10-Q
Q10001833769false--12-31P9Mhttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://hyperfine.io/20240331#AccruedExpensesAndOtherCurrentLiabilitieshttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrent0001833769us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-12-310001833769us-gaap:EquipmentMember2023-12-310001833769us-gaap:CostOfSalesMember2023-01-012023-03-310001833769us-gaap:FairValueInputsLevel1Memberhypr:MoneyMarketFundsAndDemandDepositAccountsMember2024-03-310001833769us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001833769us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001833769us-gaap:AdditionalPaidInCapitalMember2023-12-310001833769us-gaap:LeaseholdImprovementsMember2023-12-310001833769us-gaap:CommonClassAMemberhypr:AnnualEmployeeGrantsMember2024-01-012024-03-3100018337692023-09-300001833769us-gaap:CommonStockMember2024-01-012024-03-310001833769us-gaap:AdditionalPaidInCapitalMember2022-12-310001833769us-gaap:RetainedEarningsMember2023-12-310001833769us-gaap:AdditionalPaidInCapitalMember2024-03-3100018337692024-01-012024-03-310001833769us-gaap:CommonClassAMember2023-12-3100018337692021-01-012021-12-310001833769us-gaap:RetainedEarningsMember2023-01-012023-03-310001833769us-gaap:ServiceMember2024-01-012024-03-310001833769us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001833769us-gaap:ToolsDiesAndMoldsMember2024-03-310001833769us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2024-03-3100018337692023-05-012023-05-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2024-01-012024-03-310001833769us-gaap:RestrictedStockMember2024-01-012024-03-310001833769us-gaap:RetainedEarningsMember2024-03-310001833769us-gaap:RetainedEarningsMember2024-01-012024-03-310001833769us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001833769us-gaap:ComputerEquipmentMember2023-12-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-12-310001833769us-gaap:LeaseholdImprovementsMember2024-03-310001833769us-gaap:CommonClassBMember2024-03-310001833769us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001833769us-gaap:CommonClassBMember2024-05-010001833769us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2024-01-012024-03-310001833769us-gaap:RestrictedStockMember2023-01-012023-03-310001833769hypr:SalesAndMarketingDevicesMember2024-03-310001833769srt:ExecutiveOfficerMemberus-gaap:CommonClassAMember2024-01-012024-03-310001833769us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-01-012023-03-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2024-03-310001833769hypr:TradeShowAssetsMember2024-03-310001833769us-gaap:ComputerEquipmentMember2024-03-310001833769us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-3100018337692023-01-012023-03-310001833769us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2023-01-012023-12-310001833769us-gaap:NonUsMember2024-01-012024-03-310001833769hypr:SalesAndMarketingDevicesMember2023-12-310001833769us-gaap:CommonClassBMemberus-gaap:CommonStockMember2023-03-3100018337692024-03-310001833769us-gaap:AdditionalPaidInCapitalMember2023-03-310001833769us-gaap:RestrictedStockUnitsRSUMember2023-12-310001833769us-gaap:EmployeeStockOptionMember2024-01-012024-03-3100018337692021-12-310001833769hypr:HyperfineEquityIncentivePlanMember2024-03-310001833769us-gaap:ProductMember2024-01-012024-03-310001833769us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001833769us-gaap:RelatedPartyMember2023-12-3100018337692022-12-310001833769us-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-03-310001833769us-gaap:CommonStockMember2023-01-012023-03-310001833769us-gaap:TransferredOverTimeMemberus-gaap:ServiceMember2023-01-012023-03-310001833769hypr:HyperfineEquityIncentivePlanMember2024-01-012024-03-310001833769us-gaap:CommonClassAMembersrt:MinimumMember2024-03-310001833769us-gaap:ProductMemberus-gaap:TransferredAtPointInTimeMember2024-01-012024-03-3100018337692024-04-012024-03-310001833769us-gaap:ProductMember2023-01-012023-03-310001833769hypr:EarnOutSharesMembersrt:MaximumMemberus-gaap:CommonClassAMember2024-03-310001833769hypr:CatalyzerCorporation4Member2023-12-3100018337692023-12-310001833769hypr:EarnOutSharesMember2024-01-012024-03-310001833769us-gaap:CommonClassAMember2024-03-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2023-01-012023-03-310001833769us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001833769us-gaap:IndemnificationGuaranteeMember2024-03-310001833769us-gaap:CommonClassBMemberus-gaap:CommonStockMember2024-03-310001833769us-gaap:FairValueInputsLevel3Member2024-03-310001833769hypr:EarnOutSharesMember2023-01-012023-03-310001833769hypr:ShareBasedPaymentArrangementEmployeeNewHireMemberus-gaap:CommonClassAMember2024-01-012024-03-310001833769hypr:TradeShowAssetsMember2023-12-310001833769us-gaap:TransferredOverTimeMemberus-gaap:ServiceMember2024-01-012024-03-310001833769stpr:CT2024-03-010001833769us-gaap:RetainedEarningsMember2023-03-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2023-12-310001833769us-gaap:ConstructionInProgressMember2024-03-310001833769us-gaap:FairValueInputsLevel1Memberhypr:MoneyMarketFundsAndDemandDepositAccountsMember2023-12-310001833769us-gaap:ToolsDiesAndMoldsMember2023-12-310001833769us-gaap:FairValueInputsLevel2Member2023-03-310001833769us-gaap:RelatedPartyMember2024-03-310001833769us-gaap:CommonClassBMember2023-12-310001833769hypr:ResearchDevicesMember2023-12-310001833769us-gaap:CommonClassAMemberus-gaap:CommonStockMember2023-03-310001833769us-gaap:EquipmentMember2024-03-310001833769us-gaap:ProductMemberus-gaap:TransferredAtPointInTimeMember2023-01-012023-03-310001833769hypr:CatalyzerCorporation4Member2024-03-310001833769us-gaap:CostOfSalesMember2024-01-012024-03-310001833769hypr:CatalyzerCorporation4Member2023-01-012023-03-310001833769us-gaap:RetainedEarningsMember2022-12-310001833769us-gaap:CommonClassBMemberus-gaap:CommonStockMember2023-12-310001833769us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001833769hypr:HyperfineEquityIncentivePlanMember2023-12-310001833769us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2024-01-012024-03-310001833769us-gaap:ServiceMember2023-01-012023-03-310001833769us-gaap:RestrictedStockUnitsRSUMember2024-03-310001833769us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2023-12-310001833769us-gaap:CommonClassAMember2024-01-012024-03-3100018337692025-01-012024-03-310001833769hypr:CatalyzerCorporation4Member2024-01-012024-03-310001833769us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001833769stpr:CT2024-03-310001833769us-gaap:CommonClassAMember2024-05-0100018337692023-03-3100018337692020-12-310001833769hypr:ResearchDevicesMember2024-03-310001833769us-gaap:FairValueInputsLevel2Member2024-03-310001833769us-gaap:ConstructionInProgressMember2023-12-310001833769us-gaap:FairValueInputsLevel3Member2023-03-310001833769us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-31xbrli:pureiso4217:USDxbrli:sharesutr:sqftxbrli:shareshypr:Systemhypr:Customeriso4217:USD

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ___________to_________

Commission File Number: 001-39949

_________________

Hyperfine, Inc.

