplace: (i) Stone Mountain Risk, LLC (“SMR”), (ii) International Captive Exchange, LLC (“ICE”), and (iii) HI Card LLC which offers the HI (Health Intelligence) Card platform (“HI Card”). Collectively, these services embody the comprehensive value proposition of HIT. For the year ended December 31, 2024, the percentage of our total revenue attributed to each of SMR, ICE and HI Card was 50.5%, 34.1%, and 15.4%, respectively. Program services provided by SMR and underwriting and administrative activities provided by ICE (including eDIYBS) are interdependent, as they cannot function effectively without being combined. Services provided by HI Card are optional add-on to our services, and it cannot be offered on a standalone basis. Any broker that utilized program services offered by SMR and ICE is not obligated to utilize the HI Card service.

1 The total healthcare spending in the U.S. in 2022. According to The Centers for Medicare & Medicaid Services — National Health Expenditure Data; Frost & Sullivan

SMR: SMR is a program manager specializing in customized self-funded benefits plans for small businesses. It designs health plans, selects networks, manages vendors, and sets up the benefits plan on the marketplace including benefits structures, coverage options, and provider networks. Licensed brokers can log in to the marketplace to select and sell self-funded benefits plans to small businesses. Our offerings encompass reference-based pricing, group insurance captives, community health plans, and association health programs. SMR collaborates with TPAs and licensed brokers to design health plans that meet the specific needs of the employers.

ICE: ICE is an MGU, which specializes in underwriting and providing administrative functions on behalf of stop loss carriers. ICE assists with underwriting activities through its sophisticated web-based SaaS quoting platform, eDIYBS (Enhance Do It Yourself Benefit System). This platform not only monitors and manages claims activities but also facilitates reinsurance reporting and monthly reinsurance filings. Collaborating with TPAs, ICE empowers small business groups to fund their own claims and lowers the risk pool of insured, mitigating the risk associated with high-dollar medical claims. ICE medically underwrites the employees. The aim of this strategic approach to self-funding is to achieve competitively lower rates for low-risk small employers with comparatively healthy employees, as compared with the community rating of many fully insured large carriers where premiums are the same for everyone in the community.

The eDIYBS quoting platform can be used to quote health insurance for small to medium sized employers. Currently we are focusing on small employers. By integrating AI-backed solutions using machine learning and a web-based Point of Sales (POS) system, eDIYBS drastically reduces friction and complexities in the underwriting process when compared to a manual underwriting process that involves the underwriter manually reviewing health applications completed by each employee seeking insurance. Our platform allows licensed brokers to upload specific data to eDIYBS to generate bindable quotes efficiently, reducing errors associated with human interaction and manual processes. In most cases, this streamlined approach reduces processing time to approximately two minutes, compared to the traditional manual quoting model that involves sending multiple documents to underwriters for manual review, which can take several days to generate bindable quotes based on feedback we have received from brokers who engaged us for our services and the Frost & Sullivan report. Approximately 80% of bindable quotes are provided solely using AI without further manual review. According to the Frost & Sullivan report, two of our competitors that provide the underwriting aspect of our services, require two weeks to produce a quote, and while another competitor can provide an initial quote within minutes, that quote is contingent upon receiving all health applications. In addition, these competitors only underwrite their own insurance products, and do not provide a platform that can underwrite a variety of stop loss insurance policies by different insurance companies for the small employers’ self-funded benefits plan. The data used in our eDIYBS platform is provided by various third party vendors that utilize machine learning tools, which are connected to our system by an application programming interface. We then feed the data to our internal risk scoring model to generate a risk score and to calculate premiums that are within insurance underwriting guidelines and carriers’ risk acceptance threshold. Our internal proprietary system consistently improves results through machine learning tools and data feeds from third party vendors, and this process is governed by our internal governance policy on utilizing AI technology.

HI Card: HI Card seeks to simplify healthcare management with a single standardized transaction and service platform, designed to streamline the management of medical records and claims through one platform using one login. All health-related information is aggregated through this single platform. The platform provides 24/7 access to its users, including patients, healthcare providers, brokers and TPAs, among others. By partnering with hospitals across the nation, HI Card has developed a community health plan aimed at significantly reducing corporate health insurance premiums through an automated platform thus reducing administrative costs of processes that are traditionally done manually, while simultaneously enhancing benefit offerings through self-funding mechanisms. Additionally, the platform facilitates secure, immediate access to crucial health data for healthcare providers, encompassing health insurance plan specifics, medical records, and personal identification details. Moreover, HI Card empowers members to effortlessly obtain vital health information, ranging from claims status and plan particulars to directories of in-network doctors, all tailored for both themselves and their dependents, and all using one login.

HI Card also provides clients with HIT’s HI Performance Network (“HPN”), a series of hospital facilities and providers that deliver Medicare-based reimbursement pricing. HI Performance Network (HPN) now provides direct Medicare contacts in 50 states with 1,306,625 providers, including 10,489 hospital locations as of December 31, 2024. In accordance with our internal practices and procedures, we evaluate our contracts with HPN providers on the basis of cost and to ensure they adhere to our standards. An assessment is done annually to determine which providers to keep in the HPN and therefore the number of HPN providers may fluctuate from year-to-year.

Although it is not part of HIT’s core business, we will strategically allocate our assets to maximize risk-adjusted returns to shareholders. Most recently, we provided a three-year promissory note to Kang Youle Limited, an independent third party with access to a network of insurance sectors internationally. Furthermore, certain small business customers elect for a discount on premiums payable to carriers. In exchange for such discount, carriers are entitled to collect and retain such small business customers’ claim fund balance amounts (such positive claim fund balance amounts, the “Deferred Administrative Surplus”). HIT as the platform company tracks and processes claims for carriers. Having all required information for collection on our platform, we signed an agreement to give us the sole collection rights. The purchase amount equal to 53% of collection amount. Given HIT in our role of providing services on a day-to-day basis for our customers, we negotiated such collection rights. We continue to evaluate business opportunities and may expand on these business opportunities based upon their success in the future.

Health in Tech — Power on Your Health Plan

We created HIT because traditional self-funding can be overly complicated for many participants, costing both time and money, especially for the small business community. According to the U.S. Small Business Association (SBA), in 2022, small businesses with 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees. However, small businesses are drastically underserved in their access to affordable, competitive health insurance. Compared to large businesses, small businesses face higher year-over-year premium increases and pay more on average for less coverage. According to Kaiser Family Foundation (KFF), in 2023, about 47% of small businesses, which they defined as businesses with 3-199 workers, did not offer health insurance, with cost being one of the largest barriers. Health insurance remains the most important benefit for small businesses to attract and retain talent when competing against larger corporations.

Self-funded benefits plans and stop loss insurance policies generally have lower administrative and operating costs, effective claim management, and can create large savings for businesses. Self-insured businesses can also keep unused claim fund dollars. However, self-funded benefits plans are usually only designed for large corporations due to program complexities. Many TPAs, brokers and managing general underwriters (MGUs) avoid selling stop loss insurance for self-funded benefits plans even when products are available, because the complicated manual sales process is not easy and may not reduce expenses.

We founded HIT to solve these problems and to provide small businesses with access to the high-quality, low-cost health care plans that are originally only available to large corporations. We seek to integrate all aspects of self-funded benefits plans and stop loss insurance for small businesses with 5-150 employees, and medium sized businesses with over 150 employees.

Leveraging AI-backed technology from our third-party service providers, our Enhanced Do It Yourself Benefit System (eDIYBS) is a rapid medical underwriting and broker quoting system. This technology simplifies and automates the manual quoting and plan development process, meaningfully reducing the complexity and time associated with these tasks. By removing friction and eliminating human factors, brokers can obtain a bindable proposal, a proposal containing all of the binding terms of coverage, that has 12 plans with four tier rates in about two minutes. We also developed the HI Performance Network (HPN), which delivers Medicare-based reimbursement pricing to a series of hospital facilities and providers. Our HPN now provides direct Medicare contacts in 50 states with 1,306,625 providers, including 10,489 hospital locations as of December 31, 2024.

Additionally, our web-based HI Card platform has a user-friendly interface designed to enable patients, TPAs, small and medium-sized enterprises (SMEs) to access all of their benefits in one place. HI Card’s secure, proprietary technology leverages existing systems to create a single, standardized transaction platform for providers, payers, and patients alike. With HI Card, each participant in the healthcare transaction has secure real-time access to the same vital patient information — from medical and drug histories to coverage eligibility and more.

As of December 31, 2024, we had clients in 41 states, with our services and platforms actively utilized by 417 brokers, 11 Third-Party Administrators (TPAs), and 212 additional third-party agencies. The self-funded benefits plans and stop loss insurance policies were sold to 890 business clients with 18,348 employees, and we managed to maintain profitability while experiencing growth with a year-over-year revenue increase of 2% from 2023 to 2024.

Roscommon Insurance Company (“Roscommon”) and Roscommon Captive Management LLC, the self-insurance carrier business previously owned by our Chief Executive Officer, Mr. Tim Johnson, was sold to an unrelated party at the end of May 2023. This move allows the CEO to dedicate his undivided attention to driving accelerated growth and continuing development within Health In Tech.

Challenges in the Healthcare Market for Small Businesses Drive Innovation

High healthcare costs and low value of health benefits for small businesses. Healthcare costs have consistently outpaced inflation in recent years, and healthcare spending typically grows faster than the economy. According to the Centers for Medicare & Medicaid Services’ National Health Expenditure Data, U.S. health care spending grew 4.1% in 2022, reaching $4.5 trillion or $13,493 per person. As a share of the nation’s Gross Domestic Product (“GDP”), healthcare spending accounted for 17.3% in 2022.

Small businesses are underserved primarily due to a lack of insurance service solutions and lack of competition. Self-funded benefits plans and stop loss insurance services offered by our platform are medically underwritten through an automated process for a large majority of cases within the machine-learning algorithm. HIT aims to meaningfully reduce costs compared to fully funded insurance services through an automated platform for low risk and small employers with comparatively healthy employees, reducing processing times compared to a manual underwriting process that involves underwriters manually reviewing health applications completed by each employee. We seek to offer a high value proposition for businesses to manage down their healthcare costs.

Complicated insurance transaction procedures and manual processes are inefficient and costly. According to the Frost & Sullivan report, the traditional stop loss insurance for self-funded benefits plans program quoting process is manual and may take 12-14 days to complete a quote. Many TPAs, brokers and Managing General Underwriters (MGUs) avoid sales of self-funded benefits plans and stop loss insurance policies, to small businesses because they are often not scalable. HIT has developed eDIYBS, a fast and user-friendly AI-backed system, which usually takes about two minutes to produce bindable medical plan proposals, thereby shortening the sales cycle when compared to the manually produced insurance policies and benefit health plans.

Lack of transparency in the healthcare industry has an adverse impact in building trust and inability to manage costs. There are substantial difficulties for consumers to determine the true cost of services before seeking care, and they often are unable to effectively compare costs when seeking the most suitable treatment. HIT provides personalized and secured access to healthcare data through its HI Card platform, which is available 24/7 with maximal transparency. Medical care specialists can facilitate and assist businesses in determining cost effective solutions without compromising quality. Healthcare providers can view patients’ historical medical and the transactional information after obtaining the patient’s permission. This makes diagnoses easier and more accurate.

Massive and Growing Market Opportunities with Fragmented Players in Targeted Regions

According to the U.S. Bureau of Economic Analysis (the “BEA”), an estimated 45% of US GDP is tied to small businesses and over 61.7 million Americans are employed by small businesses, which contributed $11.5 trillion of GDP in 2022. An estimated $188.8 billion of annual medical insurance premium is generated by small businesses in 2023.

We currently offer tools to create and support self-funded benefits plans for small businesses. As of December 31, 2024, the total policies sold by third-party agents using our services approached $172 million with 18,348 small business employee participants.

As we continue to scale, we intend to expand our distribution to medium sized business employers with over 150 employees. Our platform is increasingly modular and able to address growing customers’ needs.

Our Strengths

Marketplace Innovator. Our AI-powered platforms using machine learning, eDIYBS and HI Card, aim to deliver efficiency, availability, and security features. Our eDIYBS platform empowers licensed brokers to sell stop loss insurance policy for self-funded benefits plans to small employers whose workforce typically ranges from 5 to 150 employees. HIT seeks to make a difference in the growing healthcare market with a distinctive business model that: (a) strives to democratize access to self-funded benefits plans and stop loss insurance policies for small business organizations, significantly broadening the client base; (b) leverages an AI machine learning technology to streamline and simplify the offering, underwriting, and closing processes for self-funded benefits plan and stop loss insurance programs; (c) enables TPAs and brokers to produce bindable proposals directly to business clients; (d) offers a mutually beneficial solution that assists business clients in reducing total medical expenses without sacrificing coverage quality; and (e) hopes to ensure a positive experience for both business clients and individual employees, in order to offer significant improvements in accessibility to comprehensive health networks in the future.

Our web-based HI Card platform has a user-friendly interface, including both web and mobile based features, and is currently under continuous beta testing for a select group of customers. The HI Card Platform is designed to enable patients, TPAs, and SMEs to access all of their benefits in one place.

• 24/7 transparency — patients can easily obtain their plan design and deductible accumulator information. Patients can also authorize medical information and share with doctors to save time.
• Unlimited access to data — brokers are empowered to manage customer information to improve efficiency, enable small employers to better manage employee insurance information to save costs, assist patients, manage health care and medical data to make better decisions.
• Reference-based pricing — lower costs for patients, streamlined claims processing for payers, faster payment turnaround for providers.

Growing Distribution Channels

As of December 31, 2024, we had 417 brokers, 11 Third-Party Administrators (TPAs), and 212 additional third-party agencies in 41 states registered on our platforms and selling our services. We coordinate all aspects of programs and seek to provide our small business customers with suitable and affordable insurance policies in the market. We plan to leverage our online quoting tools and HI Card to add strategic partnerships with large insurance brokerage firms to the platform and continue to strengthen our distribution channels.

We are a health insurance marketplace where insurance companies can list various stop-loss policy options for self-funded benefits plan. Our customers are small employers, which we also refer to as small businesses or groups, having employees from 5 to 1,000 that need health insurance plans. As a marketplace and platform company, we have contractual relationships with TPAs, carriers and small employers. Our fees are earned from small employers and carriers upon a broker or TPA successfully selling a stop loss policy for self-funded benefits plans.

