Chris Kurtenbach joined Health in Tech as Senior Vice President of Operations in November 2024 and held that role until his promotion to COO in March 2025. So HIT was familiar with Kurtenbach’s style and ability. This issue is either personal or a massive overreach of responsibility.
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All,
I took a small position last week. But this last weekend I did a deep dive into their finances and found some concerning thoughts. Basically their utilization of cash and debt.
In Oct 2023 they loaned 800k to an opaque entity in Hong Kong at 8%.
Then 4 months later they take a 1.6M dollar loan at 40% (annualized rate).
My first thoughts that a rapid growing company should rarely ever have a place to put cash that is not going towards growth.
My second thoughts is that if you needed cash 4 months later you were not in a position to loan money in the first place. Which strikes me as incompetence in the management.
If anyone else has more information or thoughts on this weird use of capital please let me know.
Drew
Rethinking position
31 Likes
@drew1618t Good call out there. Was looking to track down that info and didn’t see it in the last 10-K or 10-Q. Wondering if you have a link?
The CFO Julia Qian has been at the company since 2022 and from China originally, not sure that explains the issue, but it could be the link having some dealings with a Hong Kong based financial institution.
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WPR,
The loan was finished in 2024, so it wouldn’t be in the recent 10-k and 10-Q. But you can see it in the S-1 for HIT. Below is from the Note section of the S-1.
Notes PayableOn December 28, 2023, the Company entered into a Promissory Note Agreement with LEAZ Enterprises LLC. Under this Promissory Note Agreement, the Company borrowed $1,650,000 in principal amount. There is no interest on the loan, however there is a repayment premium of $495,000 finalized in January 2024 that is treated as interest expense in financial statements of 2024. The Company amortized the interest expense using effective interest method. This repayment premium is accrued through the effective interest method from January 2024 through the date of maturity. The note will mature on September 28, 2024. As of June 30, 2024 and December 31, 2023, the outstanding principal amount was $1,650,000, respectively.
Loans Receivable, NetOn October 10, 2023, the Company entered into a Promissory Note Agreement with Kang Youle Limited, unsecured lending. Under this Promissory Note Agreement, the Company agreed to lend $800,000 in principal amount, which bears 8% interest per annum. The note’s maturity date is October 10, 2026. As of June 30, 2024 and December 31, 2023, the outstanding principal amount was $800,000, respectively. The Company accrued interest that is due and payable in the amount of $47,997 and $15,999 as of June 30, 2024 and December 31, 2023, respectively. This amount is included within “Loans receivable, net” on the unaudited interim condensed consolidated balance sheet.
Although not part of HIT’s core business, the Company will strategically invest its assets in a manner to maximize risk-adjusted return and promote shareholder wealth. The Company provided the promissory note to Kang Youle Limited, an independent third party with access to a network of insurance sectors internationally.
These are all before the IPO but the CEO and CFO have not changed. Why would you finalize a loan on 10 OCT 2023 and then 2 months later start working on getting a loan where you pay 5 times the interest as the loan you issued pays you? CFO Julia Qian being from China and gives an opaque loan to China does not look good to me.
The only information I find of Kang Youle Limited is when it was defendant in a lawsuit in 2023 for contract debt by Porton Pharmaceutical Chemicals GmbH. (Link, 3 case down). Which again is not a good sign for management giving a loan to an opaque company that is being sued for contract debt.
Overall, I decided to sell my tiny position and take my 55% gains. 3 Reasons stand out for my deciding to sell this company.
- Doing opaque deals in China.
- A growth company should be the best place for money, not issuing loans.
- Taking a loan at 40% annualized rate of return screams incompetence to me.
Drew
23 Likes
It looks like the 40% APR loan was a factoring of some receivables. My guess is that the loan to the Chinese entity was a loan for the CFO to buy shares, which is somewhat common in microcap companies. And then the high APR loan was a factoring of receivables to get cash immediately. These are really good finds Drew but I don’t think this necessarily screams incompetence, though it certainly doesn’t make me feel better.
- Fish
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When they gave the loan, that was 50% of their cash. They knew they needed more cash and then and went and got a loan for cash within 2 months. Either of those two things alone does not scream incompetence but those things together scream incompetence.
If the loan was to the CFO it would have to be disclosed because its over $120,000. So that would be another thing to be concerned about.
Drew
8 Likes
Have you contacted investor relations and asked for an explanation of these activities? Most likely there’s a reasonable set of circumstances that will serve to illuminate the reasons for these transactions. If I’m wrong and the explanation just appears to be obfuscation, or if they fail to respond all together, then for sure there’s something amiss.
I have a 1.4% position. I was just about to buy more, but thought is best if I checked to see if anyone had posted any comments about HIT. Thank you @drew1618t for finding this rather obscure information. I won’t add to my position, but I’m not quite to the point of selling. I’m up quite a lot considering the fact that I’ve held this company for a very short period.
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Not able to address the loan question but I took another look at this over night and exited my 1% position for a 50% gain in 10 days. I missed out on another 10% but on reflection I’m still feeling ok about it.
When I looked at the growth which YoY in the high double digits for the last 2 quarters and accelerating from 56% to 86% I see a number of issues here.
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This is off a really small basis and hasn’t even yet cleared $10m per quarter. Whilst that could indicate future opportunity, it is also frankly fairly easy to grow fast at those levels. It also warrants the usual high risk warnings that come with the territory of micro caps.
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Apparently there has been a growth history of fits and starts so there is no long term evidence of sustained high growth here.
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US Medical and healthcare stocks are at high risk to the US administration’s policy stance and that has mostly been negative in the last year.
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Worst of all - the sequential revenue build is pretty much level at $1m per quarter and not really showing any growth. Once the YoY comparisons catch up the high double digits will drop to single digits at this rate at best. I can’t imagine the SP reacting well to that.
All in all - whilst a very interesting company with the possibility of very high potential and wishing best of luck to all holders (and happy to be proved wrong), I’m freeing up the capital to invest in some other extremely fast growing high potential and potentially lower risk businesses with very clear tailwinds. (IREN was the recipient of much of the proceeds).
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OK, I just sent a letter to IR asking for an explanation of the loan activity. I’ll post their reply when and if I receive one.
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