(Exact name of registrant as specified in its charter)

_________________

Delaware

 

98-1569027

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer

Identification No.)

 

351 New Whitfield Street

Guilford, Connecticut

 

06437

(Address of principal executive offices)

 

(Zip Code)

 

(866) 796-6767

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Trading Symbol(s)

 

Name of each exchange
on which registered

Class A common stock, $0.0001 Par Value Per Share

 

HYPR

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer      ☒

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 1, 2024, the registrant had 56,952,666 shares of Class A common stock outstanding and 15,055,288 shares of Class B common stock outstanding.

 


 

TABLE OF CONTENTS

 

 

 

Page

 

Cautionary Statement Regarding Forward-Looking Statements

3

PART I

FINANCIAL INFORMATION

5

Item 1.

Financial Statements

5

 

Condensed Consolidated Balance Sheets (unaudited)

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

6

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

7

 

Condensed Consolidated Statements of Cash Flows (unaudited)

8

 

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II

OTHER INFORMATION

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

 

Signatures

31

 

All brand names or trademarks appearing in this report are the property of their respective holders. Use or display by us of other parties’ trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners. Unless the context requires otherwise, references in this report to the “Company,” “we,” “us,” and “our” refer to Hyperfine, Inc. and its wholly-owned subsidiaries, including Hyperfine Operations, Inc., or Legacy Hyperfine, and Liminal Sciences, Inc., or Liminal, as the case may be.

2


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that relate to future events or our future financial performance regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. These statements are based on the beliefs and assumptions of our management team. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the success, cost and timing of our product development activities;
the commercialization and adoption of our existing products and the success of our future product offerings;
the potential attributes and benefits of our products and services;
our ability to obtain and maintain regulatory approval for our products, and any related restrictions and limitations of any approved product;
our ability to identify, in-license or acquire additional technology;
our ability to maintain our existing licensing, manufacturing and supply agreements;
our ability to compete with other companies currently marketing or engaged in the development of magnetic resonance imaging technologies, many of which have greater financial and marketing resources than us;
the size and growth potential of the markets for our products and services, and the ability of our products and services to serve those markets, either alone or in partnership with others;
the pricing of our products and services and reimbursement for medical procedures conducted using our products and services;
changes in applicable laws or regulations;
our estimates regarding expenses, revenue, capital requirements and needs for additional financing;
our ability to raise financing in the future;
our financial performance;
our success in retaining or recruiting, or necessary changes in, our officers, key employees or directors;
intense competition and competitive pressures from other companies in the industry in which we operate;
market conditions and global and economic factors, such as inflation or the conflicts in Ukraine and the Middle East;
our intellectual property rights; and
the effect of legal, tax and regulatory changes.

 

These and other risks and uncertainties are described in greater detail under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, in Item 1A of Part II of this Quarterly Report on Form 10-Q, and in other filings that we make with the Securities and Exchange Commission

3


 

(the “SEC”). The risks described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

4


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

HYPERFINE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

 

 

March 31,
2024

 

 

December 31,
2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,204

 

 

$

75,183

 

Restricted cash

 

 

 

 

 

621

 

Accounts receivable, less allowance of $248 and $321 as of March 31, 2024 and December 31, 2023, respectively

 

 

5,343

 

 

 

3,189

 

Unbilled receivables

 

 

895

 

 

 

942

 

Inventory

 

 

7,298

 

 

 

6,582

 

Prepaid expenses and other current assets

 

 

2,950

 

 

 

2,391

 

Total current assets

 

 

79,690

 

 

 

88,908

 

Property and equipment, net

 

 

3,706

 

 

 

2,999

 

Other long term assets

 

 

2,047

 

 

 

2,292

 

Total assets

 

$

85,443

 

 

$

94,199

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

2,532

 

 

$

1,214

 

Deferred grant funding

 

 

 

 

 

621

 

Deferred revenue

 

 

1,527

 

 

 

1,453

 

Due to related parties

 

 

45

 

 

 

61

 

Accrued expenses and other current liabilities

 

 

4,663

 

 

 

5,419

 

Total current liabilities

 

 

8,767

 

 

 

8,768

 

Long term deferred revenue

 

 

1,021

 

 

 

968

 

Other noncurrent liabilities

 

 

17

 

 

 

64

 

Total liabilities

 

 

9,805

 

 

 

9,800

 

COMMITMENTS AND CONTINGENCIES (NOTE 13)

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Class A Common stock, $.0001 par value; 600,000,000 shares authorized; 56,952,666  and 56,840,949 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

5

 

 

 

5

 

Class B Common stock, $.0001 par value; 27,000,000 shares authorized; 15,055,288 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

339,201

 

 

 

338,114

 

Accumulated deficit

 

 

(263,570

)

 

 

(253,722

)

Total stockholders' equity

 

 

75,638

 

 

 

84,399

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

85,443

 

 

$

94,199

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


 

HYPERFINE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Sales

 

 

 

 

 

 

Device

 

$

2,704

 

 

$

2,132

 

Service

 

 

591

 

 

 

503

 

Total sales

 

 

3,295

 

 

 

2,635

 

Cost of sales

 

 

 

 

 

 

Device

 

 

1,499

 

 

 

1,071

 

Service

 

 

442

 

 

 

409

 

Total cost of sales

 

 

1,941

 

 

 

1,480

 

Gross margin

 

 

1,354

 

 

 

1,155

 

Operating Expenses:

 

 

 

 

 

 

Research and development

 

 

5,570

 

 

 

5,461

 

General and administrative

 

 

4,430

 

 

 

6,182

 

Sales and marketing

 

 

2,004

 

 

 

2,547

 

Total operating expenses

 

 

12,004

 

 

 

14,190

 

Loss from operations

 

 

(10,650

)

 

 

(13,035

)

Interest income

 

 

796

 

 

 

869

 

Other income, net

 

 

6

 

 

 

6

 

Loss before provision for income taxes

 

 

(9,848

)

 

 

(12,160

)

Provision for income taxes

 

 

 

 

 

 

Net loss and comprehensive loss

 