Our proprietary technology enables us to medically underwrite insurance policies for carriers. We also offer customization of health benefits plans, vendors, claims, and network services. When licensed brokers log in to our platform, they upload a census, select policy, design plans, obtain a bindable quote and sell them to small businesses. These offered services are interdependent, and cannot function effectively without being combined. Services provided by HI Card are optional add-on to our services, and it cannot be offered on a standalone basis. Brokers are not obligated to utilize our HI Card service. Customers use the HI Performance Network offering by HI Card, which is a series of hospital facilities and providers that deliver Medicare-based reimbursement pricing. The HI Performance Network now provides direct Medicare contacts in 50 states with 1,306,625 providers, including 10,489 hospital locations as of December 31, 2024. Except HI Card, which are optional add-on to our services, and cannot function on a standalone basis, customers using any of our platforms have access to other platforms. Customers can also choose other networks, if they prefer to use a preferred provider organization (PPO). We seek to obtain our customers by consistently improving our platforms and services, and by providing convenience, speed and cost efficiency.

Our Contractual Relationships

SMR and HI Card contract with TPAs, which are contracted and authorized by the small business employers to enter into services contracts with SMR and HI Card on behalf of the small business employers. We do not directly interact with our small employer customers, and primarily rely on TPAs and brokers, to set up the health benefits plan programs based on requirements and preferences of the small business employer. We are not a TPA. SMR and HI Card are not providing services to the TPAs, but instead, have contracts to collaborate with the TPAs. For example, SMR collaborates with TPAs to facilitate the administration of health benefit plans and stop-loss insurance policies to our customers, which are the small business employers. The TPA will administer the purchased health benefits plan and manage the multiple service providers associated with the health benefits plan and stop-loss insurance policy. Such service providers are listed on the bindable quotes via the bindable sold case breakdown, which outlines the individual stop loss insurance and benefits service offerings selected by the small business and the cost of each. SMR selects health care vendors and creates different plans. Once the small business employer selects a plan, the platform will generate the sold case breakdown. Only the small business employer can start or terminate the relationship with the SMR and HI Card. The TPA cannot start or terminate the relationship with the SMR or HI Card. As a third-party administrator, TPAs are contractually authorized and directed by the small businesses to enter into agreements with other service providers like SMR on behalf of the small businesses. This is because small businesses may lack the expertise and resources to manage self-funded health benefits service providers. TPA’s responsibilities include paying fees to contracted vendors on behalf of small business employer, processing claims, managing enrollment through working with the underwriter, and administering self-funded health plans.

There is no contractual relationship between HIT and the brokers. HIT’s platform provides credentialing for licensed brokers, allowing them to access our marketplace to select and sell self-funded benefits plans for the small business employer at no cost. Brokers are paid by the small businesses, with no contractual relationship between HIT and the brokers, only a credentialing process, and free access is provided.

ICE, acting as an underwriter for the carrier, contracts directly with carriers. Carriers provide stop-loss insurance policies for the self-funded health benefits plans, and have contracts with ICE and the small businesses when a policy is sold. ICE, underwrites the policies and accepts insurance premiums from enrolled employees on behalf of the carrier.

Program services provided by SMR and MGU activities conducted by ICE (including eDIYBS) are interdependent and must be combined to function effectively. SMR selects health care vendors and creates different plans. The stop-loss insurance policy and self-funded health benefits plans together help small businesses manage and limit the risk exposure of health benefits plans. HI Card services are an optional add-on and cannot be offered on a standalone basis.

Small businesses pay fees based on the sold case breakdown. All the fees are collected by TPAs pursuant to the sold case breakdown and are passed through to the respective vendors. Self-funded health plans typically consist of 10 different vendors. Below is an outline of the flow of fees for our services.

• SMR: Once the aggregate monthly fees are collected by the TPA from a small business employer, the TPA will then disburse the contracted fees to SMR based on the bindable sold case breakdown. The average fee per employee paid by the small business employer for SMR’s services is about $15 per month.
• ICE: ICE collects premiums from small businesses on behalf of the carrier in accordance with the underwriting guidelines. After collecting ICE’s underwriting fee and paying other acquisition costs on behalf of the carrier, the net premium is transferred to the carrier. Underwriting fee is 12% – 13% of premium.
• HI Card: Once the aggregate monthly fees are collected by the TPA from a small business employer, the TPA will then disburse the contracted fees to HI Card based on the bindable sold case breakdown. The average fee per employee paid by the small business employer for HI Card’s services is about $15 per month.

The contract term of a stop-loss health benefits plan is 12 months of coverage plus a six month run-out period, a period of time after the end of the plan year which allows employees to request a reimbursement for medical expenses that were incurred during the plan year. Fees and premium are paid monthly during the 12 month coverage period. Monthly fees and premiums may vary based on enrollment changes (a change in the employee headcount). From time-to-time, a re-underwrite is required pursuant to the carrier’s guidelines. In such cases, SMR and ICE provide ongoing services throughout the contract terms.

Dedicated Management Team with Extensive Industry Experience to Drive Success

Our management team has in-depth know-how in the insurance industry with significant experience in senior positions at large insurance healthcare businesses and entrepreneurship roles, including self-funded benefits plans and stop loss insurance, medical insurance companies, TPAs, MGUs, retail brokerages, and health plan consulting firms. With extensive industry experience, HIT is poised to continue innovating and simplifying the sales, communication, and underwriting processes within the insurance and healthcare sectors. Our technological advancements are a direct result of our deep understanding and extensive experience with various facets of insurance and healthcare interactions.

Proprietary Technology and Data Improve Efficiency and Transparency

Our frontend platform is a web-based portal, easily accessible, with limited requirements for brokers to upload the basic minimum data. The uploaded data on the eDIYBS portal are instantly analyzed by a third-party AI company machine learning engine and our internal algorithm. Our proprietary underwriting algorithm leverages big-data analytics and nearly 330 million internal and external data points to produce a health score for each individual employee as of December 31, 2024. Our digitally enabled approach to quoting has successfully reduced the need for human involvement in a significant part of the process. In most cases, this system enables the generation of bindable proposals for an employer with enrolled individuals within the carrier’s accepted risk threshold in a about two minutes. All bindable proposals are within the carrier’s accepted risk threshold, which are developed and programmed by our proprietary system. Any quotes outside of the risk acceptance threshold will be declined by the system automatically. For individuals with health scores that surpass the carrier’s risk tolerance, our system intelligently produces a contingent proposal. In such cases, brokers are guided to employ an electronic health application, enabling customers to supply additional information necessary to finalize the sale and generate a comprehensive proposal.

Our Growth Strategy

Attract more TPAs, MGUs, and brokers to use our platforms. We believe our free-to-use eDIYBS platform, which offers a pay upon success fee model coupled with efficiencies will attract more agencies to use the platforms, when we start to market the platforms to additional customer bases.

Introduce ancillary products that expand our offerings. Our platforms are built to be extendible to new products and plans, and we plan to continue investing and scaling to address the needs of small-and medium-sized businesses.

Monetize our platforms. We built proprietary full stack technology platforms that help MGUs and other insurance services providers perform underwriting and administrative functions on behalf of insurance companies in an efficient manner. We believe we are well-positioned to further monetize our platforms through success fee-based service arrangements for products that can be relabeled for multiple customers.

Our Intellectual Property

We currently have three registered trademarks, one patent, and one pending patent application. Our patent covers our HI Card system which is used to store, process and access data, and we have one patent application pending for DIYBS, which relates to our eDIYBS platform. We have also registered the trademarks “HI Card,” “Health In Tech” and “HIT.”

Use of Artificial Intelligence

Our eDIYBS platform is backed by third-party AI technology utilizing machine learning. Our customers’ sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with our vendors’ use of generative AI technologies. Any such information that we input into a third-party machine learning platform could be revealed to others, including if information is used to train the third party’s machine learning models. Additionally, where a machine learning model ingests personal information and makes connections using such data, those technologies may reveal other sensitive, proprietary, or confidential information generated by the model.

Moreover, machine learning models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct. We use machine learning outputs from our vendors to make certain decisions. Specifically, we provide information we receive from our customers, which may include sensitive health information, to third party vendors who input that data into AI-backed models to determine a risk profile of each potential insurance plan member in order to quote the insurance plan. Unlike many of our competitors, which only provide initial quotes using AI-backed risk profiles, but that are finally bindable only after each employee to be insured completes a health application detailing the employee’s health history and other risks, and the health application is reviewed by the underwriter to price the self-insured program, we provide bindable quotes solely using our AI-backed eDIYBS platform within about two minutes, unless the eDIYBS platform raises certain unknown risk flags that require further manual review via a health application completed by the employee and manually reviewed by an underwriter. Approximately 80% of bindable quotes are provided solely using AI without further manual review. Providing bindable quotes solely using AI-backed technology can lead to errors in the actual risk profile of the employee pool being insured, leading to higher insurance costs than originally anticipated during the quoting process. The direct risk is borne by the insurance company providing the policy, however, if there is an increase in such errors, insurance companies may refuse to continue allowing our eDIYBS platform to provide bindable quotes, reducing the value of eDIYBS as compared to some of our competitors’ platforms, which may require greater usage of manual reviews of health applications, thereby increasing quoting times, and reducing usage of our eDIYBS platform by brokers, TPAs, MGUs and others. Additionally, there may be potential flaws in how the AI-backed models assesses risk profiles that could lead our eDIYBS platform to create higher risk profiles that bias certain individuals or classes of individuals and adversely impact their rights. Although any such biased outcomes are currently unknown to us, if any of these errors occur, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, or regulatory and legal liability.

We have implemented an Artificial Intelligence Governance Policy to establish a framework for the ethical and responsible use of AI technologies within our company, which aims to ensure that AI systems are used, developed, deployed, and managed in a manner that aligns with our organizational values, regulatory requirements, and industry best practices. This policy applies to all employees, contractors, and third parties involved in the use, development, deployment, management, and use of AI systems within our company. The policy requires that we provide regular training and awareness programs for our employees on AI technologies, ethical considerations, and compliance requirements, and to engage with customers, regulators, and the public, to gather feedback and ensure transparency in the use of AI systems. It also requires that the AI systems be designed and implemented to prevent bias and ensure fairness, and that we regularly audit our service providers to identify and mitigate any such biases. Any non-compliance with the policy by an employee or service provider may result in disciplinary action, up to and including termination of employment or contracts.

In compliance with the policy, we carefully select and conduct due diligence of third-party vendors, evaluating their reputation, track record, and compliance with industry standards and fairness. We establish clear contractual agreements that define the responsibilities and obligations of third parties concerning data security and privacy, including clauses for data breach notification and compliance with relevant regulations such as HIPAA. We conduct regular security assessments and audits to identify any potential vulnerabilities and ensure third-party systems adhere to security and fairness standards. Additionally, we enforce data encryption both in transit and at rest, along with strict access control measures, limits data access to authorized personnel only.

We leverage continuous monitoring mechanisms which are vital for detecting and responding to security incidents involving third-party systems, supported by tools like Security Information and Event Management (SIEM) to track and analyze security events. In addition, we conduct risk assessments which helps evaluate the potential effects of third-party data processing on individual privacy and mitigate associated risks. Data acquired from our third party service providers is checked against our claims data and/or health applications regularly. Our underwriting team tests samples of groups of claims data on a routine basis to validate that the results from our third party service providers are performing as expected. Parameters are in place on every code call to our third party service provider to validate that the data returned is within our defined tolerances. Data outside of those tolerances are flagged for manual underwriting review. The Company does not currently use any form of AI within our eDIYBS application and relies solely on third party service providers.

The agreement with the first AI data service provider was entered into on January 26, 2022. The agreement provides services including predictive modeling solutions utilizing the service provider’s software and decision engine that is hosted and managed by the service provider. The agreement is subject to a new work order which extends three years from October 1, 2024 to September 30, 2027. The Company will have the one time right to terminate the agreement for any reason at the end of the second year with 60 days prior written notice. Pursuant to the agreement, the Company agreed to pay the service provider on a per user basis based on the number of users, with a minimum monthly fee of $60,000.

The agreement with the second AI data service provider was entered into on May 24, 2022. The agreement provides services including providing behavioral capture scores using the services provider’s machine learning platform, and delivering risk reports to help make more accurate underwriting decisions. The agreement will expire on January 23, 2026. The parties may renew the agreement upon mutual written agreement. Pursuant to the agreement, the Company agreed to pay the service provider a monthly fee of $16,250.

We have also developed a robust incident response plan, integrating third parties into the process, and ensuring their awareness of roles and responsibilities further strengthen security measures. We conduct regular training and awareness programs for employees and third-party personnel on data security and privacy best practices. Adopting the principle of data minimization ensures that only necessary data is shared with third parties, and unnecessary data is regularly reviewed and purged. Finally, we ensure compliance with legal and regulatory requirements by staying updated on changes in data protection laws which are crucial for reducing data exposure risks and maintaining secure AI operations.

Automated systems rely on vast amounts of data to find patterns or correlations, including AI technology that utilizes machine learning, and then apply those patterns to new data to perform tasks or make recommendations and predictions. While these tools can be useful, these tools also have the potential to produce outcomes that result in unlawful discrimination. Various federal agencies have issued statements on their agencies’ response to AI risks related to civil rights and consumer protection law. The statements outlined ongoing work on AI issues and listed as categories of potential sources of discrimination in automated systems:

• Data and datasets, including datasets that are unrepresentative or incorporate historical bias.
• Model opacity and access.
• Design and use, including the context for use of automated systems.

Although we believe the current AI-related regulations are not a material risk to our business, there can be no assurances that interpretations of existing regulations or the implementation of new regulations will create material regulatory risk to us in the future.

Regulation

Our business operates in a heavily regulated industry. Various aspects of our business are, may become, or may be viewed by regulators from time to time as subject, directly or indirectly, to U.S. federal and state laws and regulations. We are affected by laws and regulations that apply to businesses in general and the insurance services industry, as well as to businesses operating on the internet and through mobile applications. This includes a continually expanding and evolving range of laws, regulations and standards that address information security, data protection, privacy and data collection, among other things. We are also subject to laws governing marketing and advertising activities conducted by telephone, email, mobile devices and the Internet.

We are an insurance technology company that provides a platform to facilitate self-insured private employer health plans. Self-insured private employer health plans generally fall under the jurisdiction of the Employee Retirement Income Security Act of 1974 (ERISA), a federal law enforced by the US Department of Labor and the Employee Benefits Security Administration, which limits the ability of states to regulate such plans to avoid duplicative or conflicting regulations which would make it more difficult for employer to offer health insurance to its employees. As a result of the ERISA preemption, we are able to offer our insurance technology platform throughout the states and make employer-sponsored health insurance plans accessible for small businesses and deliver cost and time savings for employers, employees, members, brokers, Third-party Administrators (TPAs), and providers.

In addition, SMR is a licensed insurance agent in the State of South Carolina. As such, SMR is licensed to sell or broker insurance products in South Carolina should SMR choose to sell or broker any products. SMR has not sold or brokered any insurance products to date and may not do so in the future. Accordingly, except as noted for SMR in South Carolina, neither HIT nor any of its other subsidiaries acts in any of these roles that require a state insurance license in providing its insurance related services and products.

