UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
_________________
(Mark One)
EXCHANGE ACT OF 1934
For the quarterly period ended
or
EXCHANGE ACT OF 1934
For the transition period from ___________to_________
Commission File Number:
_________________
(Exact name of registrant as specified in its charter)
_________________
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.)
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of each exchange |
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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.
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).
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 ☐ |
Smaller reporting company |
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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 November 1, 2024, the registrant had
TABLE OF CONTENTS
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Page |
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3 |
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PART I |
5 |
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Item 1. |
5 |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) |
6 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) |
7 |
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8 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
Item 3. |
30 |
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Item 4. |
30 |
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PART II |
31 |
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Item 1. |
31 |
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Item 1A. |
31 |
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Item 2. |
31 |
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Item 3. |
31 |
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Item 4. |
31 |
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Item 5. |
31 |
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Item 6. |
32 |
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33 |
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., (“Legacy Hyperfine”), and Liminal Sciences, Inc., (“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:
3
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 (the “2023 Annual Report on Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2024, as updated and/or supplemented in subsequent filings with 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)
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September 30, |
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December 31, |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, less allowance of $ |
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Unbilled receivables |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Other long term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Deferred grant funding |
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Deferred revenue |
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Due to related parties |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Long term deferred revenue |
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Other noncurrent liabilities |
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Total liabilities |
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STOCKHOLDERS' EQUITY |
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Class A Common stock, $ |
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Class B Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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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)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Sales |
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Device |
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$ |
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$ |
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$ |
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$ |
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Service |
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Total sales |
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Cost of sales |
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Device |
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Service |
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Total cost of sales |
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Gross margin |
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Operating Expenses: |
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Research and development |
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General and administrative |
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Sales and marketing |
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Total operating expenses |
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Loss from operations |
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( |
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( |
) |
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( |
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( |
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Interest income |
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Other income (expense), net |
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( |
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Loss before provision for income taxes |
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( |
) |
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( |
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( |
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( |
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Provision for income taxes |
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Net loss and comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per common share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted |
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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)
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Class A Common Stock |
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Class B Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in Capital |
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Deficit |
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Equity |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2024 |
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( |
) |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Shares issued under “at-the-market” (ATM) offering program, net |
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— |
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— |
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— |
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— |
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Issuance of restricted stock |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Class A Common Stock |
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Class B Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in Capital |
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Deficit |
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Equity |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2023 |
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( |
) |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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|||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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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)
|
|
Nine Months Ended |
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|||||
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|
2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Stock-based compensation expense |
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Loss on disposal of property and equipment, net |
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Other |
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Changes in assets and liabilities: |
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Accounts receivable, net |
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( |
) |
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( |
) |
Unbilled receivables |
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( |
) |
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( |
) |
Inventory |
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( |
) |
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( |
) |
Prepaid expenses and other current assets |
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( |
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Due from related parties |
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— |
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Prepaid inventory |
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Other long term assets |
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( |
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Accounts payable |
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Deferred grant funding |
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( |
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( |
) |
Deferred revenue |
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( |
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Due to related parties |
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( |
) |
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
( |
) |
|
Operating lease liabilities, net |
|
|
( |
) |
|
|
— |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from shares issued under “at-the-market” offering program, net of selling costs |
|
|
|
|
|
— |
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents, and restricted cash reported in the balance sheets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of noncash information: |
|
|
|
|
|
|
||
Unpaid purchase of property and equipment |
|
$ |
|
|
$ |
|
||
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, portable ultra-low-field (“ULF”) magnetic resonance (“MR”) brain imaging. The Swoop® Portable MR Imaging® System (“Swoop® system”) produces high-quality, diagnostic 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, providing 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 at the point of care in professional health care facilities such as emergency rooms, intensive care units, hospitals, outpatient clinics and physician offices, or rehabilitation centers. 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 for 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. In July 2024, the Company received 510(k) clearance from the FDA of the ninth-generation AI-powered Swoop® system software. This software update significantly reduces scan times across multiple MR sequences without sacrificing image quality. Outside of the United States, the Swoop® system has 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. In October 2024, the Company received CE approval for the latest generation of software. 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 during the nine months ended September 30, 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 SEC. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been
9
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
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.