$

(9,848

)

 

$

(12,160

)

Net loss per common share attributable to common stockholders, basic and diluted

 

$

(0.14

)

 

$

(0.17

)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

71,934,045

 

 

 

70,864,226

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6


 

HYPERFINE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except share amounts)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2023

 

 

56,840,989

 

 

$

5

 

 

 

15,055,288

 

 

$

2

 

 

$

338,114

 

 

$

(253,722

)

 

$

84,399

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,848

)

 

 

(9,848

)

Issuance of restricted stock

 

 

41,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

70,670

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

55

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,032

 

 

 

 

 

 

1,032

 

Balance, March 31, 2024

 

 

56,952,666

 

 

 

5

 

 

 

15,055,288

 

 

 

2

 

 

 

339,201

 

 

 

(263,570

)

 

 

75,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2022

 

 

55,622,488

 

 

$

5

 

 

 

15,055,288

 

 

$

2

 

 

$

333,199

 

 

$

(209,484

)

 

$

123,722

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,160

)

 

 

(12,160

)

Issuance of restricted stock

 

 

324,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

54,211

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,126

 

 

 

 

 

 

1,126

 

Balance, March 31, 2023

 

 

56,000,995

 

 

 

5

 

 

 

15,055,288

 

 

 

2

 

 

 

334,374

 

 

 

(221,644

)

 

 

112,737

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

HYPERFINE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Three Months
Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(9,848

)

 

$

(12,160

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

263

 

 

 

254

 

Stock-based compensation expense

 

 

1,032

 

 

 

1,126

 

Payments received on net investment in lease

 

 

34

 

 

 

2

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(2,154

)

 

 

(915

)

Unbilled receivables

 

 

47

 

 

 

(259

)

Inventory

 

 

(833

)

 

 

(1,122

)

Prepaid expenses and other current assets

 

 

(1,252

)

 

 

272

 

Due from related parties

 

 

 

 

 

48

 

Prepaid inventory

 

 

693

 

 

 

281

 

Other long term assets

 

 

200

 

 

 

(18

)

Accounts payable

 

 

1,208

 

 

 

954

 

Deferred grant funding

 

 

(621

)

 

 

(58

)

Deferred revenue

 

 

127

 

 

 

(125

)

Due to related parties

 

 

(16

)

 

 

64

 

Accrued expenses and other current liabilities

 

 

(1,392

)

 

 

(1,835

)

Operating lease liabilities, net

 

 

2

 

 

 

 

Net cash used in operating activities

 

 

(12,510

)

 

 

(13,491

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(145

)

 

 

(61

)

Net cash used in investing activities

 

 

(145

)

 

 

(61

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

55

 

 

 

49

 

Net cash provided by financing activities

 

 

55

 

 

 

49

 

Net decrease in cash and cash equivalents and restricted cash

 

 

(12,600

)

 

 

(13,503

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

75,804

 

 

 

118,243

 

Cash, cash equivalents and restricted cash, end of period

 

 

63,204

 

 

 

104,740

 

Reconciliation of cash, cash equivalents, and restricted cash reported in the balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

 

63,204

 

 

 

104,027

 

Restricted cash

 

 

 

 

 

713

 

Total cash, cash equivalents and restricted cash

 

$

63,204

 

 

$

104,740

 

Supplemental disclosure of noncash information:

 

 

 

 

 

 

Unpaid purchase of property and equipment

 

$

742

 

 

$

36

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Hyperfine, Inc. (together with its subsidiaries, as applicable, “Hyperfine” or the “Company”), formerly known as HealthCor Catalio Acquisition Corp. (“HealthCor”), was incorporated as a Cayman Islands exempted company on November 18, 2020. The Company’s legal name became Hyperfine, Inc. in connection with the closing (the “Closing”) of the business combination with HealthCor (the “Business Combination”) on December 22, 2021 (the “Closing Date”). In connection with the Closing, Hyperfine, Inc., a Delaware corporation (“Legacy Hyperfine”), and Liminal Sciences, Inc., a Delaware corporation (“Liminal”), merged with and into separate wholly owned subsidiaries of HealthCor and became wholly-owned subsidiaries of the Company (the “Mergers”), and changed their names to Hyperfine Operations, Inc. and Liminal Operations, Inc., respectively. Liminal subsequently changed its name to Liminal Sciences, Inc.

 

The Company is an innovative health technology business with a mission to revolutionize patient care globally through accessible, affordable, clinically relevant ultra-low-field (“ULF”) magnetic resonance (“MR”) brain imaging. The Company's Swoop® Portable MR Imaging® System (“Swoop® system”) produces high-quality images at a lower magnetic field strength than conventional magnetic resonance imaging (“MRI”) scanners. The Swoop® system is designed to transform brain MR for the patient, the clinician and the provider, and to provide a highly differentiated experience for patients, timely imaging to clinicians, and favorable economics for hospital administrators. The Swoop® system is a portable, ULF MRI device for producing images that display the internal structures of the head where full diagnostic examination is not clinically practical. When interpreted by a trained physician, these images provide information that can be useful in determining a diagnosis. Healthcare professionals can use the Swoop® system to make effective clinical diagnoses and decisions in various care settings where conventional MRI devices are inaccessible. The easy-to-use interface and portable design of the Company's Swoop® system make it easily and readily accessible anywhere in a hospital, clinic, or patient care site and it does not require any special facilities accommodations nor specialized personnel to operate safely. ULF MR does not expose patients to harmful ionizing radiation and compares favorably in this regard to X-ray computed tomography (“CT”) or positron emission tomography (“PET”). The Company's Swoop® system received initial 510(k) clearance for brain imaging from the U.S. Food and Drug Administration (“FDA”) in 2020. In February and October 2023, the Company received 510(k) clearances from the FDA of the latest updates to its Swoop® system AI-powered software. The combination of these two software updates significantly improved diffusion-weighted imaging (“DWI”), incorporated deep-learning based denoising in the post-processing of DWI images for crisper images, and improved image quality for all Swoop® system sequences. The Swoop® system has also received marketing authorization for brain imaging in several countries, including the European Union (CE certification), the United Kingdom (UK Conformity Assessment (“UKCA”)), Canada, Australia and New Zealand. All of the Company’s revenue to date has been generated from sales of the Swoop® system and related services. The Company has an indirect wholly-owned subsidiary in the United Kingdom that did not have any significant operations during 2023 nor the three months ended March 31, 2024.

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The unaudited accompanying condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. All intercompany transactions and balances have been eliminated.

 

These condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date.

 

9


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods. The results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2024, or any other period.