Because the laws and regulations governing insurance services, privacy, data security and marketing are constantly evolving and striving to keep pace with innovations in technology and media, it is possible that we may need to materially alter the way we conduct some parts of our business activities or be prohibited from conducting such activities altogether at some point in the future.

Our Leadership Team

We have assembled an experienced management team with deep insurance and technology experience. Our management team has in-depth know-how in the insurance sector through experience in senior positions in large insurance healthcare companies and entrepreneurship at self-funded benefits, stop loss insurance and medical insurance companies, TPAs, MGUs, retail brokerages, and health plan consulting firms. With extensive industry experience, we believe we can create solutions that simplify the sales process, digitalize and automate underwriting, and streamline the communication process. The technology we have constructed is based on the knowledge and experience of our management in insurance and healthcare sector. Members of our team bring experience from multiple insurance companies including AIG, CB, HealthSmart, Lucent Health, and Fidelity Life, among others.

Our Corporate Information

We were incorporated in Nevada in November 2021. We have our headquarters in Stuart, Florida, with many of our team members working remotely throughout the United States. Our principal executive office is located at 701 S. Colorado Ave, Suite 1, Stuart, FL 34994, and our phone number is 888-373-0333. In September 2013, our founder, Tim Johnson, established International Captive Exchange, LLC, an Iowa limited liability company, which as of November 2021 is our wholly-owned subsidiary. In March 2022, International Captive Exchange merged with DIYBS, LLC, an Iowa limited liability company, with International Captive Exchange surviving the merger. In December 2014, our founder, Tim Johnson, established Stone Mountain Risk, LLC, an Iowa limited liability company, which as of November 2021, is a wholly owned subsidiary of HIT. In March 2017, Mr. Johnson, established HI Card LLC, an Iowa limited liability company which as of November 2021, is a wholly owned subsidiary of HIT.

Our website address is www.healthintech.com (http://www.healthintech.com). The information contained on our website is not a part of this Report, and you should not consider any information contained on, or that can be accessed through, our website as part of this Report or in deciding whether to purchase our Class A common stock.

Competition

The insurance services technology industry is characterized by a rapid evolution of technologies, significant competition and strong defense of intellectual property. While we believe that our platforms, technology, knowledge, experience, and resources provide us with unique competitive advantages, we expect to face competition from major healthcare, insurance and technology companies, among others.

Our competitors include technology companies which offer online marketplace for small business and insurances services and insurance services companies, which may be developing technology similar to ours that provide similar benefits to SMEs, including ServiceNow (NYSE: NOW), Phreesia, Inc (NYSE: PHR) and Everquote (Nasdaq: EVER).

Many of the companies against which we may compete have significantly greater financial resources and expertise in research and development. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These early stage and more established competitors also compete with us in recruiting and retaining qualified insurance services and technology personnel and establishing new technology, as well as in acquiring technologies complementary to, or necessary for, our platforms.

Initial Public Offering

On December 24, 2024, we completed our Initial Public Offering of 2,300,000 shares of Class A Common Stock at a price of $4.00 per share. The total gross proceeds received from the initial public offering was $9.2 million before deducting underwriting discounts and commissions.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to:

• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act;
• reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements; and
• exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

If some investors find our Class A Common Stock less attractive as a result of these exemptions, there may be a less active trading market for our Class A Common Stock and the price of our Class A Common Stock may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act.

Implications of Being a Smaller Reporting Company

Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our Class A Common Stock held by non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our Class A Common Stock held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter.

Facilities

Our headquarters is in Stuart, Florida where we currently lease office space with approximately 4,900 square feet under a five year lease starting in November 2022, under which we currently pay approximately $10,500 per month. We believe that this space is sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on commercially reasonable terms. Additionally, we intend to continue to maintain our business model designed to leverage virtual technology to minimize brick and mortar facilities while optimizing our ability to attract top talented employees that may reside in any geography.

Employees

As of December 31, 2024, we had a total of 73 full-time employees and 7 part-time employees. We believe that we maintain a satisfactory working relationship with our employees, and we have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations. None of our employees is represented by a labor union.

Human Capital Resources

Employee Engagement, Talent Development & Benefits. We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We provide our employees with competitive salaries and bonuses, and intend to provide opportunities for equity ownership.

Diversity, Inclusion, and Culture. Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce. We believe that our business benefits from the different perspectives a diverse workforce brings, and we pride ourselves on having a strong, inclusive and positive culture based on our shared mission and values.

Set forth below are the risk factors that we believe are material to our investors and a summary thereof. You should carefully consider the following risk factors, as well as the other information in this annual report on Form 10-K, and in our other public filings. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described in our public filings when evaluating our business.

SUMMARY OF RISK FACTORS

• Our success and ability to grow our business depend in part on retaining and expanding our network brokers, TPAs, MGUs, carriers, and other third-party agencies. If we fail to add to our network, or retain our current one, our business, revenue, operating results, and financial condition could be harmed.
• Our growth strategy includes, without limitation, the acquisition of additional clients in existing and new markets and states, introducing new services, products and plans, and monetizing our technology.
• Failure to accurately perform underwriting actuarial reviews and adjustments to our underwriting tools could result in an increase in the cost and pricing of health plans we are able to program in the future, which could negatively impact the reputation of our eDIYBS platform and our financial results.
• If the number of members utilizing our platforms decreases or the number of products or services to which they subscribe, our revenue will decrease.
• The insurance products and services we offer through our platform are subject to ongoing, complex, and evolving regulatory obligations, and to continued regulatory review, we could be asked to provide additional claim reports, data and monitoring funds for the insurer which result in significant additional expense and the diversion of our management’s time and efforts. If we fail to assist the insurance company to comply with regulatory requirements, or are unable to meet performance standards, The insurance products could be taken off from our platform that could be severely impact our revenue income.
• Changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program, could materially and adversely harm our business and operating results.
• If we fail to comply with applicable privacy, security, and data laws, regulations and standards, including with respect to third-party service providers that utilize sensitive personal information on our behalf, or applicable consumer protection laws, our business, reputation, results of operations, financial position, and cash flows could be materially and adversely affected.
• Our limited operating history makes it difficult to evaluate our current business performance, implementation of our business model, and our future prospects.
• We are subject to risks associated with outsourcing services and functions to third parties.
• If we are unable to integrate and manage our information systems effectively, our operations could be disrupted.
• From time to time, we may become involved in costly and time-consuming litigation and regulatory actions, which require significant attention from our management.
• We rely on the experience and expertise of our founder/Chief Executive Officer, senior management team, highly-specialized technology and insurance experts, key technical employees, and other highly skilled personnel.
• If we or our partners or other third parties with whom we collaborate sustain a cyber-attack or suffer privacy or data security breaches that disrupt our information systems or operations, or result in the dissemination of sensitive personal or confidential information, we could suffer increased costs, exposure to significant liability, adverse regulatory consequences, reputational harm, loss of business, and other serious negative consequences.
• Our Class A Common Stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price you purchased your shares.
• The dual class structure of our common stock has the effect of concentrating voting control with our Chief Executive Officer and Chief Financial Officer for the foreseeable future, which will limit the ability of our other investors to influence corporate matters, including the election of directors and the approval of any change of control transaction.
• We do not intend to pay dividends on our Class A Common Stock for the foreseeable future.
• Future sales or availability of our Class A Common Stock or rights to purchase our Class A Common Stock, including pursuant to our equity incentive plans, or other equity securities or securities convertible into our Class A Common Stock, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our Class A Common Stock to decline.
• Our management team has limited experience managing a public company.
• The obligations associated with being a public company require significant resources and management attention, and we have and will continue to incur increased costs as a result of becoming a public company.
• As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and PCAOB regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.
• Anti-takeover provisions in our governing documents and under Nevada law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and depress the market price of our Class A Common Stock.
• An active trading market for our Class A Common Stock may not be sustained.
• If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the market price of our Class A Common Stock may decline.
• We are a “controlled company” within the meaning of the Nasdaq listing rules, and we may follow certain exemptions from certain corporate governance requirements that could adversely affect our shareholders.

Risks Related to our Business and Industry

Our success and ability to grow our business depend in part on retaining and expanding our network of brokers, TPAs MGUs, and other third-party agents. If we fail to add to our network, or retain our current one, our business, revenue, operating results, and financial condition could be harmed.

While we generate our revenue primarily from small employers and insurance carriers, we currently derive substantially all of our business through brokers, TPAs, and other third-party agents who provide referrals. As a result, the size of our network is critical to our success. We have experienced significant network growth since we commenced operations, and we believe we have the opportunity to continue grow our network by providing innovation in automation, great client experience, competitive pricing, access to quality providers, and competitive insurance coverage relative to other insurers in the same geographic and insurance markets.

Attracting new brokers, TPAs, carriers, MGUs and other third-party agencies depend, in large part, on our ability to continue to be perceived as providing continued advancement in automation, great client experience, competitive pricing, access to quality providers, and competitive insurance coverage relative to other insurers in the same geographic and insurance markets. Some of the other administrators of self-insured medical plans with which we compete have greater financial and other resources, offer a broader scope of services and may be able to price their services more competitively than ours. Additionally, our ability to attract new brokers and agents and retaining existing ones depends in part on the success of our marketing campaign to such agents. Many of our competitors also have relationships with more brokers, carriers, and other agents than we do or may be able to offer their services to larger clients and/or obtain better cost economics.

If we fail to remain competitive on system automation, client experience, and pricing, our ability to grow our business and generate revenue by attracting and retaining clients may be adversely affected. There are many other factors that could negatively affect our ability to grow our client base, including if:

• our competitors or new market entrants mimic our product offerings or our technology platform, causing current and potential clients to use our competitors’ products instead of our platforms;
• our digital platform experiences technical or other problems or disruptions that frustrate the client experience;
• we or our partners or other third parties with whom we collaborate sustain a cyber-attack or suffer privacy or data security breaches;
• we experience unfavorable shifts in client perception of our digital platform or other client service channels;
• we suffer reputational harm to our brand resulting from negative publicity, whether accurate or inaccurate;
• we are unable to maintain licenses and approvals to offer insurance in our current markets or to expand geographically in an economically sustainable manner;
• we fail to continue to offer new and competitive services;
• insurance brokers or others that we rely on to build our member base are unable to market our insurance services effectively, or if we fail to attract brokers to sell our insurance services, or lose important broker relationships to our competitors or otherwise; or
• our clients do not find sufficient value in our stop loss insurance policies for health benefits products.

Our inability to overcome these challenges could impair our ability to attract new clients and retain existing clients, and could have a material adverse effect on our business, prospects, operating results, and financial condition. Our business, prospects, financial condition, and results of operations may be harmed if we fail to execute our growth strategy.

Our growth strategy includes, without limitation, the acquisition of additional clients in existing and new markets and states, introducing new services and plans, and monetizing our technology.

We are expanding rapidly by partnering with additional TPAs, brokers, carriers, MGUs and other third-party agents to utilize our platform and provide referrals, and entering into new markets and introducing SaaS solutions in the markets in which we currently operate. As of December 31, 2024, we operated in 41 states. As our business grows, we may incur significant expenses prior to commencement of operations and the receipt of revenue in new markets or from new platforms. Further, even if we successfully attract clients in sufficient numbers to cover our costs, the new business could fail, which could not only result in financial harm, but also reputational harm to our brand. We may also experience delays in operational start dates. As we expand, if competitors seek to retain market share by reducing prices, we may be forced to negotiate with providers to reduce their prices on similar offerings in order to remain competitive, which could impact our financial condition and may require a change in our operating strategies. It is difficult to predict the full effect of pricing changes. Even if we successfully convince providers to reduce the pricing, our resulting membership base could be lower than anticipated and our growth could stall. As a result of these factors, entering new markets or introducing new stop loss insurance policies for self-funded benefits plans may decrease our profitability. In addition, we are continuously updating and developing new technology. However, if our technology is not effectively utilized, we may not be able to efficiently and cost-effectively operate our business.

As we expand our service offerings and enter new markets, we need to establish our reputation and brand with new clients, and to the extent we are not successful in creating positive impressions, our business in these newer markets could be adversely affected. There can also be no assurance that we will be able to maintain or enhance our reputation and brand in our existing markets, and failure to do so could materially adversely affect our business, results of operations, and financial condition.

We may also pursue opportunities to monetize our platforms in new ways, such as through white-labeling success fee-based service arrangements. We may not be able to introduce or perform these arrangements as well as expected or at all, and these arrangements may pose operational challenges, may not achieve timely profitability, may expose us to additional liability, or may limit our ability to offer services in certain insurance markets and geographic regions.

We expect that our growth strategy will continue to focus on opportunities in existing and new markets and states for the foreseeable future, which will require significant dedication of management attention and financial resources. If we are unable to effectively execute our growth strategy, our future growth will suffer, and our results of operations could be harmed.

We rely on the ability of our insurance carriers to service our clients.

Our reliance on insurance carriers to service the excess coverage needs of our clients exposes us to certain risks as we attempt to grow our business. Although we conduct due diligence on the insurance carriers that provide excess coverage to our customers, and seek to only partner with reliable, name brand insurance carriers, as we continue to grow, the insurance carriers who service our clients may not budget sufficient resources to service our clients or may otherwise be unable to adequately service our clients by timely funding insurance claims as required. As a technology platform company, we are not obligated to make up any insurer’s shortfalls. However, we may lose our clients or suffer reputational risk from issues resulting from carrier errors and insufficiencies. As a result, we may need to rely on multiple insurance carriers to service one client or may have to delay onboarding new clients until adequate replacement carriers can be engaged. Any delay or disruption in our ability to appropriately service our clients as a result of challenges with insurance carriers could significantly harm our reputation and affect our business, financial condition and results of operations.

We may not be able to maintain profitability in the future.

We expect to make significant investments to further market, develop, and expand our business, including by continuing to develop our technology platforms, acquiring more members, maintaining existing members and investing in partnerships, collaborations and acquisitions. In addition, we expect to continue to increase our headcount in the coming years. As a public company, we will also incur significant legal, accounting, compliance, and other expenses that we did not incur as a private company. We will continue to make such investments to grow our business. Despite these investments, we may not succeed in increasing our revenue on the timeline that we expect and ultimately could fail to realize profits in the future. Moreover, if our revenue declines, we may not be able to reduce costs in a timely manner because many of our costs are fixed, at least in the short-term. If we are unable to manage our costs effectively, this may limit our ability to optimize our business model, acquire new clients, and grow our revenues. Accordingly, despite our best efforts to do so, we may not achieve or maintain profitability, and we may continue to incur significant losses in the future.