The accompanying unaudited 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 and nine months ended September 30, 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 a single source manufacturer and single source suppliers for the supply of its products. Disruption from the manufacturer 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 September 30, 2024 and December 31, 2023, the Company had
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 revenue recognized in non-U.S. countries of $
10
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
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:
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 March 2024, the SEC issued final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. Effective fiscal year 2026, the Company is required to disclose climate-related risks that are reasonably likely to have a material impact on the Company’s business strategy, results of operations, or financial condition. Additionally, the Company will be required to disclose the effects of severe weather events and other natural conditions within the notes to the financial statements, subject to certain materiality thresholds. Effective fiscal year 2027, required disclosures will also include disclosure of material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). In April 2024, the SEC issued an order voluntarily staying the effectiveness of the new rules pending the completion of judicial review of certain legal challenges to their validity. The Company is currently evaluating the impact of these rules assuming adoption as well as monitoring the status of the related litigation and the SEC’s stay.
In March 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements. The ASU contains amendments to the ASC that remove references to various FASB Concepts Statements. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements or disclosures.
In December 2023, the 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.
11
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
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 will be adopting the annual disclosure requirements of this ASU in its Annual Report Form 10-K for the fiscal year ending December 31, 2024.
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.
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
Pattern of Recognition |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Device |
|
Point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Service |
|
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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:
|
|
September 30, |
|
|
December 31, |
|
||
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
Unbilled receivables - current |
|
$ |
|
|
$ |
|
||
Unbilled receivables - non-current(1) |
|
$ |
|
|
$ |
|
||
Deferred revenue |
|
$ |
|
|
$ |
|
||
Long term deferred revenue |
|
$ |
|
|
$ |
|
||
______________________
(1)
12
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
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
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 and nine months ended September 30, 2024 that was included in the deferred revenue balance at the beginning of the period was $
The amount of revenue recognized during the three and nine months ended September 30, 2023 that was included in the deferred revenue balance at the beginning of the period was $
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 and nine months ended September 30, 2024 and 2023. The Company recorded service revenue from lease arrangements of $
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 $
13
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
Transaction price allocated to remaining performance obligations
As of September 30, 2024 and December 31, 2023, the Company had remaining performance obligations amounting to $
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
The Company had $
5. INVENTORIES
A summary of inventories is as follows:
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
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.
14
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, are recorded at historical cost and consist of the following:
|
|
September 30, |
|
|
December 31, |
|
||
Laboratory equipment |
|
$ |
|
|
$ |
|
||
Research devices |
|
|
|
|
|
|
||
Sales and marketing devices |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Tooling |
|
|
|
|
|
|
||
Trade show assets |
|
|
|
|
|
|
||
Leased devices |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense amounted to $
Depreciation expense amounted to $
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
The weighted-average remaining lease term associated with the measurement of the Company's operating lease obligations is
The Company recorded short-term operating lease cost during the three and nine months ended September 30, 2024 of $
Future minimum commitments due under the lease agreement as of September 30, 2024 are $
On March 1, 2024, the Company entered into a lease agreement for approximately
15
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
|
|
|
|
|
|
|
||
|
|
September 30, |
|
|
December 31, |
|
||
Bonuses |
|
$ |
|
|
$ |
|
||
Contracted services |
|
|
|
|
|
|
||
Legal fees |
|
|
|
|
|
|
||
Payroll and related benefits |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
9. STOCKHOLDERS' EQUITY
Common Stock At-the-Market (ATM) Offering Program
On November 9, 2023, the Company filed a $
As of the filing of the 2023 Annual Report on Form 10-K, the Company is subject to the SEC general instructions of Form S-3 known as the “baby shelf rules.” Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its shelf registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of its common stock held by non-affiliates. Therefore, the Company is limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3, including shares issued under the Sales Agreement, until such time as the Company's public float exceeds $
Equity Incentive Plan
The Company's 2021 Equity Incentive Plan (the “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 Plan.