 

Except as described elsewhere in this Note 2 under the heading “Recently Issued Accounting Pronouncements”, there have been no material changes to the Company’s significant accounting policies as described in the audited consolidated financial statements as of December 31, 2023 and 2022.

Risks and Uncertainties

 

The Company is subject to risks and uncertainties caused by events with significant geopolitical and macroeconomic impacts, including, but not limited to, the conflicts in Ukraine and the Middle East, inflation and actions taken to counter such impacts. The Company relies on single source manufacturers and suppliers for the supply of its products. Disruption from these manufacturers or suppliers has and would have a negative impact on the Company’s business, financial position and results of operations in its consolidated financial statements. The Company continues to critically review its liquidity and anticipated capital requirements in light of the significant uncertainty created by geopolitical and macroeconomic conditions.

 

Concentrations of Credit Risk

 

The Company's cash and cash equivalents are deposited with several major financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company reduces this risk by maintaining such deposits with high quality financial institutions that management believes are creditworthy and the Company monitors this credit risk and makes adjustments to the concentrations as necessary. The Company has not experienced any losses in such accounts and does not believe that it is exposed to any significant risk of loss on these balances.

 

With respect to accounts receivable, credit risk is mitigated by the Company’s ongoing credit evaluation of its customers’ financial condition. As of March 31, 2024 and December 31, 2023, the Company had three customers and two customers, respectively, that each accounted for more than 10% of trade receivables. With respect to revenues, three customers and one customer each accounted for more than 10% of revenues for the three months ended March 31, 2024 and 2023, respectively.

 

Segment Information

The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer (“CEO”). Substantially all of the Company’s long-lived assets are located in the United States. Other than $2,434 of revenue recognized in non-U.S. countries for the three months ended March 31, 2024, all of the revenues during this period were earned in the United States. Since the Company is aggregated into a single reportable segment, all required financial segment information is provided in the condensed consolidated financial statements.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with certainty. On an ongoing basis, management evaluates these estimates and assumptions. Significant estimates and assumptions included:

Revenue recognition, including determination of the timing and pattern of satisfaction of performance obligations, determination of the standalone selling price (“SSP”) of performance obligations;
Allowance for credit losses;
Net realizable value (the selling price as well as estimated costs of disposal and transportation) of inventory, and demand and future use of inventory;

10


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

Valuation allowances with respect to deferred tax assets; and
Assumptions underlying the fair value used in the calculation of stock-based compensation expense.

The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.

 

Recently Issued Accounting Pronouncements

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances effective tax rate reconciliation disclosure requirements and provides clarity to the disclosures of income taxes paid, income before taxes and provision for income taxes. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating this ASU to determine the impact of the amendments on the Company’s consolidated financial statements and disclosures.

 

In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. This ASU is applicable to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2024, and subsequent interim periods, with early application permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC have not had, or are not believed by management to have, a material impact on the Company’s present or future financial statements.

 

 

 

3. REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers by product type. The Company believes that these categories best represent the payor types by nature, amount, timing and uncertainty of its revenue streams. The following table summarizes the Company’s disaggregated revenues:

 

 

 

 

Three Months Ended
March 31,

 

 

 

Pattern of Recognition

 

2024

 

 

2023

 

Device

 

Point in time

 

$

2,704

 

 

$

2,132

 

Service

 

Over time

 

 

591

 

 

 

503

 

Total revenue

 

 

 

$

3,295

 

 

$

2,635

 

 

11


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

Contract Balances

Contract balances represent amounts presented in the condensed consolidated balance sheets when either the Company has transferred goods or services to the customer, or the customer has paid consideration to the Company under the contract. These contract balances include trade accounts receivable and deferred revenue. Deferred revenue represents consideration received from customers at the beginning of the subscription period for services that are transferred to the customer over the respective subscription period. The accounts receivable balances represent amounts billed to customers for goods and services where the Company has an unconditional right to payment of the amount billed.

The following table provides information about receivables and deferred revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Accounts receivable, net

 

$

5,343

 

 

$

3,189

 

Unbilled receivables - current

 

$

895

 

 

$

942

 

Unbilled receivables - non-current(1)

 

$

909

 

 

$

1,044

 

Deferred revenue

 

$

1,527

 

 

$

1,453

 

Long term deferred revenue

 

$

1,021

 

 

$

968

 

______________________

(1) Recorded in other long term assets in the Company’s consolidated balance sheets.

 

The Company recognizes a receivable when it has an unconditional right to payment. Typical payment terms require the Company's customers to pay the Company within 30 days of invoice and up to less than one year based on the terms agreed upon with the respective customer.

 

Accounts Receivable, Unbilled Services, and Deferred Revenue

 

Accounts receivable are recorded at net realizable value. Unbilled receivables arise when performance obligations are satisfied for which revenue has been recognized but the customers have not been billed. Contractual provisions and payment schedules may or may not correspond to the timing of the performance of services under the contract.

 

Deferred revenue is a contract liability that consists of customer payments received in advance of performance and billings in excess of revenue recognized, net of revenue recognized from the balance at the beginning of the period.

 

The amount of revenue recognized during the three months ended March 31, 2024 and 2023 that was included in the deferred revenue balance at the beginning of the period was $493 and $430, respectively.

Timing of Billing and Performance

 

Difference in the timing of revenue recognition and associated billings and cash collections result in recording of billed accounts receivable, unbilled accounts receivable (including contract assets), and deferred revenue on the consolidated balance sheet. Amounts are billed in accordance with the agreed-upon contractual terms, resulting in recording unbilled accounts receivable in instances where the right to bill is contingent solely on the passage of time, and contract assets in instances where the right to consideration is conditional on something other than the passage of time.

 

Revenue from Leasing Arrangements

 

Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers and remains separately accounted for under ASC 842, including leases for the three months ended March 31, 2024 and the year ended December 31, 2023. The Company records operating lease rental revenue as service revenue on a straight-line basis over the lease term. The Company recorded service revenue from lease arrangements of $82 and $114 for the three months ended March 31, 2024 and 2023, respectively. The Company records revenue from the sale of hardware devices under sales-type leases as device revenue in an amount equal to the present value of minimum

12


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

lease payments at the inception of the lease. Sales-type leases also produce financing income, which is included in device revenue in the consolidated statements of operations and comprehensive loss and is recognized at effective rates of return over the lease term.

 

Costs of Obtaining or Fulfilling Contracts

The Company incurs incremental costs of obtaining contracts with customers. Incremental costs of obtaining contracts, which include commissions paid as a result of obtaining contracts with customers, are capitalized to the extent that the Company expects to recover such costs. Capitalized costs are amortized in a pattern that is consistent with the Company’s transfer to the customer of the related goods and services. Such costs are recorded in Other long term assets and were $378 and $391 as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $78 and $16, respectively, in expense related to the amortization of the capitalized contract costs.