Failure to accurately perform underwriting actuarial reviews and adjustments to our underwriting tools could result in an increase in the cost and pricing of health plans we are able to program in the future, which could negatively impact the reputation of our eDIYBS platform and our financial results.

Our profitability depends on our ability to maintain and engage brokers, TPAs, carriers, MGUs and other third-party agents to utilize our platforms. Any failure to accurately perform underwriting actuarial review, whether as a result of a failure by the algorithm or underlying data maintained in our eDIYBS system or through a manual review process for certain higher risk members, could result in excesses of costs to fund insurance claims above those anticipated through the quoting process. Although we are not party to any agreement that would require us to pay excess fees above estimated insurance costs, or any agreement that provides for indemnification of the carrier, such an occurrence could lead to reputation harm to our eDIYBS platform and increased premiums using our platform in the future, which could impact our financial position.

Failure of HI Card to properly function and provide an interface for medical claims for clients on our platform could negatively affect our clients and could lead to them terminating our services.

Our profitability depends on our ability to engage brokers, TPAs, carriers, MGUs and other third-party agencies to utilize our programs. In order to retain clients, our HI Card platform must adequately provide as an interface for clients to review medical claims. In the event that our platform does not function as anticipated, we could lose clients which would negatively impact our financial position.

If the number of members utilizing our platforms decreases or the number of services to which they subscribe, our revenue will decrease.

We base our fees on the number of individuals to whom we and the brokers, TPAs, carriers MGUs and other agents utilizing our platforms provide services or referrals, and the number of services subscribed to by such agents or utilized by their employees. Many factors may lead to a decrease in the number of individuals covered by our clients and the number of services subscribed to by our clients, including:

• layoffs by our clients or affecting our clients, in response to the COVID pandemic or otherwise;
• failure of our clients to adopt or maintain effective business practices;
• changes in the nature or operations of our clients;
• government regulations; and
• increased competition or other changes in the benefits marketplace.

If the number of individuals using our platforms decreases for any reason, our revenue will likely decrease. Failure to manage our continued growth effectively could increase our expenses, decrease our revenue, and prevent us from implementing our business strategy.

We have experienced growth in the past and anticipate future growth, which could put a strain on our business. To manage our anticipated future growth effectively, we must continue to maintain and enhance our IT infrastructure, financial and accounting systems, and controls. We also must attract, train, and retain a significant number of qualified sales and marketing personnel, customer support personnel, professional services personnel, software engineers, technical personnel, and management personnel. Failure to effectively manage our anticipated future growth could lead us to over-invest or under-invest in development and operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, losses, loss of productivity or business opportunities, and result in loss of associates and reduced productivity of remaining associates. Our anticipated future growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new services. If our management is unable to effectively manage our anticipated future growth, our expenses might increase more than expected, our revenue could decline or might grow more slowly than expected, and we might be unable to implement our business strategy. The quality of our services might suffer, which could negatively affect our reputation and harm our ability to retain and attract clients. We rely on the health of the U.S. health insurance industry and benefits of self-insurance plans.

We rely on the health of the U.S. health insurance industry and benefits of self-insurance plans.

Our services are heavily concentrated on self-insurance for small to mid-sized companies. As a result of our focus, we are dependent on the health of the insurance industry and are subject to risks related to the performance of the health insurance industry and, in particular, self-insurance plans. Any negative impact on the health insurance industry as a whole or upon self-insurance plans could cause a material adverse effect on our business and financial condition.

Changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program, could materially and adversely harm our business and operating results.

Our platforms that utilize machine learning are within the private sector of the U.S. health insurance system, which is evolving quickly and subject to a changing regulatory environment, and our future financial performance will depend in part on growth in the market for private health insurance, as well as our ability to adapt to regulatory developments.

The healthcare regulatory landscape can change unpredictably and rapidly due to changes in political party legislative majorities or executive branch administrations at the state or federal level in the United States. Changes and developments in the health insurance system in the United States and the states in which we operate could also reduce demand for our services and harm our business.

As the regulatory and legislative environments within which we operate are evolving, we may not be able to ensure timely compliance with such changes due to limited resources. Furthermore, we may face challenges prioritizing the allocation of resources between implementing systems responsive to new legislative or regulatory requirements, focusing on growth-related operations and implementing management systems and controls related to being a public company.

In addition, changes to government policies not specifically targeted to the healthcare industry, such as a change in tax laws and the corporate tax rate or government spending cuts, could have significant impacts on our business, results of operations, financial condition and liquidity.

If we fail to comply with applicable privacy, security, and data laws, regulations and standards, including with respect to third-party service providers that utilize sensitive personal information on our behalf, or applicable consumer protection laws, our business, reputation, results of operations, financial position, and cash flows could be materially and adversely affected.

As part of our platforms’ normal operations, we collect, process, and retain confidential health and other information about individuals. We are subject to various federal and state laws and rules regarding the collection, use, disclosure, storage, transmission, and destruction of confidential information about individuals. For example, we are subject to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which requires us to protect the privacy, security, and confidentiality of medical records and protected health information, or PHI, that we collect, disseminate, maintain, and use. HIPAA requires covered entities and business associates to maintain policies and procedures governing PHI that is used or disclosed, and to implement administrative, physical, and technical safeguards to protect PHI, including PHI maintained, used, and disclosed in electronic form. These safeguards include employee training, identifying business associates with whom covered entities need to enter into HIPAA-compliant contractual arrangements, and various other measures. Health insurers and other covered entities are also required to report impermissible uses or disclosures of PHI to affected individuals and the U.S. Department of Health and Human Services, or HHS, unless the covered entity demonstrates through a risk assessment that there is low probability the PHI has been compromised, and to notify the media in any states where 500 or more people are impacted by any unauthorized release or use of or access to PHI. Ongoing implementation and oversight of these measures involves significant time, effort, and expense. While we undertake substantial efforts to secure the PHI that we maintain, use, and disclose in electronic form, a cyber-attack or other intrusion that bypasses our information security systems causing an information security breach, loss of PHI, confidential client information, or other data subject to privacy laws or a material disruption of our operational systems could result in a material adverse impact on our business, along with potentially substantial fines and penalties.

HIPAA also established new enforcement mechanisms and enhanced penalties for failure to comply with specific standards relating to the privacy, security, and electronic transmission of PHI. If a person knowingly or intentionally obtains or discloses PHI in violation of HIPAA requirements, criminal penalties may also be imposed. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

State laws may apply to our collection, use, handling, processing, destruction, disclosure, and storage of personal information as well. States have begun enacting more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency that may affect our privacy and security practices. We expect states to continue to enact legislation that provides consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers. Such legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

The regulatory framework governing the processing of certain information, particularly financial and other personal information, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. It is possible that these laws, regulations and standards may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities. We may face challenges in addressing current and evolving requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses in our effort to do so. Any failure or perceived failure by us, or any third parties with which we do business, to comply with our privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities. In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations.

Our limited operating history makes it difficult to evaluate our current business performance, implementation and growth of our business model, and our future prospects.

We developed our platforms backed by third-party technology utilizing machine learning, which encompasses our primary businesses going forward, in 2017 and 2021, the core platform eDIYBS was fully implemented in May 2023, and we have a limited operating history. Due to our limited operating history and the rapid growth, we have experienced since we began operations, there is greater uncertainty in estimating our operating results, and our historical results may not be indicative of, or comparable to, our future results. In addition, we have limited data to validate key aspects of our business model and to improve our systems to manage growth. As a relatively new entrant in the markets in which we operate, we have limited experience and are unable to predict whether we will be able to effectively and consistently provide solutions that are tailored to the budgets of small businesses and to the health and other insurance needs of their employees. We cannot provide any assurance that the data we collect from our customers through application processes, and from data already held by our data analytics service providers, will provide useful measures for evaluating our business model. Moreover, we cannot provide any assurance that partnerships or joint ventures we may enter into in the future will perform as well as historical partnerships or expectations. Our inability to adequately assess our performance and growth could have a material adverse effect on our brand, reputation, business, financial condition, and results of operations.

We are subject to risks associated with outsourcing services and functions to third parties.

We contract with third-party vendors and service providers who provide services to us and our subsidiaries to help with our internal administrative functions, as well as third-party vendors and service providers who help us administer our services and plans. The partial or complete loss of a vendor or other third-party relationship could cause a material disruption to our business and make it difficult and costly to provide services that our regulators and members expect, which could have a material adverse effect on our financial condition, cash flows, and results of operations.

Some of these third-parties have direct access to our systems in order to provide their services to us and operate the majority of our communications, network, and computer hardware and software. For example, we currently offer our services through our website and online app using Amazon Web Services, Inc., or AWS, platforms for cloud computing, a provider of cloud infrastructure services. Our operations depend on protecting the virtual cloud infrastructure hosted in AWS by maintaining its configuration, architecture, and interconnection specifications, as well as the information stored in these cloud platforms and which third-party internet service providers transmit. In the event that our AWS service agreement is terminated or there is a lapse of service, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in meeting key service obligations to our clients and business partners, as well as delays and additional expense in arranging new facilities and services, which could harm our business, results of operations, and financial condition.

Our arrangements with third-party vendors and service providers may make our operations vulnerable if those third parties fail to satisfy their obligations to us, including their obligations to maintain and protect the security and confidentiality of our information and data, or the information and data relating to our clients. We are also at risk of a data security incident involving a vendor or third-party, which could result in a breakdown of such third-party’s data protection processes or cyber-attackers gaining access to our infrastructure through the third-party. To the extent that a vendor or third-party suffers a data security incident that compromises its operations, we could incur significant costs and possible service interruption. In addition, we may have disagreements with our third-party vendors or service providers regarding relative responsibilities for any such failures or incidents under applicable business associate agreements or other applicable outsourcing agreements. Any contractual remedies and/or indemnification obligations we may have for vendor or service provider failures or incidents may not be adequate to fully compensate us for any losses suffered as a result of any vendor’s failure to satisfy its obligations to us or under applicable law. Our vendor and service provider arrangements could be adversely impacted by changes in vendors’ or service providers’ operations or financial condition, or other matters outside of our control. Violations of, or noncompliance with, laws and/or regulations governing our business or noncompliance with contract terms by third-party vendors and service providers could increase our exposure to liability to our members, providers, or other third parties, or could result in sanctions and/or fines from the regulators that oversee our business. In turn, this could increase the costs associated with the operation of our business or have an adverse impact on our business and reputation. Moreover, if these vendor and service provider relationships were terminated for any reason, we may not be able to find alternative partners in a timely manner or on acceptable financial terms, and may incur significant costs and/or experience significant disruption to our operations in connection with any such vendor or service provider transition. As a result, we may not be able to meet the full demands of our members or customers and, in turn, our business, financial condition, and results of operations may be harmed. In addition, we may not fully realize the anticipated economic and other benefits from our outsourcing projects or other relationships we enter into with third-party vendors and service providers, as a result of unanticipated delays in transitioning our operations to the third-party vendor or service provider, such third-party vendor or service provider’s noncompliance with contract terms, unanticipated costs or expenses, or violations of laws and/or regulations, or otherwise. This could result in substantial costs or other operational or financial problems that could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

If we are unable to integrate and manage our information systems effectively, our operations could be disrupted.

Our operations depend significantly on effective information systems. The information gathered and processed by our information systems, assists us in, among other things, providing quotes to our network of brokers, TPAs, carriers, MGUs and other agents, monitoring utilization and other cost factors, and processing claims. Our information systems and applications require continual maintenance, upgrading, and enhancement to meet our current and expected operational needs. If we underestimate the need to expand or experience difficulties with the transition to or from information systems or do not appropriately plan, integrate, maintain, enhance, or expand our information systems, we could suffer, among other things, operational disruptions, loss of existing clients and difficulty in attracting new clients, regulatory enforcement, and increases in administrative expenses. In addition, our ability to integrate and manage our information systems may be impaired as the result of events outside our control, including acts of nature, such as earthquakes or fires, or acts of terrorists. Also, we may from time to time obtain significant portions of our systems-related or other services or facilities from independent third parties, which may make our operations vulnerable if such third parties discontinue such services or fail to perform adequately.

From time to time, we may become involved in costly and time-consuming litigation and regulatory actions, which require significant attention from our management.

From time to time, we may be a defendant in lawsuits or the subject of regulatory actions, or could be subject to audits and investigations relating to our business, including, without limitation, claims of trademark and other intellectual property infringement, claims alleging bad faith, enforcement actions by state regulatory bodies alleging non-compliance with state law. We also may receive subpoenas and other requests for information from various federal and state agencies, regulatory authorities, state Attorneys General, committees, subcommittees, and members of the U.S. Congress and other state, federal, and international governmental authorities. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business and financial position, results of operations, and/or cash flows, and may affect our reputation and brand. In addition, regardless of the outcome of any litigation or regulatory proceedings, investigations, audits, or reviews, responding to such matters is costly and time consuming, and requires significant attention from our management, and could, therefore, harm our business and financial position, results of operations or cash flows. Insurance may not cover such claims, may not provide sufficient payments to cover all of the costs to resolve one or more such claims, and may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and settlements exceed insured levels, could adversely affect our results of operations and cash flows, thereby harming our business. See “Item 3. Legal Proceedings.”

The regulations and contractual requirements applicable to us and other market participants are complex and subject to change, making it necessary for us to invest significant resources in complying with our regulatory and contractual requirements. Ongoing vigorous legal enforcement and the highly technical regulatory scheme for our clients and others with whom we do business mean that our compliance efforts in this area will continue to require significant resources, and we may not always be successful in ensuring appropriate compliance by our Company, employees, consultants, or vendors, for whose compliance or lack thereof we may be held responsible and liable. Regulatory audits, investigations, and reviews could result in changes to our business practices, and also could result in significant or material premium refunds, fines, penalties, civil liabilities, criminal liabilities, or other sanctions, if we are determined to be in violation of applicable laws or regulations. Any of these audits, reviews, or investigations could have a material adverse effect on our financial position, results of operations, or business, or could result in significant liabilities and negative publicity for our Company.

We rely on the experience and expertise of our Founder, senior management team, highly-specialized technology and insurance experts, key technical employees, and other highly skilled personnel.

Our success depends upon the continued service of Tim Johnson, our Founder, Chief Executive Officer and a member of our board of directors, the members of our senior management team, highly-specialized insurance experts, and key technical employees, as well as our ability to continue to attract and retain additional highly qualified personnel. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain, and integrate highly skilled personnel for all areas of our business. If we are unable to attract the requisite personnel, our business, and prospects may be adversely affected. Each of our Founder, members of our senior management team, specialized technology and insurance experts, key technical personnel, and other employees could terminate their relationship with us at any time. The loss of our Founder or any other member of our senior management team, specialized technology and insurance experts, or key personnel might significantly delay or prevent the achievement of our strategic business objectives and could harm our business. In addition, much of our essential technology and infrastructure are custom-made for our business by our personnel. The loss of key technology personnel, including members of management, as well as our engineering and service development personnel, could disrupt our operations and harm our business. We also rely on a small number of highly-specialized insurance experts, the loss of any one of whom could have a disproportionate impact on our business. Competition in our industry for qualified employees is intense. Our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees, and retaining and motivating our existing employees. Moreover, if and when the stock options or other equity awards are substantially vested, employees under such equity arrangements may be more likely to leave, particularly when the underlying shares have seen a value appreciation.