16
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
Stock option activity
The following table summarizes the changes in the Company’s outstanding stock options for the nine months ended September 30, 2024:
|
|
Number of |
|
|
Outstanding at January 1, 2024 |
|
|
|
|
Granted (1) (2) |
|
|
|
|
Exercised |
|
|
( |
) |
Forfeited / Cancelled / Expired |
|
|
( |
) |
Outstanding at September 30, 2024 |
|
|
|
|
_____________________________________________
In general, employee awards will vest based on continued service, which is generally over
Restricted stock unit activity
The following table summarizes the changes in the Company’s outstanding RSUs for the nine months ended September 30, 2024:
|
|
Number of |
|
|
Outstanding at January 1, 2024 |
|
|
|
|
Granted |
|
|
— |
|
Vested |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding at September 30, 2024 |
|
|
|
|
The following table presents details of stock-based compensation expenses by functional line item noted within the Company's operating expenses:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cost of sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
17
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
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 |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Numerator for Basic and Dilutive EPS – Loss available to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator for Basic and Dilutive EPS - Weighted-average common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and dilutive net loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Outstanding options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earn-Out Shares (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total anti-dilutive common equivalent shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
_________________________
(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
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.
18
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
Income taxes for the three and nine months ended September 30, 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
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 September 30, 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 $
Hyperfine entered into a Master Services Agreement (the “Master Services Agreement”) with 4C effective as of July 7, 2021 pursuant to which Hyperfine may engage 4C to provide services such as general administration, 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 $
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
During 2020 and 2021, the Company was awarded multiple grants totaling $
19
HYPERFINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts are in thousands, except share and per share amounts)
Company's unaudited condensed consolidated balance sheet. As of September 30, 2024, and December 31, 2023, there were
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.
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
The Company agreed to pay $
14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the condensed consolidated financial statements were issued and has determined that there were no subsequent events required to be disclosed.
20
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 2023 Annual Report on Form 10-K. 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 2023 Annual Report on Form 10-K, as updated and/or supplemented in subsequent filings with the SEC. 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 and nine months ended September 30, 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, portable ultra-low-field (“ULF”) magnetic resonance (“MR”) brain imaging. Our Swoop® Portable MR Imaging® System (“Swoop® system”) produces high-quality, diagnostic 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, providing 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 at the point of care in professional health care facilities such as emergency rooms, intensive care units, hospitals, outpatient clinics and physician offices, or rehabilitation centers. 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, recent approval of new Alzheimer’s medications 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. We believe our market opportunity is significant across the multiple sites of care where the Swoop® system brings clinical and economic value. We estimate in the United States alone our total addressable market for Swoop® system device placements to be more than $16 billion.
Despite their advantages, many healthcare institutions worldwide lack the facilities, specialized operators, and capital necessary to acquire, maintain and staff 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 in the reconstruction pipeline of T1, T2, diffusion-weighted Imaging (“DWI”), and fluid-attenuated inversion recovery (“FLAIR”) sequences. 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
21
algorithms were validated by expert radiologists. The Swoop® system is used clinically every day as the first mover in the field of portable ULF MRI, and with an install base that continues to expand. The learnings from this market experience have served to improve our software, AI, and denoising algorithms resulting in the image quality and performance improvements of our product over the nine 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.
Our Swoop® system received initial 510(k) clearance for brain imaging from FDA in 2020. In February and October 2023, we received 510(k) clearances from the FDA for 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. In July 2024, we received 510(k) clearance from the FDA of the ninth-generation AI-powered Swoop® system software. This software update significantly reduces scan times across multiple MR sequences without sacrificing image quality. Outside of the United States, the Swoop® system has 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. In October 2024, we received CE approval for the latest generation of software.