Transaction price allocated to remaining performance obligations

As of March 31, 2024 and December 31, 2023, the Company had remaining performance obligations amounting to $5,618 and $5,661, respectively. The Company expects to recognize approximately 30% of its remaining performance obligations as revenue in fiscal year 2024, and an additional 70% in fiscal year 2025 and thereafter.

 

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2 — Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets or liabilities valued with Level 3 inputs.

The carrying value of cash and cash equivalents, accounts payable and accrued expenses and other current liabilities approximates their fair values due to the short-term or on demand nature of these instruments.

The Company had no assets or liabilities classified as Level 2 or Level 3 and there were no transfers between fair value measurement levels during the three months ended March 31, 2024 and 2023.

The Company had $63,005 and $74,685 of money market funds, demand deposit and savings accounts included in cash and cash equivalents and restricted cash as of March 31, 2024 and December 31, 2023, respectively. These assets were valued using quoted prices in active markets and accordingly were classified as Level 1.

13


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

 

5. INVENTORIES

A summary of inventories is as follows:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Raw materials

 

$

2,617

 

 

$

1,757

 

Finished goods

 

 

4,681

 

 

 

4,825

 

Total inventories

 

$

7,298

 

 

$

6,582

 

Manufacturing overhead costs primarily include management’s best estimate and allocation of the labor costs incurred related to acquiring finished goods from the Company’s contract manufacturer. Labor costs include wages, taxes and benefits for employees involved in warehousing, logistics coordination, material sourcing, and production planning activities.

 

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, are recorded at historical cost and consist of the following:

 

 

March 31,
2024

 

 

December 31,
2023

 

Laboratory equipment

 

$

986

 

 

$

986

 

Research devices

 

 

1,679

 

 

 

1,532

 

Sales and marketing devices

 

 

490

 

 

 

490

 

Computer equipment

 

 

678

 

 

 

668

 

Construction in progress

 

 

1,335

 

 

 

595

 

Tooling

 

 

509

 

 

 

505

 

Trade show assets

 

 

254

 

 

 

254

 

Leased devices

 

 

397

 

 

 

397

 

Other

 

 

612

 

 

 

611

 

 

 

6,940

 

 

 

6,038

 

Less: Accumulated depreciation and amortization

 

 

(3,234

)

 

 

(3,039

)

Property and equipment, net

 

$

3,706

 

 

$

2,999

 

 

Depreciation expense amounted to $263 and $254 for the three months ended March 31, 2024 and 2023, respectively.

 

7. RIGHT-OF-USE (“ROU”) ASSETS AND LEASES LIABILITIES

 

The Company has operating leases for its corporate offices, including its Palo Alto, California lease agreement which expires on April 30, 2025. As of March 31, 2024 the Palo Alto, California lease had an operating lease ROU assets of $194, current portion of operating lease liabilities of $189, and noncurrent portion of operating lease liabilities of $17, which are included in the Company's condensed consolidated balance sheets in other long term assets, accrued expenses and other current liabilities, and other noncurrent liabilities, respectively.

The weighted-average remaining lease term associated with the measurement of the Company's operating lease obligations is 13 months and the weighted-average discount rate is 7.9%.

 

The Company recorded short-term operating lease cost during the three months ended March 31, 2024 of $45. Cash paid for operating lease during the three months ended March 31, 2024 was $48.

 

Future minimum commitments due under the lease agreement as of March 31, 2024 are $165 for the remainder of 2024 and $50 thereafter.

 

14


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

On March 1, 2024, the Company entered into a lease agreement for approximately 10,000 square feet of warehouse space in Guilford, Connecticut. The lease term is 12 months beginning March 1, 2024, and includes an option to renew for an additional one-year term at the then prevailing rental rate. The exercise of the lease renewal option is at the Company’s sole discretion. The Company applied ASC 842 practical expedient for short-term leases, which allows entities with leases of 12 months or shorter to not recognize ROU assets and lease liabilities for short-term leases. Future minimum commitments due under the lease agreement as of March 31, 2024, are $52 for the remainder of 2024 and $12 thereafter.

 

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Bonuses

 

$

1,012

 

 

$

2,463

 

Contracted services

 

 

1,894

 

 

 

1,237

 

Legal fees

 

 

339

 

 

 

412

 

Payroll and related benefits

 

 

1,072

 

 

 

676

 

Operating lease liabilities

 

 

189

 

 

 

185

 

Other

 

 

157

 

 

 

446

 

Total accrued expenses and other current liabilities

 

$

4,663

 

 

$

5,419

 

 

 

9. EQUITY INCENTIVE PLAN

 

The Company's 2021 Equity Incentive Plan (the “Hyperfine Plan”) is administered by the Company's board of directors and its compensation committee, which may grant restricted stock units (“RSUs”) and options to purchase shares either as incentive stock options or non-qualified stock options, and other stock-based awards. The option grants are subject to certain terms and conditions, option periods and conditions, exercise rights and privileges as set forth in the Hyperfine Plan.

 

Stock option activity

 

The following table summarizes the changes in the Company’s outstanding stock options for the three months ended March 31, 2024:

 

 

 

Number of
Options

 

Outstanding at January 1, 2024

 

 

14,271,587

 

Granted (1)

 

 

4,461,083

 

Exercised

 

 

(70,670

)

Forfeited / Cancelled / Expired

 

 

(181,006

)

Outstanding at March 31, 2024

 

 

18,480,994

 

_____________________________________________

(1)
Includes employee new hire grants of stock options to purchase 91,100 shares of the Company's Class A common stock. Also includes annual employee grants of stock options and special employee grants of stock options to purchase 1,934,983 shares of the Company's Class A common stock, and grants to executive officers of stock options to purchase 2,435,000 shares of the Company's Class A common stock. The grants will vest 25% on the first anniversary date of the grant with the remainder vesting equally over the remaining 36 months, subject to the employee’s continued service to the Company through the applicable vesting dates.

 

15


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

In general, employee awards will vest based on continued service which is generally over four years. Nonemployee director awards generally will vest in one year based on continued service on the date of the next regular annual stockholders meeting. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The grant date fair value was determined using similar methods and assumptions as those previously disclosed by the Company.