We face significant competition for personnel. To attract top talent, we have to offer, and believe we will need to continue to offer, competitive compensation and benefits packages. We may also need to increase our employee compensation levels in response to competitor actions. If we are unable to hire new employees quickly enough to meet our needs, or otherwise fail to effectively manage our hiring needs or successfully integrate new hires, including our recently hired management team members, our efficiency, ability to meet forecasts and our employee morale, productivity, and retention could suffer, which in turn could have an adverse effect on our business, results of operations, and financial condition.

If we or our partners or other third parties with whom we collaborate sustain a cyber-attack or suffer privacy or data security breaches that disrupt our information systems or operations, or result in the dissemination of sensitive personal or confidential information, we could suffer increased costs, exposure to significant liability, adverse regulatory consequences, reputational harm, loss of business, and other serious negative consequences.

As part of our normal operations, we and our partners and other third parties with whom we collaborate routinely collect, process, store, and transmit large amounts of data, including PHI subject to HIPAA, as well as proprietary or confidential information relating to our business or third parties, including our members, providers, and vendors. Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security breaches, effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security or prevent breaches or attacks. We have experienced from time to time, and may experience in the future, breaches of our security measures, as well as those of our customers, partners, and third-party service providers, due to human error, malfeasance, insider threats, system errors vulnerabilities, or other irregularities. To date, we have not experienced any material impact as a result of such cybersecurity events. Certain threat actors may be supported by significant financial and technological resources, making them even more sophisticated and difficult to detect. As a result, our costs and the resources we devote to protecting against these advanced threats and their consequences may continue to increase over time.

Our information technology systems and safety control systems, or those of our third-party service providers, are subject to a growing number of threats from computer programmers, hackers, and other adversaries that may be able to penetrate our network security and misappropriate our confidential information or that of third parties, create system disruptions, or cause damage, security issues, or shutdowns. Because the techniques used to circumvent, gain access to, or sabotage security systems, can be highly sophisticated and change frequently, they often are not recognized until launched against a target, and may originate from less regulated and remote areas around the world. We may be unable to anticipate these techniques or implement adequate preventive measures, resulting in potential data loss and damage to our systems. Our systems are also subject to compromise from internal threats such as improper action by employees, including malicious insiders, or by vendors, counterparties, and other third parties with otherwise legitimate access to our systems. Our policies, employee training (including phishing prevention training), procedures, and technical safeguards may not prevent all improper access to our network or proprietary or confidential information by employees, vendors, counterparties, or other third parties.

Any compromise or perceived compromise of the security of our systems or the systems of one or more of our vendors or service providers could damage our reputation and brand, cause the termination of relationships with our members, result in disruption or interruption to our business operations, marketing partners and carriers, reduce demand for our services, result in improper disclosure of data and violations of applicable privacy and other laws, cause us to incur significant remediation costs, and divert the attention of management from the operation of our business, and subject us to significant liability and expense, as well as regulatory action fines, penalties and lawsuits, which would harm our business, operating results, and financial condition. Although we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and, in any event, insurance coverage would not address the reputational damage that could result from a security incident or any regulatory actions or litigation that may result. In addition, in the event that additional data security laws are implemented, we may not be able to timely comply with such requirements, or such requirements may not be compatible with our current processes.

Our customers’ sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.

Our eDIYBS platform is backed by third-party AI technology utilizing machine learning. Our customers’ sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with our vendors’ use of generative AI technologies. Any such information that we input into a third-party machine learning platform could be revealed to others, including if information is used to train the third party’s machine learning models. Additionally, where a machine learning model ingests personal information and makes connections using such data, those technologies may reveal other sensitive, proprietary, or confidential information generated by the model.

Machine learning models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct. Providing bindable quotes solely using AI-backed technology can lead to errors in the actual risk profile of the employee pool being insured, leading to higher insurance costs than originally anticipated during the quoting process.

Machine learning models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct. We use machine learning outputs from our vendors to make certain decisions. Specifically, we provide information we receive from our customers, which may include sensitive health information, to third party vendors who input that data into AI-backed models to determine a risk profile of each potential insurance plan member in order to quote the insurance plan. We provide bindable quotes solely using our AI-backed eDIYBS platform, unless the eDIYBS platform raises certain unknown risk flags that require further manual review via a health application completed by the employee and manually reviewed by an underwriter. Providing bindable quotes solely using AI-backed technology can lead to errors in the actual risk profile of the employee pool being insured, leading to higher insurance costs than originally anticipated during the quoting process. The direct risk is borne by the insurance company providing the policy, however, if there is an increase in such errors, insurance companies may refuse to continue allowing our eDIYBS platform to provide bindable quotes, which would require greater usage of manual reviews of health applications, thereby increasing standard quoting times, and reducing usage of our eDIYBS platform by brokers, TPAs, MGUs and others. Additionally, there may be potential flaws in how the AI-backed models assesses risk profiles that could lead our eDIYBS platform to create higher risk profiles that bias certain individuals or classes of individuals and adversely impact their rights. Although any such biased outcomes are currently unknown to us, if any of these errors occur, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, or regulatory and legal liability.

There can be no assurances that our Artificial Intelligence Governance Policy and other measures will prevent risks related to our use of AI.

We have implemented an Artificial Intelligence Governance Policy to establish a framework for the ethical and responsible use of AI technologies within our company, which aims to ensure that AI systems are used, developed, deployed, and managed in a manner that aligns with our organizational values, regulatory requirements, and industry best practices. However, despite these policies and measures, there can be no assurances that the policies and measures will prevent all data breaches, improper accuracy and fairness in the output of AI-backed models, or the other risks to our business related to our use of AI.

Real or perceived errors, failures or bugs in our systems, website, or app could impair our operations, damage our reputation and brand, and harm our business and operating results.

Our continued success is dependent on our systems, applications, and software continuing to operate and to meet the changing needs of our clients and users. We rely on our technology and engineering staff and vendors to successfully implement changes to, and maintain, our systems and services in an efficient and secure manner.

Like all information systems and technology, our website and online app may contain material errors, failures, vulnerabilities, or bugs, particularly when new features or capabilities are released, any of which could lead to interruptions, delays, or website or online app shutdowns, or could cause loss of critical data, or the unauthorized disclosure, access, acquisition, alteration or use of personal or other confidential information.

A significant impact on the performance, reliability, security, and availability of our systems, software, or services may harm our reputation and brand, impair our ability to operate, retain existing members, or attract new members, and expose us to legal claims and government action, each of which could have a material adverse effect on our financial condition, results of operations, and growth prospects.

Failure to secure, protect, or enforce our intellectual property rights could harm our business, results of operations, and financial condition.

Our commercial success is dependent in part on protecting our core technologies, intellectual property assets, and proprietary rights (such as source code, information, data, processes, and other forms of information, know-how, and technology). We rely on a combination of copyrights, patents, trademarks, service marks, trade secret laws, and contractual restrictions to establish and protect our intellectual property. However, the steps that we have already taken to protect our intellectual property may not be sufficient or effective, and our confidentiality, non-disclosure, or invention assignment agreements with employees, consultants, partners, or other parties may be breached and may otherwise not be effective in establishing our rights in intellectual property and in controlling access to our proprietary information. Even if we do detect violations, we may need to engage in litigation to enforce our rights.

We currently hold various domain names relating to our brand. Failure to protect our domain names could adversely affect our reputation and brand, and make it more difficult for users to find our website. We may be unable, without significant cost or at all, to prevent third parties from diverting traffic from or acquiring domain names that are similar to, infringe upon, or otherwise decrease the value of our patents, trademarks and other proprietary rights.

While we take precautions designed to protect our intellectual property, it may still be possible for competitors and other unauthorized third parties to copy our technology and use our proprietary brand, content, and information to create or enhance competing solutions and services, which could adversely affect our competitive position in our rapidly evolving and highly competitive industry. Some license provisions that protect against unauthorized use, copying, decompiling, transfer, and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries, and the remedies for such events may not be sufficient to compensate for such breaches. We enter into confidentiality and invention assignment agreements with our executive officers and consultants, and enter into confidentiality agreements with our third-party providers and strategic partners. We cannot assure you that these agreements will be effective in controlling access to, and use and distribution of, our platform and proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings. Such arrangements may limit our ability to protect, maintain, enforce, or commercialize such intellectual property rights. If we are unable to prevent the unauthorized use or exploitation of our intellectual property, the value of our brand, content, and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to clients, and potential clients, may become confused, and our ability to attract customers may be adversely affected. Any inability or failure to protect our intellectual property could adversely impact our business, results of operations, and financial condition.

We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We do not know whether any of our applications will result in the issuance of a patent, trademark, or copyright, as applicable, or whether the examination process will require us to narrow our claims. In addition, we may not receive competitive advantages from the rights granted under our intellectual property. Our existing intellectual property, and any intellectual property granted to us, or that we otherwise acquire in the future, may be contested, circumvented, or invalidated, and we may not be able to detect or prevent third parties from infringing our rights to our intellectual property. Therefore, the exact effect of the protection of this intellectual property cannot be predicted with certainty. In addition, given the costs, effort, and risks of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose not to seek patent protection for certain future innovations. Any failure to adequately obtain such patent protection, or other intellectual property protection, could later prove to adversely impact our business.

We may be required to spend significant resources in order to monitor, protect, and defend our intellectual property rights, and some violations may be difficult or impossible to detect. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform, or harm our reputation or brand. In addition, we may be required to license additional technology from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms, or at all, and could adversely affect our ability to compete or require us to rebrand or otherwise modify our offerings, which could further exhaust our resources. Furthermore, we may also be obligated to indemnify our clients or business partners in connection with any such litigation and to obtain licenses.

The use of open source software in our services and solutions may expose us to additional risks and harm our intellectual property rights.

Some of our services and solutions use or incorporate software that is subject to one or more open source licenses. Open source software is typically freely accessible, usable, and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licenses require the user of such software to make any derivative works of the open source code available to others on potentially unfavorable terms or at no cost.

The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts. Accordingly, there is a risk that those licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our solutions. In that event, we could be required to seek licenses from third parties in order to continue offering our services or solutions, to re-develop our services or solutions, to discontinue sales of our services or solutions, or to release our proprietary software code under the terms of an open source license, any of which could harm our business. Further, given the nature of open source software, it may be more likely that third parties might assert copyright and other intellectual property infringement claims against us based on our use of these open source software programs.

While we monitor the use of all open source software in our services, solutions, processes, and technology and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related service or solution when we do not wish to do so, it is possible that such use may have inadvertently occurred in deploying our proprietary solutions. In addition, if a third-party software provider has incorporated certain types of open source software into software we license from such third-party for our services and solutions without our knowledge, we could, under certain circumstances, be required to disclose the source code to our products and solutions. This could harm our intellectual property position and our business, results of operations, and financial condition.

We might require additional capital to support business growth.

We intend to continue to make investments to support our business growth and might require additional funds to respond to business challenges or opportunities, including the need to develop new products and services or enhance our existing services, enhance our operating infrastructure, and acquire complementary businesses and technologies. Accordingly, we might need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any additional debt financing secured by us could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we might not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

Risks Related to Ownership of Our Class A Common Stock

Our Class A Common Stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

It is possible that an active trading market will not develop or continue or, if developed, that any market will be sustained, which could make it difficult for you to sell your shares of Class A Common Stock at or above the initial public offering price. Consequently, you may not be able to sell shares of our Class A Common Stock at prices equal to or greater than the price you paid in our initial public offering.

Many factors, some of which are outside our control, may cause the market price of our Class A Common Stock to fluctuate significantly, including those described elsewhere in this “Risk Factors” section and in this Report, as well as the following:

• our operating and financial performance and prospects;
• our quarterly or annual earnings, or those of other companies in our industry, compared to market expectations;
• conditions that impact demand for our offerings and platform, including demand in our industry generally and the performance of the third parties through whom we conduct significant parts of our business;
• future announcements concerning our business or our competitors’ businesses;
• the public’s reaction to our press releases, other public announcements, and filings with the SEC;
• the market’s reaction to our reduced disclosure and other requirements as a result of being treated as an “emerging growth company” under the JOBS Act;
• coverage by or changes in financial estimates by securities analysts or failure to meet their expectations;
• market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
• strategic actions by us or our competitors, such as acquisitions or restructurings;
• changes in laws or regulations which adversely affect our industry or us;
• changes in accounting standards, policies, guidance, interpretations, or principles;
• changes in our board of directors, senior management, or key personnel;
• issuances, exchanges or sales, or expected issuances, exchanges, or sales of our capital stock;
• changes in our dividend policy;
• adverse resolution of litigation, or other claims against us; and
• changes in general market, economic, and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, global pandemics, acts of war, and responses to such events.

As a result, volatility in the market price of our Class A Common Stock may prevent investors from being able to sell their Class A Common Stock at or above the initial public offering price, or at all. These broad market and industry factors may materially reduce the market price of our Class A Common Stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our Class A Common Stock is low. As a result, you may suffer a loss of all or a portion of your investment.

The dual class structure of our common stock will have the effect of concentrating voting control with our Chief Executive Officer and Chief Financial Officer for the foreseeable future, which will limit the ability of our other investors to influence corporate matters, including the election of directors and the approval of any change of control transaction.