 

Restricted stock unit activity

 

The following table summarizes the changes in the Company’s outstanding RSUs for the three months ended March 31, 2024:

 

 

 

Number of
RSUs

 

Outstanding at January 1, 2024

 

 

369,026

 

Granted

 

 

 

Vested

 

 

(41,036

)

Forfeited

 

 

(13,747

)

Outstanding at March 31, 2024

 

 

314,243

 

 

 

The following table presents details of stock-based compensation expenses by functional line item noted within the Company's operating expenses:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cost of sales

 

$

24

 

 

$

23

 

Research and development

 

 

337

 

 

 

206

 

Sales and marketing

 

 

39

 

 

 

38

 

General and administrative

 

 

632

 

 

 

859

 

 

 

$

1,032

 

 

$

1,126

 

 

 

10. NET LOSS PER SHARE

 

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all common equivalent shares of the Company, including outstanding stock options, RSUs and Earn-Out Shares (defined below), to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all common equivalent shares of the Company outstanding would have been anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net Loss

 

$

(9,848

)

 

$

(12,160

)

Numerator for Basic and Dilutive EPS – Loss available to common stockholders

 

$

(9,848

)

 

$

(12,160

)

Denominator:

 

 

 

 

 

 

Common Stock

 

 

71,934,045

 

 

 

70,864,226

 

Denominator for Basic and Dilutive EPS - Weighted-average common stock

 

 

71,934,045

 

 

 

70,864,226

 

Basic and dilutive net loss per share

 

$

(0.14

)

 

$

(0.17

)

 

16


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

Since the Company was in a net loss position for all periods presented, net loss per share attributable to Class A and Class B common stockholders was the same on a basic and diluted basis, as the inclusion of all common equivalent shares outstanding would have been anti-dilutive. Anti-dilutive common equivalent shares were as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Outstanding options to purchase common stock

 

 

18,480,994

 

 

 

13,297,988

 

Outstanding RSUs

 

 

314,243

 

 

 

1,151,596

 

Earn-Out Shares (1)

 

 

9,357,835

 

 

 

9,400,616

 

Total anti-dilutive common equivalent shares

 

 

28,153,072

 

 

 

23,850,200

 

_________________________

(1) The Company will issue to holders of Legacy Hyperfine and Liminal securities as of immediately prior to the effective time of the Mergers, in accordance with their pro rata share, up to 10,000,000 shares of Class A common stock as earn-out consideration (the “Earn-Out Shares”) net of forfeitures, if at any time during the period between the Closing Date of December 22, 2021 and the third anniversary of the Closing Date (the “Earn-Out Period”), (i) the last share price of the Class A common stock is greater than or equal to $15.00 for any 20 trading days within any 30 consecutive trading day period, or (ii) there is a transaction that will result in shares of Class A common stock being converted or exchanged into the right to receive cash or other consideration having a value greater than or equal to $15.00. During the Earn-Out Period, if there is a transaction (other than for stock splits, stock dividends, special cash dividends, reorganizations, recapitalizations or similar transactions affecting the Class A common stock) that will result in the shares of Class A common stock being converted or exchanged into the right to receive cash or other consideration having a value less than $15.00, then the right to receive Earn-Out Shares will terminate.

 

11. INCOME TAXES

 

The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

 

Income taxes for the three months ended March 31, 2024 and 2023 are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, if they occur. The Company’s estimated annual effective tax rate was 0.0% for the three months ended March 31, 2024 and 2023. The primary reconciling items between the federal statutory rate of 21.0% for these periods and the Company’s overall effective tax rate of 0.0% were related to the effects of deferred state income taxes, research and development credits, stock-based compensation, and the valuation allowance recorded against the full amount of its net deferred tax assets.

 

A valuation allowance is required when it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The realization of deferred tax assets depends on the generation of sufficient future taxable income during the period in which the Company’s related temporary differences become deductible. The Company has recorded a full valuation allowance against its net deferred tax assets as of March 31, 2024 and 2023 since management believes that based on the earnings history of the Company, it is more likely than not that the benefits of these assets will not be realized.

 

12. RELATED PARTY TRANSACTIONS

 

The Company utilizes and subleases office and lab space in Connecticut, which is being leased from an unrelated landlord by 4Catalyzer Corporation (“4C”), which is owned by a related party. The Company pays rent to 4C on a month-to-month basis. A total of approximately $129 and $58 was paid during the three months ended March 31, 2024 and 2023, respectively.

 

Hyperfine entered into a Master Services Agreement (the “Master Services Agreements”) with 4C effective as of July 7, 2021 pursuant to which Hyperfine may engage 4C to provide services such as general administration,

17


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

facilities, information technology, financing, legal, human resources and other services, through future statements of work and under terms and conditions to be determined by the parties with respect to any services to be provided. The Company paid an aggregate of $34 and $137 during the three months ended March 31, 2024 and 2023, respectively, under the Master Services Agreement. As of March 31, 2024 and December 31, 2023 there were $45 and $61 due to 4C, respectively, for expenses paid on the Company's behalf. These payables are included in due to related parties on the condensed consolidated balance sheet.

 

13. COMMITMENTS AND CONTINGENCIES

 

Commitments

 

The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company did not make any matching contributions to the 401(k) plan for the three months ended March 31, 2024 or 2023.

 

During 2020 and 2021, the Company was awarded multiple grants totaling $4,910 from the Bill & Melinda Gates Foundation (“BMGF”) for the provision and equipping of sites with the Company’s portable MR brain imaging system to enable the performance of a multi-site study focused on optimizing diagnostic image quality. These grants are designed to provide data to validate the use of the Swoop® system in measuring the impact of maternal anemia, malnutrition, infection and birth related injury. All of these grants are designed to support the deployment of a total of 25 Swoop® system devices and other services to investigators, which commenced in the spring of 2021. In March 2023, the term of the BMGF grant agreement was extended to February 2024. As of March 31, 2024 and December 31, 2023, 25 and 22 Swoop® system units, respectively, have been delivered to the BMGF. In May 2023, the Company was awarded an additional $3,354 grant from the BMGF to continue to develop a scalable approach to measuring neurodevelopment via low-field MRI in neonates, infants, and young children in low-to-middle income countries through February 2026. The funds are accounted for as restricted cash with a corresponding credit to deferred grant funding. Any grant funds, plus any interest income, that have not been used for, or committed to, the project must be returned promptly to the BMGF upon expiration of or termination of the agreement. During the three months ended March 31, 2024, the Company completed and delivered the remaining Swoop system® devices and delivered a grant milestone of a software update that provides faster scan times, additional system quality control tests, and other minor enhancements. The Company released $621 of restricted cash and recorded grant receivable of $470 excluding interest earned of $9, in prepaid expenses and other current assets in the condensed consolidated balance sheet. As of March 31, 2024 and December 31, 2023, there were no grant fund amounts that were required to be returned under the terms of the project.

 

Purchase Commitments

 

The Company’s purchase commitments and obligations include all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which the Company has not received the goods or services. A majority of these purchase obligations are due within a year. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on the Company’s business needs prior to the delivery of goods or performance of services.