Our Class B Common Stock have 10 votes per share, and our Class A Common Stock have one vote per share. The holders of our outstanding Class B Common Stock, which consist of our Chief Executive Officer and our Chief Financial Officer, beneficially own 76.63% of our outstanding capital stock and hold 91.96% of the voting power of our outstanding capital stock. Further, we may issue additional shares of our Class B Common Stock in the future, which will have a dilutive effect on holders of our Class A Common Stock (see “— Future sales or availability of our Class A Common Stock or rights to purchase our Class A Common Stock, including pursuant to our equity incentive plans, or other equity securities or securities convertible into our Class A Common Stock, including our Class B Common Stock, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our Class A Common Stock to decline.” for additional information). Our Amended and Restated Articles of Incorporation (our “Articles of Incorporation”) do not provide for any sunset provisions that limit the lifespan of our Class B Common Stock, including in the case of the death of a Class B Common Stock shareholder or intra-family transfers of shares of Class B Common Stock. Because of the ten-to-one voting ratio between our Class B Common Stock and Class A Common Stock, the holders of Class B Common Stock, in particular our Chief Executive Officer and Chief Financial Officer, collectively will control over a majority of the combined voting power of all of our Class A Common Stock and Class B Common Stock and therefore will be able to control all matters submitted to our stockholders for approval until a significant portion of such shares of outstanding Class B Common Stock have been converted to shares of Class A Common Stock as further described in “Description of Capital Stock.” This concentrated control will limit or preclude the ability of our other investors to influence corporate matters for the foreseeable future. For example, our Chief Executive Officer and Chief Financial Officer will have sufficient voting power to determine the outcome with respect to elections of directors, amendments to our Articles of Incorporation, amendments to our Third Amended and Restated Bylaws (our “Bylaws”) that are subject to a stockholder vote, increases to the number of shares available for issuance under our equity incentive plans or adoption of new equity incentive plans, and approval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval for the foreseeable future. In addition, this concentrated control may also prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders. This control may also adversely affect the market price of our Class A Common Stock.

Because the interests of our Chief Executive Officer and Chief Financial Officer may differ from those of our other stockholders, actions that they take with respect to us, as significant stockholders, may not be favorable to our other stockholders, including holders of our Class A Common Stock.

We cannot predict the effect our dual class structure may have on the market of our Class A Common Stock.

We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A Common Stock, in adverse publicity, or in other adverse consequences. For example, certain index providers, such as S&P and Dow Jones, have announced restrictions on including companies with multiple-class share structures in certain of their indices, including the S&P 500. Accordingly, our dual class share structure would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those indices may not invest in our Class A Common Stock. These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Because of the dual class structure of our common stock, we will likely be excluded from certain indices and we cannot assure that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A Common Stock less attractive to other investors. As a result, the market price of our Class A Common Stock could be adversely affected.

We do not intend to pay dividends on our Class A Common Stock for the foreseeable future.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, we do not anticipate declaring or paying any cash dividends on our Class A Common Stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors, subject to applicable laws, and will depend on, among other things, our business prospects, results of operations, financial condition, cash requirements and availability, industry trends, and other factors that our board of directors may deem relevant. Any such decision also will be subject to compliance with contractual restrictions and covenants in the agreements governing our current indebtedness. Moreover, we may incur additional indebtedness, the terms of which may further restrict or prevent us from paying dividends on our Class A Common Stock. As a result, you may have to sell some or all of your Class A Common Stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. Our inability or decision not to pay dividends could also adversely affect the market price of our Class A Common Stock.

Future sales or availability of our Class A Common Stock or rights to purchase our Class A Common Stock, including pursuant to our equity incentive plans, or other equity securities or securities convertible into our Class A Common Stock, including our Class B Common Stock, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our Class A Common Stock to decline.

Sales of substantial amounts of our shares of Class A Common Stock in the public market, or the perception that these sales could occur, could adversely affect the market price of our shares of Class A Common Stock and could materially impair our ability to raise capital through equity offerings in the future. Resales of our shares of Class A Common Stock in the public market by the Selling Shareholder may cause the market price of our shares of Class A Common Stock to decline. As of the date of this Annual Report on Form 10-K, 12,369,358 shares are freely tradable without restriction or further registration under the Securities Act, and certain shares of Class A Common Stock held by our existing shareholders may also be sold in the public market in the future, subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. We intend to file a registration statement with the SEC on Form S-8 in March 2025 providing for the registration of shares of our Class A Common Stock issued or reserved for issuance under the 2024 Plan. Subject to the satisfaction of vesting conditions and the expiration of lock-up agreements, shares issued pursuant to or registered under the registration statement on Form S-8 will be available for resale immediately in the public market without restriction. From time to time in the future, we may also issue additional shares of our Class A Common Stock, Class B Common Stock preferred stock or other securities convertible into Class A Common Stock pursuant to a variety of transactions, including acquisitions. The issuance by us of additional shares of our Class A Common Stock or securities convertible into our Class A Common Stock, including our Class B Common Stock, would dilute your ownership of us, and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our Class A Common Stock.

The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended to protect investors, and to reduce the amount of information we provide in our reports filed with the SEC. We cannot be certain if this reduced disclosure will make our Class A Common Stock less attractive to investors.

The JOBS Act is intended to reduce the regulatory burden on “emerging growth companies.” As defined in the JOBS Act, a public company whose initial public offering of common equity securities occurs after December 8, 2011, and whose annual net revenues are less than $1.235 billion will, in general, qualify as an “emerging growth company” until the earliest of:

• the last day of its fiscal year following the fifth anniversary of the date of its initial public offering of common equity securities;
• the last day of its fiscal year in which it has annual gross revenue of $1.235 billion or more;
• the date on which it has, during the previous three-year period, issued more than $1.0billion in nonconvertible debt; and
• the date on which it is deemed to be a “large accelerated filer,” which will occur at such time as the company (1) has an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of its most recently completed second fiscal quarter, (2) has been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months, and (3) has filed at least one annual report pursuant to the Exchange Act.

Under this definition, we are an “emerging growth company” and could remain an “emerging growth company” until as late as the fifth anniversary of the completion of our initial public offering, or December 24, 2029. For so long as we are an “emerging growth company,” we will, among other things:

• not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, or Section 404(b);
• not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section 14A(a) of the Exchange Act;
• not be required to seek stockholder approval of any golden parachute payments not previously approved pursuant to Section 14A(b) of the Exchange Act;
• be exempt from the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements; and
• be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period and, as a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. We cannot predict if investors will find our Class A Common Stock less attractive as a result of our decision to take advantage of some or all of the reduced disclosure requirements above. If some investors find our Class A Common Stock less attractive as a result, there may be a less active trading market for our Class A Common Stock and our stock price may be more volatile.

Our management team has limited experience managing a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could materially adversely affect our business, financial condition and operating results.

The obligations associated with being a public company require significant resources and management attention, and we have and will continue to incur increased costs as a result of becoming a public company.

As a public company, we face increased legal, accounting, administrative, and other costs and expenses that we did not incur as a private company prior to our recent initial public offering, and which have not been reflected in our historical consolidated financial statements included elsewhere in this Report. We have already started to incur, and expect to continue to incur, significant costs related to operating as a public company. We are subject to the Exchange Act, the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the PCAOB, and the rules and standards of Nasdaq, each of which imposes additional reporting and other obligations on public companies. As a public company, we are required to, among others:

• prepare, file, and distribute annual, quarterly, and current reports with respect to our business and financial condition;
• prepare, file, and distribute proxy statements and other stockholder communications;
• expand the roles and duties of our Board and committees thereof, and management;
• hire additional financial and accounting personnel and other experienced accounting and finance staff with the expertise to address complex accounting matters applicable to public companies;
• institute more comprehensive financial reporting and disclosure compliance procedures;
• involve and retain to a greater degree outside counsel and accountants to assist us with the activities listed above;
• enhance our investor relations function;
• establish new internal policies, including those relating to trading in our securities and disclosure controls and procedures;
• comply with our exchange’s listing standards; and
• comply with the Sarbanes-Oxley Act.

These rules and regulations and changes in laws, regulations, and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, have and will continue to increase our legal and financial compliance costs and make some activities more time consuming and costly. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving regulatory requirements has and will continue to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, the need to establish the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, which could prevent us from improving our business, financial condition, and results of operations. If we do not continue to develop and implement the right processes and tools to manage our changing enterprise and maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition, and results of operations. In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses.

As a public company, complying with applicable rules and regulations has made it more difficult and more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage, or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees, or as executive officers.

As a public reporting company, we are subject to rules and regulations established from time to time by the SEC regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.

We are a public reporting company subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel.

In addition, as a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting. Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), requires that, beginning with our second annual report following our initial public offering, management assess and report annually on the effectiveness of our internal control over financial reporting, and identify any material weaknesses in our internal control over financial reporting. Although Section 404(b) requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal control over financial reporting, we have opted to rely on the exemptions provided in the JOBS Act and, consequently, will not be required to comply with SEC rules that implement Section 404(b) until such time as we are no longer treated as an “emerging growth company.” We could potentially qualify as an “emerging growth company” until as late as the fifth anniversary of the completion of our initial public offering, or December 24, 2029.

If our senior management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, and our independent registered public accounting firm cannot render an unqualified opinion on management’s assessment and the effectiveness of our internal control over financial reporting at such time as it is required to do so, and material weaknesses in our internal control over financial reporting are identified, we could be subject to regulatory scrutiny, a loss of public and investor confidence, and to litigation from investors and stockholders, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes, and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our Class A Common Stock price and adversely affect our business, financial condition, and results of operations. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC, the exchange upon which our securities are listed or other regulatory authorities, which would require additional financial and management resources.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful stockholder claims against us and may reduce the amount of money available to us.

As permitted by Section 78.7502 of Chapter 78 of the Nevada Revised Statutes, or the NRS, our Articles of Incorporation limit the liability of our directors. In addition, as permitted by Section 78.7502 of the NRS, our Bylaws provide that we shall indemnify, to the fullest extent authorized by the NRS, any person who is involved in any litigation or other proceeding because such person is or was a director, officer, employee, or agent of ours or is or was serving as an officer, director, employee, or agent of another entity at our request, including service with respect to employee benefit plans, against all expense, loss, or liability reasonably incurred or suffered in connection therewith. Our Articles of Incorporation provide that indemnification includes the right to be paid expenses incurred in defending any proceeding in advance of its final disposition.

Section 78.7502 of the NRS permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, except an action by or in the right of us, by reason of the fact that the person is or was a director, officer, employee, or agent of ours, or is or was serving at our request as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, against expenses, including attorneys’ fees, judgment, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding if the person is not liable under Section 78.138 of the NRS, or acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.

The above limitations on liability and our indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their fiduciary duty as directors by shifting the burden of such losses and expenses to us. Certain liabilities or expenses covered by our indemnification obligations may not be covered by our directors’ and officers’ insurance policy or the coverage limitation amounts may be exceeded. As a result, we may need to use a significant amount of our funds to satisfy our indemnification obligations, which could severely harm our business and financial condition and limit the funds available to stockholders who may choose to bring a claim against us.

Provisions in our Bylaws and Nevada law may have the effect of discouraging lawsuits against our directors and officers.

Our Bylaws require, unless we consent in writing to the selection of an alternative forum, that the Eighth Judicial District Court of Clark County, Nevada, shall, to the fullest extent permitted by law, be the exclusive forum for any or all actions, suits, proceedings, whether civil, administrative or investigative or that asserts any claim or counterclaim, (a) brought in the name or right of our company or on our behalf; (b) asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of our company to us or our stockholders; (c) arising or asserting a claim pursuant to any provision of Chapters 78 or 92A of the NRS or any provision of our Articles of Incorporation or Bylaws; (d) to interpret, apply, enforce or determine the validity of our Articles of Incorporation or Bylaws; or (e) asserting a claim governed by the internal affairs doctrine. Notwithstanding the foregoing, our Bylaws provide that this exclusive provision forum will not apply to suits arising under (i) the Exchange Act or any other claim for which federal courts have exclusive jurisdiction and (ii) the Securities Act, as to which the Eighth Judicial District Court of Clark County, Nevada and the federal district court for the District of Nevada shall have concurrent jurisdiction.

Although we believe this provision benefits us by providing increased consistency in the application of Nevada law in the types of lawsuits to which it applies, a court (either in the State of Nevada or otherwise) may determine that this provision is either unenforceable or inapplicable to a particular claim due to choice-of-law considerations. To the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers.

Anti-takeover provisions in our governing documents and under Nevada law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and depress the market price of our Class A Common Stock.

Our Articles of Incorporation, Bylaws, and Nevada law contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Among others, our Articles of Incorporation and Bylaws include the following provisions:

• a dual class structure that provides our holders of Class B Common Stock with the ability to control the outcome of most matters requiring stockholder approval;
• limitations on convening special stockholder meetings, which could make it difficult for our stockholders to adopt desired governance changes;
• advance notice procedures, which apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;
• newly created directorships are filled by a majority of directors then in office; and
• the approval of two-thirds of the then outstanding voting power of our capital stock, voting as a single class, is required to remove a director.

We may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law. If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.

In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

Any provision of our Articles of Incorporation, Bylaws, or Nevada law that has the effect of delaying, preventing, or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A Common Stock, and could also affect the price that some investors are willing to pay for our Class A Common Stock.

An active trading market for our Class A Common Stock may not be sustained.

Although our shares of Class A Common Stock are listed on Nasdaq, an active trading market for our Class A Common Stock may not be sustained. If an active trading market for our Class A Common Stock is not maintained, the liquidity of our Class A Common Stock, your ability to sell your shares of our Class A Common Stock when desired, and the prices that you may obtain for your shares of Class A Common Stock will be adversely affected.

If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our Class A Common Stock, the price of our Class A Common Stock could decline.

The trading market for our Class A Common Stock will depend in part on the research and reports that third-party securities analysts publish about our company and our industry. We may be unable to attract research coverage, and if one or more analysts cease coverage of our company, we could lose visibility in the market. In addition, one or more of these analysts could downgrade our Class A Common Stock or issue other negative commentary about our company or our industry. As a result of one or more of these factors, the trading price of our Class A Common Stock could decline.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the market price of our Class A Common Stock may decline.

We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this Report, and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.

We are a “controlled company” within the meaning of the Nasdaq listing rules, and we may follow certain exemptions from certain corporate governance requirements that could adversely affect our shareholders.

Tim Johnson, our largest stockholder and our Chief Executive Officer, own more than a majority of the voting power of our outstanding shares of Common Stock. As such, we will be deemed a “controlled company” under Nasdaq Marketplace Rules 5615(c). Under the Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and is permitted to phase in its compliance with the independent committee requirements. Although we do not intend to rely on the “controlled company” exemptions under the Nasdaq listing rules, we could elect to rely on these exemptions in the future. If we were to elect to rely on the “controlled company” exemptions, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Accordingly, if we rely on the exemptions, during the period we remain a controlled company and during any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

Health In Tech prioritizes a proactive and comprehensive approach to risk management and cybersecurity, ensuring the protection of our Operational Technology (OT) environment and critical infrastructure from evolving cyber threats. Our security framework is built on robust, adaptive measures, which are regularly refined to incorporate industry best practices and cutting-edge technologies.

Through strategic oversight, advanced threat detection, and frequent improvement, we maintain a high level of protection for our systems and data.

Risk Management and Strategy:

Below is an overview of our processes for assessing, identifying, and managing material risks from cybersecurity threats, all of which are conducted in-house.