 

Contingencies

 

The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure.

 

18


HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(all amounts are in thousands, except share and per share amounts)

 

The Company has indemnification obligations under some agreements that the Company enters into with other parties in the ordinary course of business, including business partners, investors, contractors, and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party against claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in any particular case. The Company has not recorded any liability under such indemnification provisions within its condensed consolidated balance sheets. The Company is not aware of any claims or other circumstances that would give rise to material payments from the Company under such indemnification provisions.

 

The Company agreed to pay $1,000 to a third party service provider if the Company's pre-closing equity holders receive any Earn-Out Shares. As the Company has not met the criteria to trigger the earn-out, such payment is not determined to be probable and no liability was recognized within our condensed consolidated balance sheets. See Note 10. Net Loss Per Share, for further information regarding the earn-out criteria.

14. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued and has determined that there were no subsequent events required to be disclosed.

19


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2024. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2023, and of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Hyperfine, Inc. and its consolidated subsidiaries. The unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, respectively, present the financial position and results of operations of Hyperfine, Inc. and its wholly owned subsidiaries.

Overview

 

We are an innovative health technology business with a mission to revolutionize patient care globally through accessible, affordable, clinically relevant ultra-low-field (“ULF”) magnetic resonance (“MR”) brain imaging. Our Swoop® Portable MR Imaging® System (“Swoop® system”) produces high-quality images at a lower magnetic field strength than conventional magnetic resonance imaging (“MRI”) scanners. Our Swoop® system is designed to transform brain MR for the patient, the clinician and the provider, and to provide a highly differentiated experience for patients, timely imaging to clinicians, and favorable economics for hospital administrators. The Swoop® system is a portable, ULF MRI device for producing images that display the internal structures of the head where full diagnostic examination is not clinically practical. When interpreted by a trained physician, these images provide information that can be useful in determining a diagnosis. Healthcare professionals can use the Swoop® system to make effective clinical diagnoses and decisions in various care settings where conventional MRI devices are inaccessible. The easy-to-use interface and portable design of our Swoop® system make it easily and readily accessible anywhere in a hospital, clinic, or patient care site and it does not require any special facilities accommodations nor specialized personnel to operate safely. ULF MR does not expose patients to harmful ionizing radiation and compares favorably in this regard to X-ray computed tomography (“CT”) or positron emission tomography (“PET”).

 

The demand for MR imaging has been increasing due to the aging population and the rising prevalence of neurological, neurodegenerative, and cardiovascular conditions, as well as the trends towards decentralized healthcare in mature as well as low- and middle-income countries. Healthcare professionals and insurers recognize imaging as an effective, non-invasive diagnostic tool for evaluation and ongoing monitoring. The Swoop® system is the next generation brain imaging device designed to increase access to MRI in a cost-effective manner and expand the current $35 billion imaging market.

 

Despite their advantages, many healthcare institutions worldwide lack the facilities, specialized operators, and capital necessary to acquire and maintain expensive conventional MRI devices. The Swoop® system is the first U.S. Food and Drug Administration (“FDA”)-cleared, portable, ULF, MR brain imaging system and is capable of providing imaging at multiple sites of care, such as intensive care units, clinics, emergency departments or physicians’ offices, and can inform the timely detection, diagnosis, monitoring, and treatment of acute and chronic conditions inside and outside the hospital. We designed the Swoop® system to address the limitations of conventional imaging technologies and make MR brain imaging accessible nearly anytime and anywhere across professional healthcare settings. We believe the adoption of the Swoop® system by healthcare professionals has clinical and economic benefits throughout healthcare communities in both high and low resource settings.

 

The Swoop® system is AI-powered and integrates deep learning, a form of AI, for the reconstruction and denoising of T1, T2, and fluid-attenuated inversion recovery (“FLAIR”) sequences. The Swoop® system also incorporates deep learning denoising in the diffusion-weighted imaging (“DWI”) sequences for image post-processing. The integration of deep learning does not require any additional steps from the user. As a result, deep learning can enhance the image quality and, consequently, the diagnostic value of images generated at ULF. The algorithms are designed to improve ULF image quality, while reducing the impact of scan artifacts. The images created with these algorithms were validated by expert radiologists. The Swoop® system is used clinically every day as the first mover

20


 

in the field of portable ULF MRI, and with an install base that continues to expand. The learnings from this field experience has served to improve our software, AI, and denoising algorithms resulting in the image quality and performance improvements of our product over the eight software releases since our initial clearance. As we move forward, we are continuously investing in improving our AI-powered image quality and leveraging each imaging-focused software release to further improve the Swoop® system performance.

 

Legacy Hyperfine received initial 510(k) clearance for brain imaging of patients of all ages from the FDA in 2020 and has now received eight subsequent clearances from the FDA after the initial clearance. We received our most recent clearance from the FDA in October 2023 for the latest update of our Swoop® system AI-powered software. This updated software expanded the Swoop® system’s AI denoising capabilities by incorporating deep learning denoising in the DWI sequence for image post-processing. In February and October 2023, we received 510(k) clearances from the FDA for the latest updates to our Swoop® system AI-powered software. The combination of these two software updates significantly improved DWI, incorporated deep-learning based denoising in the post-processing of DWI images for crisper images, and improved image quality for all Swoop® system sequences. The Swoop® system has also received marketing authorization for brain imaging in several countries, including the European Union (CE), the United Kingdom (UKCA), Canada, Australia and New Zealand.

 

Key Performance Measures

 

Management reviews and analyzes several key performance measures including Total revenues and Total Swoop® system units sold. These measures are reviewed and analyzed to evaluate our business performance, identify trends affecting our business, allocate capital, and make strategic decisions.

 

Total revenues were $3.3 million for the three months ended March 31, 2024, an increase of $0.7 million, or 25.0% from the three months ended March 31, 2023, primarily driven by increases in Swoop® system units sold and service revenues. See "Results of Operations - Sales" below for further information. Total Swoop® system units sold were 13 units for the three months ended March 31, 2024, an increase of 3 units, or 30.0% from the three months ended March 31, 2023.

 

Factors Affecting Results of Operations

 

The following factors have been important to our business and we expect them to impact our results of operations and financial condition in future periods:

 

Technical innovation

 

We have developed our Swoop® system through extensive research and development activities. Moreover, our team is dedicated to clinical support programs designed to integrate the Swoop® system into an array of diverse healthcare environments and applications. We believe that, from our commercial and clinical experience, we are gaining invaluable insights into the Swoop® system’s feasibility. We believe these learnings will enable us to further improve our product and develop new services and tools in the future. We are continuously improving our image quality and imaging capabilities. Building upon this foundation and our expertise in ULF brain imaging, we plan to develop new imaging applications, broadening the range of clinical uses for our technology. Additionally, we are leveraging our strengths in AI and cloud technology to explore the Swoop® system’s role as a brain imaging clinical decision support platform. While these technical innovations may increase our research and development expenses, we expect them to have a positive impact on our results of operations and profitability in the future.