Network/System Security

• Isolation of OT from IT and User Networks: We ensure our OT systems are physically or logically separated from corporate IT networks, reducing the risk of cross-contamination.
• OT Device Hardening: We enhance security by disabling unnecessary ports, services, and protocols, minimizing potential attack surfaces.
• We ensure data Encryption in transit and at rest.
• Patch Management: We maintain a controlled patch management process, ensuring OT systems receive regular updates while considering their unique lifecycle and operational requirements.
• We conduct continuous vulnerability scanning to internal and external networks.
• Endpoint Protection: We implement best-practice security baselines and hardening measures, supported by next-generation security agents EDR for monitoring and automated remediation. Additionally, our Security Information and Event Management (SIEM) system enables autonomous remediation and real-time threat alerting our security team.
• Anti-Malware Solutions: Recognizing that traditional antivirus may not always be applicable, we deploy specialized security software to detect and prevent malware threats.

Ransomware Detection and Response

• Behavioral Analysis: We utilize advanced behavioral analysis tools to detect ransomware threats by identifying unusual encryption activity, unauthorized file modifications, and abnormal network communications.
• Backup and Recovery: We perform regular backups of critical systems, ensuring they are securely isolated from the production environment to safeguard against ransomware attacks. Additionally, our disaster recovery plans undergo routine testing of backups to ensure rapid and effective recovery when needed.

Access Control

• Principle of Least Privilege (PoLP): We enforce strict access controls, granting system access only to individuals who require it for their roles. Regular audits ensure compliance and minimize security risks.
• Multi-Factor Authentication (MFA): We require MFA for all system access, adding an extra layer of security to protect against unauthorized access.
• Role-Based Access Control (RBAC): Access to sensitive systems is governed by users’ roles, ensuring only authorized personnel can perform specific actions on critical systems with regular user access audits.

Secure Remote Access

• VPN and secure tunneling: We utilize secure VPNs and tunneling technologies with strong encryption to protect remote access to our systems. These connections are continuously monitored to ensure security and integrity.

Incident Response and Recovery Plans

• We have a comprehensive incident response plan with detailed procedures for addressing ransomware attacks and other cyber threats, in an effort to provide a swift and effective response.
• Cross-Team Coordination: Our IT and security teams collaborate seamlessly during incidents to respond quickly, contain threats, and minimize impact.

Security Audits and Risk Assessments

• Regular security audits: We conduct frequent security audits and vulnerability assessments to identify potential weaknesses and keep our defenses up to date. Additionally, we engage a third-party penetration testing firm for annual assessments to identify and address security vulnerabilities/misconfigurations.
• Regular risk management: We regularly evaluate and adapt our security measures to respond to emerging threats, including new ransomware strains and the evolving cyber threat landscape.
• We incorporate threat intelligence into our security operations to proactively identify and mitigate potential cyber risks.

Employee and Contractor Required Training and Awareness

• Ongoing cybersecurity awareness training, encompassing phishing awareness and sensitive data handling, is required for all employees and contractors. In addition, all IT and IT security staff are required to complete secure coding and data hygiene training.
• We conduct simulated phishing tests monthly with required retraining on any failures.
• Simulated exercises: We regularly run simulated attack exercises to ensure our teams are prepared to act swiftly and effectively during an actual cyberattack.

Risk Management and Oversight Committee

• We conduct comprehensive risk assessments to identify vulnerabilities across systems, processes, and third-party dependencies.
• We use of semi-quantitative risk assessment as a tool for evaluating the probability (likelihood) and severity (impact) of potential risks.
• We perform comprehensive vendor risk assessments to verify third-party security measures effectively meet our organization’s security policies and ensure vendor compliance with all relevant regulatory requirements and review on an annual basis.
• Our Governance, Risk, and Compliance (GRC) applications enable continuous, automated testing and real-time monitoring of infrastructure and user compliance.
• We have strong executive and board oversight of regulatory and compliance risks, including changes in laws and regulations that could affect the company’s business.
• We maintain a materiality assessment process designed to ensure compliance with all applicable securities laws and regulations, including the SEC’s cybersecurity disclosure rules. We also consider industry-specific regulations and standards, such as HIPAA for healthcare organizations.

To date, we have not identified any cybersecurity incidents or threats that have materially impacted our business strategy, operations, or financial condition. Our materiality assessment process is designed to ensure compliance with all applicable securities laws and regulations, including the SEC’s cybersecurity disclosure rules. We also consider industry-specific regulations and standards. However, there can be no assurances that such a cybersecurity incident will occur or that such incident will materially impact our business. Any breach of our security measures, or those of our third-party service providers, could result in unauthorized access to and misappropriation of our information, corruption of data or disruption of systems, operations or transactions, any of which could have a material adverse effect on our business strategy, results of operations or financial condition. See “Item 1A. Risk Factors” of this Annual Report on Form 10-K for further discussion of the risks related to cybersecurity threats.

Governance:

Our Vice President of Security and Compliance leads our cybersecurity program and is responsible for implementing and maintaining our cybersecurity controls and provides regular updates to the Audit Committee and our executive management team on the status of our cybersecurity program and any cybersecurity incidents.

Our Audit Committee and our executive team maintain rigorous oversight of our enterprise-wide risk management and cybersecurity strategy. Our dedicated security and compliance team, leveraging over two decades of expertise, ensures consistent implementation, refinement, and resilience of these programs, utilizing a framework incorporating NIST, HIPAA, SOC 2, and SOX, providing assurance that our defenses remain robust against emerging threats and evolving regulatory mandates.

Our principal office is located at 701 S. Colorado Ave, Suite 1, Stuart, FL 34994, where we lease approximately 4,900 square feet of space under lease agreements for our business operations expiring in October 2027. We believe our existing facilities are adequate to meet our current requirements.

We are not party to any material legal proceedings. We have in the past, and from time to time may be in the future, involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto included in this annual report. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See “Item 1A. Risk Factors” and “Special Note Regarding Forward-Looking Statements”.

Overview

Health in Tech (“HIT”) is an insurance technology platform company, which offers a marketplace that aims to improve processes in the healthcare industry through vertical integration, process simplification, and automation. By removing friction and complexities, we streamline the underwriting, sales and service process for insurance companies, licensed brokers, and TPAs.

Marketplace: We are a health insurance marketplace where insurance companies can list various stop-loss policy options for self-funded benefits plans. Licensed brokers registered on our platform can log in, upload certain required information, select policy plans, obtain a bindable quote and sell them to small businesses. In most cases, our technology enables us to medically underwrite insurance policies and produce bindable quotes within about two minutes, allowing us to deliver an integrated and seamless sales cycle.

Customizable Solutions: Beyond policy underwriting and sales, our marketplace offers customization of health benefits plans, vendors, claims, and network services. Brokers can select customized plans that suit their customers.

Accessibility and Savings: We make self-funded benefits plan and stop loss insurance accessible online for small businesses. We aim to deliver meaningful cost savings for low-risk, small employers with comparatively healthy employees through a digital medical underwriting process. We seek to deliver time savings for employers, brokers, TPAs, and carriers, by leveraging both external and internally developed technology.

As of December 31, 2024, we had clients in 41 states, with our services and platforms actively utilized by 417 brokers, 11 Third-Party Administrators (TPAs), and 212 additional third-party agencies. Our stop loss insurance policies for self-funded benefits plans were sold to 890 business clients with 18,348 employees. In addition, we continued to maintain profitability while driving revenue growth of 2% year over year from fiscal year 2023 to fiscal year 2024.

We currently generate most of our revenue from service fees and underwriting fees, that are associated with customers who purchase self-funded benefits plans and stop loss insurance. These plans are facilitated through a network of brokers, TPAs, MGUs, carriers, and other third-party agents. These agencies either directly engage our services or provide valuable client referrals. Roscommon Insurance Company (“Roscommon”) and Roscommon Captive Management LLC, the self-insurance carrier business, previously owned by our Chief Executive Officer, Mr. Tim Johnson, was sold to an unrelated party at the end of May 2023. This move allows the CEO to dedicate his undivided attention to driving accelerated growth and continuing development within Health In Tech.

Recent Developments

Initial Public Offering

On December 24, 2024, we completed our initial public offering (the “IPO”) of 2,300,000 shares of Class A common stock. The total gross proceeds received from the IPO was $9.2 million before deducting underwriting discounts and commissions.

Key Factors Affecting our Performance

Our ability to retain and expand our network of brokers, TPAs, MGUs and other third-party agents.

While we generate our revenue primarily from small employers and insurance carriers, we currently derive substantially all of our business through brokers, TPAs, and other third-party agents who provide referrals. As a result, the size of our network is critical to our success. We have experienced significant network growth since we commenced operations, and we believe we have the opportunity to continue to grow our network by providing superior innovation in automation, great client experience, competitive pricing, access to quality providers, and competitive insurance coverage relative to other insurers in the same geographic and insurance markets.

Our ability to enter into more collaborations with insurance carriers and offer new products and plans

Our business growth will depend on our ability to collaborate with a diverse range of insurance carriers to service the excess coverage needs of our clients. These collaborations are essential for expanding our portfolio of products and services. Our growth strategy is heavily reliant on our capability to introduce innovative insurance products and plans. By collaborating with multiple insurance carriers, we can leverage their expertise and resources to develop a broader range of offerings. This not only enables us to meet the specific requirements of our clients but also helps in staying competitive in a rapidly changing market.

Our ability to accurately perform underwriting procedures

Our growth is significantly dependent on our ability to accurately perform underwriting procedures and maintain strong relationships with brokers, TPAs, carriers, MGUs, and other third-party agents who utilize our platforms. A failure to conduct precise underwriting actuarial reviews and adjustments to our underwriting tools could result in increased costs and pricing for health plans.

While we are not bound by any agreements that would necessitate paying fees exceeding estimated insurance costs, nor do we have agreements that require indemnification of the carrier, such a failure could cause reputational harm to our eDIYBS platform. This could lead to increased premiums for plans accessed through our platform, potentially affecting our financial standing and market competitiveness.

Our ability to continue invest in technology and innovation

Our ongoing commitment to investing in technology is crucial for driving advancements in automation and enhancing operational efficiency across all aspects of our business. We are dedicated to regularly updating and developing new technology. This continuous investment in technology and innovation will position us at the forefront of the insurance technology.

Seasonality

Our business is generally affected by the seasonal patterns of our enrollment and medical expenses. Usage of our underwriting and quoting platform is seasonal, primarily due to the common renewal of health plan policies in December and January. While we believe we have visibility into the seasonality of our business, our rapid growth rate over the last couple years may have made seasonal fluctuations more difficult to detect. If our rate of growth slows over time, seasonal or cyclical variations in our operations may become more pronounced, and our business, results of operations and financial position may be adversely affected.

Key Financial and Operating Performance Metrics

We regularly monitor a number of financial and operating metrics in order to measure our current performance and project our future performance. These metrics help us develop and refine our growth strategies and make strategic decisions. We discuss revenues, cost of revenues, and the components of operating expenses. We utilize other key metrics as described below.

Number of Enrolled Employees (EEs) Medical Health Plan Billed

Our primary customers are small businesses, which can have anywhere from 5 to 150 employees. Our service fee is billed to such business customers on a per enrolled employee (EE) per month (PEPM) basis, which ranges from $2 to $35 based on selected services for each small business, and our underwriting revenue is a percentage of monthly premium paid on a PEPM basis. Accordingly, we use the number of EEs as a key indicator of our market penetration and growth, as compared to simply tracking the total number of our business customers, which can vary depending on the number of employees (and their family) enrolled at the business customer. The number of EEs is an employment based count, and not only would include a single employee, but also an employee’s family (spouse and/or children), if the family is also insured on the plan.

The following table sets forth the number of EEs billed for the periods indicated:

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In 2024, we diversified the stop loss policies offering, by adding new carriers. By December 31, 2024, 11,937 EEs were covered by A-rated stop-loss policies, representing an increase of 5,563 EEs compared to 6,374 EEs that were covered by A-rated stop-loss policies as of December 31, 2023. Small businesses that preferred A-rated carriers generally demonstrated stronger performance and were willing to pay higher program fees for better medical network coverage and enhanced health benefits. Despite a temporary 14% reduction in employee counts, we achieved a 2% increase in revenues during the year ended December 31, 2024.

Adjusted EBITDA

Adjusted EBITDA represents our earnings from continuing operations before net interest expense, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and public company readiness costs not deemed capitalizable. Adjusted EBITDA is not a measure calculated in accordance with United States Generally Accepted Accounting Principles, or GAAP. Please refer to “Summary Consolidated Financial Data — Adjusted EBITDA” in this Report for a discussion of the limitations of adjusted EBITDA and reconciliations of adjusted EBITDA to income from continuing operations, net of income taxes, the most comparable GAAP measurements, respectively, for the years ended December 31, 2024 and 2023. We exclude certain non-recurring or non-cash items when calculating Adjusted EBITDA, and we believe this approach provides a more meaningful measure by offering a clearer view of our underlying operational performance.

Components of Operating Results

Revenues

While we generate our revenue primarily from small employers and insurance carriers, we grow our business primarily from offering solutions that streamline sales processes, enhance service delivery, and reduce the sales cycle duration for TPAs, MGUs, and Brokers. We offer our services through our three subsidiaries. Program services provided by SMR and MGU activities provided by ICE (including eDIYBS) are interdependent, as they cannot function effectively without being combined. Services provided by HI Card is an optional add-on to our other services, and it cannot be offered on a standalone basis. Brokers that utilize the program services on behalf of the small employer provided by SMR and MGU activities provided by ICE, are not obligated to utilize our HI Card service. Currently ICE does not offer underwriting services as a standalone service. In the future, we may consider offering it as a standalone service.

(i) SMR is a program manager specializing in customized self-funded benefits programs for small businesses. It creates health plans, selects networks and manages vendors, and sets up benefits plans on the marketplace, including benefits structures, coverage options, and provider networks. Licensed brokers log in to the marketplace to select and sell self-funded benefits plans to small businesses. Our offerings encompass reference-based pricing, group insurance captives, community health plans, and association health programs. SMR collaborates with TPAs and licensed brokers to design health plans that meet the specific needs of employers. The revenue from SMR is derived from a set fee charged per enrolled employee (EE) per month (PEPM). The fee varies depending on the type of program selected by the broker. SMR’s fees are paid by small employers.

(ii) ICE develops and maintains all underwriting models. It defines risk criteria based on risk guidelines provided by carriers, manages underwriting of risk, manages claims activity, ensures reinsurance reporting, and handles monthly reinsurance filings. The revenue from ICE is derived as a specific percentage from the premium received, in our capacity as the Managing General Underwriter (MGU) of insurance companies (Carriers). ICE’s fees are paid by carriers.