 

Commercialization efforts of the Swoop® system

 

Our results have included revenue from outside the United States and outside the United States. Legacy Hyperfine received initial 510(k) clearance from the FDA in 2020. We are focused on building relationships and executing contracts with U.S. hospital systems. We are building a direct sales and field support organization in the United States and have recently made changes within our sales and clinical support teams who are working in strong collaboration to increase adoption, support successful implementations and support routine use at customer sites. As of 2024, we have targeted a select number of international markets to add to our commercial efforts operating through distributors.

21


 

 

Expand sales in international markets

 

The countries in which we have begun commercializing our Swoop® system include Canada, Australia, and New Zealand. We obtained a Medical Device License issued by Health Canada, UKCA certification in the United Kingdom, CE certification in the EU and regulatory authorization in Australia and New Zealand. In 2024, we have plans to expand our international commercial focus to select international countries.

While we will maintain our commercial focus in the United States in 2024, our commitment to the vision of providing affordable and accessible imaging that enables earlier detection and timely management of health conditions worldwide is currently made possible by grant funding from the BMGF. Through our engagement with the BMGF, we have deployed and continue to deploy the Swoop® system in low-middle income settings without readily-accessible MRI technology. The multiple grants provided by our research partnership with the BMGF, which commenced funding in the spring of 2020, support the deployment of 25 Swoop® system and accessories to investigators. As of March 31, 2024 and December 31, 2023, 25 and 22 Swoop® system units, respectively, have been delivered to the BMGF. The ongoing investigation is designed to provide data to validate the potential use of the Swoop® system in measuring the impact of maternal anemia, malnutrition, infection, and birth-related injury. In May 2023, we were awarded an additional 3-year grant from the BMGF to continue to develop a scalable approach to measuring neurodevelopment via ULF brain imaging in neonates, infants, and young children in low-to-middle income countries. During the three months ended March 31, 2024, we completed and delivered the remaining Swoop system® devices and delivered a grant milestone of a software update that provides faster scan times, additional system quality control tests, and other minor enhancements, we released $0.6 million of restricted cash and recorded grant receivable of $0.5 million excluding interest earned, in prepaid expenses and other current assets in our condensed consolidated balance sheet.

 

Results of Operations

 

The following is a discussion of our results of operations for the three months ended March 31, 2024 and 2023. Our accounting policies are described under "Summary of Significant Accounting Policies" in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

 

 

 

Three Months Ended
March 31,

 

 

Change

 

($ Amounts in thousands)

 

2024

 

 

2023

 

 

%

 

Sales

 

 

 

 

 

 

 

 

 

Device

 

$

2,704

 

 

$

2,132

 

 

 

26.8

%

Service

 

 

591

 

 

 

503

 

 

 

17.5

%

Total sales

 

 

3,295

 

 

 

2,635

 

 

 

25.0

%

Cost of Sales

 

 

 

 

 

 

 

 

 

Device

 

 

1,499

 

 

 

1,071

 

 

 

40.0

%

Service

 

 

442

 

 

 

409

 

 

 

8.1

%

Cost of sales

 

 

1,941

 

 

 

1,480

 

 

 

31.1

%

Gross margin

 

 

1,354

 

 

 

1,155

 

 

 

17.2

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,570

 

 

 

5,461

 

 

 

2.0

%

General and administrative

 

 

4,430

 

 

 

6,182

 

 

 

(28.3

)%

Sales and marketing

 

 

2,004

 

 

 

2,547

 

 

 

(21.3

)%

Total operating expenses

 

 

12,004

 

 

 

14,190

 

 

 

(15.4

)%

Loss from operations

 

 

(10,650

)

 

 

(13,035

)

 

 

(18.3

)%

Interest income

 

 

796

 

 

 

869

 

 

 

(8.4

)%

Other income, net

 

 

6

 

 

 

6

 

 

 

%

Loss before provision for income taxes

 

 

(9,848

)

 

 

(12,160

)

 

 

(19.0

)%

Provision for income taxes

 

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

 

$

(9,848

)

 

$

(12,160

)

 

 

(19.0

)%

 

 

22


 

Comparison of the Three Months Ended March 31, 2024 and 2023 ($ Amounts shown in tables in thousands)

 

Sales

 

 

 

Three Months Ended
March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

Device

 

$

2,704

 

 

$

2,132

 

 

$

572

 

 

 

26.8

%

Service

 

 

591

 

 

 

503

 

 

 

88

 

 

 

17.5

%

Total sales

 

$

3,295

 

 

$

2,635

 

 

$

660

 

 

 

25.0

%

 

 

Device sales increased by $0.6 million, or 26.8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was driven primarily by an increase in the volume of device sales.

 

Service sales increased by $0.1 million, or 17.5%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was driven by an increase in the volume of commercial system units installed as generally all commercial systems installations generate recurring service revenue. Service sales revenue is generally recognized over time as we are providing the customer with ongoing access to our resources and software upgrades throughout the subscription period. This type of revenue is recurring in nature and we expect will continue to grow as more devices are sold.

 

Cost of sales

 

 

 

Three Months Ended
March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

Device

 

$

1,499

 

 

$

1,071

 

 

$

428

 

 

 

40.0

%

Service

 

 

442

 

 

 

409

 

 

 

33

 

 

 

8.1

%

Total cost of sales

 

$

1,941

 

 

$

1,480

 

 

$

461

 

 

 

31.1

%

 

 

Cost of device sales increased by $0.4 million, or 40.0%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was driven primarily by an increase in units sold.

 

Cost of service sales increased by $33 thousand, or 8.1%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase is due to the increased install base.

 

Research and development

 

 

 

Three Months Ended
March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

Research and development

 

$

5,570

 

 

$

5,461

 

 

$

109

 

 

 

2.0

%

 

 

Research and development expenses increased by $0.1 million, or 2.0%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was driven primarily by an increase in personnel related costs of $0.7 million as a result of increased headcount and an increase in consulting costs of $0.3 million, partially offset by $0.9 million of higher grant fulfilments recorded as credits to research and development expenses.

 

General and administrative

 

 

 

Three Months Ended
March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

General and administrative

 

$

4,430

 

 

$

6,182

 

 

$

(1,752

)

 

 

(28.3

)%

 

23