(iii) HI Card provides medical claims access data and claims negotiation for SMR’s program members who select such services and provides 24/7 accessibility to all incurred medical data for employees who enroll in the HI Card service. Accordingly, all of the revenue we generate from HI Card is from SMR’s program members, which are enrolled employees of the small employer. The revenue generated from HI Card is derived from a set fee charged per enrolled employee (EE) per month (PEPM). The fee may vary depending on services or the network selected by the broker. Brokers are not obligated to utilize the HI Card service for the small employers. HI Card’s fees are paid by small employers.

The following table sets forth the components of our revenues by subsidiaries and percentages of our total revenues for the periods presented:

Cost of revenues

Cost of revenues primarily consists of infrastructure costs to operate our platform such as hosting fees and fees paid to various third-party partners for access to their technology, services and amortization expenses of our capitalized internal-use software related to our platform. We mainly outsource captive management services and data services from the third-party companies. Our internal proprietary system seeks to consistently improve underwriting and services results through machine learning and data feeds. The captive management activities include introducing new carriers, conducting due diligence on carriers, conducting feasibility studies to determine the viability to be a stop-loss carrier on the platform, negotiating terms and contracts, coordinating audit requests, managing relationship with unrelated carriers and their regulators and auditor firms to ensure that our risk associated with our service offerings is minimized. See “Item 1A. Risk Factors — Risks Related to our Business and Industry” for additional information on the risks associated with our service offerings.

Sales and marketing expenses

Sales and marketing expenses primarily consist of personnel-related costs including salaries, benefits and commissions cost for our sales and marketing personnel. Sales and marketing expenses also include the costs for advertising, promotional and other marketing activities, as well as certain fees paid to various third-party for sales and customer acquisition.

General and administrative expenses

General and administrative expenses primarily consist of personnel-related costs and related expenses for our executives, finance, legal, human resources, technical support, and administrative personnel as well as the costs associated with professional fees for external legal, accounting, and other consulting services, insurance premiums.

Research and development expenses

Research and development expenses primarily consist of personnel-related costs, including salaries and benefits for our research and development personnel. Additional expenses include costs related to the software development, quality assurance, and testing of new technology, and enhancement of our existing platform technology.

Provision for income taxes

Provision for income taxes consists primarily of changes to our current and deferred federal and state tax assets and liabilities. Deferred income taxes are recognized for the tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Our deferred tax assets and liabilities are calculated by applying the current tax rates and laws to taxable years in which such differences are expected to reverse.

We continually review the need for, and the adequacy of, valuation allowances, and recognize benefits from our deferred tax assets only when an analysis of both positive and negative factors indicates that it is more likely than not such benefits will be realized.

Income from discontinued operations, net of income taxes

At the end of May 2023 (the “Closing Date”), the Company’s Chief Executive Officer (“CEO”) completed the sale of the Carrier (Roscommon and Roscommon Captive Management Company) for $500,000. Subsequent to this date, we have had no significant involvement in the operations of Carrier, which is now controlled by an independent third-party. Beginning in June 2023, Carrier’s historical financial results for periods prior to the Closing Date have been reflected in our consolidated statements of operations, retrospectively, as discontinued operations. See “Note 3 — Discontinued Operations” to our consolidated financial statements included in this report for further detail.

Results of Operations

The following table sets forth our consolidated statements of operations for the periods presented, both in absolute amount and as a percentage of our total revenues for the periods presented:

(1) We define adjusted EBITDA as income from continuing operations, net of income taxes before net interest expense, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and public company readiness costs deemed not capitalizable. See “Adjusted EBITDA” below for more information and for a reconciliation of adjusted EBITDA to income from continuing operations, net of income taxes, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Adjusted EBITDA

Consolidated Balance Sheet Data

Cash and cash equivalents

As of December 31, 2024, the balance of cash and cash equivalents increased by $5,432,898 to $7,849,248, from $2,416,350 as of December 31, 2023. This increase was mainly attributable to $4,093,444 provided by financing activities. On December 24, 2024, we completed our IPO of 2,300,000 shares of Class A common stock. Please refer to “Liquidity and Capital Resources” for additional information.

Accounts receivable, net

As of December 31, 2024, the balance of accounts receivable decreased by $588,563 to $1,647,103, from $2,235,666 as of December 31, 2023. This decrease was mainly attributable to process improvements and the automation of our accounts receivable (AR) system. The accounts receivable turnover period for the year ended December 31, 2024 was 29 days, representing a 13-day reduction from 42 days for the year ended December 31, 2023.

Other receivables

As of December 31, 2024, the balance of other receivables decreased by $1,180,848 to $500,252, from $1,681,100 as of December 31, 2023. This decrease was mainly attributable to the collection of $1,269,595 from Deferred Administrative Surplus for the year ended December 31, 2024.

Software

As of December 31, 2024, the balance of software increased by $401,076 to $3,962,461, from $3,561,385 as of December 31, 2023. This increase was mainly attributable to a $927,868 investment in new software development and a $14,349 increase in completed existing software, partially offset by a $541,141 increase in accumulated amortization for the year ended December 31, 2024.

Total liabilities

As of December 31, 2024, the balance of total liabilities decreased by $2,810,605 to $2,599,461, from $5,410,066 as of December 31, 2023. This decrease was mainly attributable to the reduction in accounts payable and accrued expenses, resulting from a $1,650,000 payment made in January 2024 for the purchase of Deferred Administrative Surplus, as well as the full repayment of notes payable with a $1,650,000 principal upon maturity in September 2024.

Total stockholders’ equity

As of December 31, 2024, the balance of total stockholders’ equity increased by $7,075,802 to $13,169,028, from $6,093,226 as of December 31, 2023. This increase was mainly attributable to our net proceeds of $5,936,836 from our IPO, after deducting offering costs, underwriting discounts and commissions. Please refer to our Consolidated Statements of Changes in Stockholders’ Equity for additional information.

Comparison of Years Ended December 31, 2024 and 2023

Revenues

Revenues increased by $0.3 million, or 1.8%, to $19.5 million for the year ended December 31, 2024, from $19.2 million for the year ended December 31, 2023. We took a strategic approach to moderating growth in order to achieve critical milestones.

In the third quarter of 2024, we developed new healthcare plan products and established a partnership with a new carrier. We began developing AI-assisted underwriting solutions for mid-sized businesses with more than 150 employees. In the fourth quarter of 2024, we beta-tested these products for mid-sized employers, which unlocked a significant expansion in the addressable market.

Revenues from underwriting modeling decreased by $1.6 million, or 19.2%, for the year ended December 31, 2024, compared to the same period in 2023. This temporary decline was primarily due to the increased offering of A-rated insurance policies, which resulted in lower underwriting fees.

Despite this decline, revenues from fees increased by $1.9 million, or 17.5%, over the same period. The growth in revenues from fees was mainly attributable to the higher program fee payments for better medical network coverage and enhanced health benefits from businesses that purchased A-rated insurance policies, which more than offset the decline in underwriting revenues.

Cost of revenues

Cost of revenues increased by $1.7 million to $4.0 million for the year ended December 31, 2024, from $2.3 million for the year ended December 31, 2023. As a percentage of revenue, cost of revenues increased to 20.8% for the year ended December 31, 2024, from 12.0% for the same period in 2023. This increase was mainly attributable to $1.4 million in higher cost for channel partner and new captive management fee and a $0.2 million increase in amortization of software, most of which was completed in May 2023.

The captive management activities involve third-party captive management companies that assist us in managing relationships with unrelated carriers, their regulators, and auditor firms to ensure that our service offerings carry minimal risk. Of the $1.4 million increase in captive management activity costs, $0.9 million was attributable to deconsolidation. Historically, these costs were incurred by our consolidated entity and reflected as discontinued operations. These five-month costs incurred and reflected in discontinued operations were approximately $0.9 million for the year ended December 31, 2023. The remaining increase was attributable to adding a new captive management partner related to the new products and new channels launched in July 2024.

Sales and marketing expenses

Sales and marketing expense decreased by 0.2 million to $3.2 million for the year ended December 31, 2024, compared to 3.4 million for the year ended December 31, 2023. As a percentage of revenue, sales and marketing expenses decreased to 16.2% for the year ended December 31, 2024, compared to 17.7% for the same period in 2023. This reduction was primarily due to a $0.2 million decrease in sales promotions for products originally designed for small employers, primarily driven by our strategic shift to diversify offerings by introducing new solutions for mid-sized employers during this period.

General and administrative expenses

General and administrative expenses increased by $0.4 million to $8.5 million for the year ended December 31, 2024, from $8.1 million for the year ended December 31, 2023. As a percentage of revenue, general and administrative expenses increased to 43.5% for the year ended December 31, 2024, from 42.2% for the same period in 2023.

We bifurcate general and administrative expenses as follows:

Administrative division — The administrative division mainly represents payroll and benefits expenses incurred related to Executives, Human Resources, Accounting, and Finance related personnel.

Operations division — The operations division mainly consists of payroll and benefits expenses incurred related to our underwriting, claims management, operations development, and enrollment personnel.

Public company readiness costs not deemed capitalizable — The public company readiness costs not deemed capitalizable category relates to services provided by our services providers that while related to our pending initial public offering, are not directly attributable to such pending initial public offering.

The increase in general and administrative expenses for the year ended December 31, 2024, were primarily attributable to the expansion of our administrative and operations divisions. The growth in personnel within our in-house operational, claims, and underwriting teams was essential to supporting our expanding customer base and the rising demand for A-rated insurance policies. Additionally, the expansion of our administrative division enabled us to handle more tasks internally, contributing to greater operational efficiency and long-term cost optimization.

Offsetting these increases, public company readiness costs not deemed capitalizable decreased by approximate $1.1 million in 2024, as a significant portion of our public company preparation work was completed in 2023.

Research and development expenses

Research and development expenses increased by $0.8 million to $2.8 million for the year ended December 31, 2024, from $2.0 million for the year ended December 31, 2023. As a percentage of revenue, research and development expenses increased to 14.4% for the year ended December 31, 2024, compared to 10.5% for the same period in 2023. This increase was primarily attributable to the increase in personnel-related costs related to IT compliance, IT information security and new product service research and development. We continue to prioritize investments in innovation, including developing customized features and optimizing our system and service platforms to enhance customer convenience.

Provision for income taxes

Provision for income taxes decreased by $0.7 million to $0.2 million for the year ended December 31, 2024, from $0.9 million for the year ended December 31, 2023. This decrease was primarily attributable to reduction in our income before tax, which resulted from higher operating expenses mainly driven by the increase in headcount to expand our in-house departments.

Income from discontinued operations, net of income taxes

Income from discontinued operations, net of income taxes, was $1.5 million for the year ended December 31, 2023. At the end of May 2023, our CEO, Tim Johnson, sold his ownership of a self-insurance carrier business to an unrelated third-party. As of that date, we had no continuing significant involvement in the operations of the carrier, and it was controlled by an independent third-party. Accordingly, the profit or loss of the self-insurance carrier business for the year ended December 31, 2023, is presented as discontinued operations.

Adjusted EBITDA

Adjusted EBITDA decreased by $2.5 million to $2.3 million for the year ended December 31, 2024, from $4.8 million for the year ended December 31, 2023. As a percentage of revenue, adjusted EBITDA decreased to 11.7% for the year ended December 31, 2024, from 25.1% for the same period in 2023. This decrease was primarily due to the higher operating expenses mainly driven by the increase in experienced high caliber managers.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have funded our operations primarily through cash from operating activities, short-term loans, our IPO completed in December 2024, and our issuance of Series A Convertible Preferred Stock for $2 million to an institutional investor, which was converted in to shares of Class A Common Stock in August 2023 on a one for one basis.

Our cash and cash equivalents as of December 31, 2024 were held in order to fund our working capital needs. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit and money market accounts that are currently providing minimal returns. We believe that our cash generated from our operating activities will allow for us to continue as a going concern at least twelve months from the date of this Annual Report on Form 10-K.

Summary of Cash Flows — Continuing Business

Operating Activities

Net cash provided by operating activities increased by $0.7 million to $2.2 million for the year ended December 31, 2024, compared to $1.5 million for the same period in 2023, primarily due to process improvements and the automation of our accounts receivable (AR) system. Cash provided by operating activities for the year ended December 31, 2024, principally resulted from our income from continuing operations, net of income taxes $0.7 million, $1.3 million in adjustments for non-cash items primarily related to amortization, amortization of debt discount and stock-based compensation expense, and $0.2 million of cash provided by changes in working capital, including a decrease in accounts receivable of $0.6 million, a decrease in other receivables of $1.2 million, an increase in prepaid expenses and other current assets of $0.5 million, a decrease in accounts payable and accrued expenses of $0.9 million and a decrease in income taxes payable of $0.2 million.

Cash provided by operating activities for the year ended December 31, 2023 principally resulted from our income from continuing operations, net of income taxes $2.5 million, $0.5 million in adjustments for non-cash items primarily related to amortization and deferred tax expenses, and offset by $1.5 million of cash used to fund changes in working capital, including an increase in accounts receivable of $1.3 million, an increase in other receivables of $1.7 million, a decrease in due to discontinued operations of $0.7 million and an increase in accounts payable and accrued expenses of $2.1 million.

Investing Activities

Cash used in investing activities decreased by $1.1 million to $0.8 million for the year ended December 31, 2024, compared to $1.9 million for the year ended December 31, 2023. The primary use of cash used in investing activities in 2024 were related to the development of our internal-use software, reflecting our continued investment in enhancing all our technology platforms.

Cash used in investing activities for the year ended December 31, 2023 principally resulted from the development of our internal-use software of $1.1 million and funds issued pursuant to Promissory Note Agreement with Kang Youle Limited where HIT has entered into a lending agreement of $0.8 million.

Financing Activities

Net cash provided by financing activities was $4.1 million for the year ended December 31, 2024, compared to $1.4 million for the year ended December 31, 2023. The increase was primarily driven by $8.2 million in net proceeds from the issuance of Class A common stock in connection with our IPO. However, this was partially offset by $2.0 million in payments of deferred offering cost and $2.1 million in repayments of notes payable.

Net cash provided by financing activities for the year ended December 31, 2023 principally resulted from $1.7 million in proceeds from short-term loans and partially offset by $0.3 million in payments of deferred offering costs.

Contractual Obligations and Commitments

Our principal commitments consist of obligations under our non-cancellable lease for our office. The following table summarizes the contractual obligation as of December 31, 2024. Future events could cause actual payments to differ from these estimates.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We adopted this standard effective January 1, 2024 using a retrospective method.

We do not believe that any other recently issued but not yet effective accounting pronouncements are expected to have a material effect on our consolidated financial statements.

JOBS Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We have elected to early adopt certain new accounting standards, as disclosed herein. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to Management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the fiscal year ended December 31, 2024. Accordingly, Management believes that the financial statement contained elsewhere in this Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

Management’s Annual Report on Internal Controls over Financial Reporting

This Report does not include a report of Management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, during the period ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.