Key Performance Metrics
Management reviews and analyzes several key performance metrics including Total revenues and Total Swoop® system units sold. These metrics are reviewed and analyzed to evaluate our business performance, identify trends affecting our business, allocate capital, and make strategic decisions.
Total revenues were $3.6 million and $10.6 million for the three and nine months ended September 30, 2024, respectively, an increase of $1.3 million, or 56.4% and $2.2 million, or 26.6% from the three and nine months ended September 30, 2023, respectively. See "Results of Operations" below. Total Swoop® system units sold were 13 units and 39 units, for the three and nine months ended September 30, 2024, respectively, an increase of 7 units and 9 units from the three and nine months ended September 30, 2023, respectively.
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, workflow, and applications. We believe that, from our commercial and clinical experience, we are gaining invaluable insights into the Swoop® system’s clinical utility. 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 proprietary 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 the United States and outside the United States. Our Swoop® system received initial 510(k) clearance from the FDA in 2020. Initially, we have been focused on executing contracts with U.S. hospitals and hospital systems. We have built a direct sales and field support organization in the United States who are working in strong collaboration to increase adoption, support successful implementations and support
22
routine use at expanded customer sites. As of 2024, we have targeted a select number of international markets to add to our commercial efforts operating through distributors.
Expand sales in international markets
In 2024, we are executing on our international expansion plans by entering into agreements with experienced and accomplished distributors. We have distribution partners covering several countries across Europe and Asia Pacific, as well as Canada. With the Swoop® system’s transformative, affordable, and accessible platform, we aim to serve more clinicians and patients needing brain imaging across the globe. The Swoop® system has received marketing authorization for brain imaging in several countries, including the European Union (CE certification), the United Kingdom (UKCA), Canada, Australia and New Zealand. Additionally, we have started the regulatory approval process in India through Central Drugs Standard Control Organization.
Our commitment to the vision of providing affordable and accessible imaging that enables earlier detection and timely management of health conditions worldwide is furthermore advanced by grant funding from the BMGF. Through our engagement with the BMGF, we have deployed the Swoop® system in low-middle income settings without readily-accessible MRI technology. During 2020 and 2021, we were awarded multiple grants totaling $5.0 million from the BMGF for the provision and equipping of sites with our 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. 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 and was completed by February 2024. In May 2023, we were awarded an additional $3.4 million 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. During the nine months ended September 30, 2024, we completed and fulfilled grant deliverables and milestones amounting to $1.5 million and we received cash grant funding of $1.1 million. As of September 30, 2024, we recorded restricted cash of $0.2 million with an offset to deferred grant funding in our unaudited condensed consolidated balance sheet.
Results of Operations
The following is a discussion of our results of operations for the three and nine months ended September 30, 2024 and 2023. Our accounting policies are described under "Summary of Significant Accounting Policies" in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||
($ Amounts in thousands) |
|
2024 |
|
|
2023 |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
% |
|
||||||
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Device |
|
$ |
3,033 |
|
|
$ |
1,728 |
|
|
|
75.5 |
% |
|
$ |
8,707 |
|
|
$ |
6,670 |
|
|
|
30.5 |
% |
Service |
|
|
610 |
|
|
|
602 |
|
|
|
1.3 |
% |
|
|
1,862 |
|
|
|
1,676 |
|
|
|
11.1 |
% |
Total sales |
|
|
3,643 |
|
|
|
2,330 |
|
|
|
56.4 |
% |
|
$ |
10,569 |
|
|
$ |
8,346 |
|
|
|
26.6 |
% |
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Device |
|
|
1,359 |
|
|
|
835 |
|
|
|
62.8 |
% |
|
$ |
4,280 |
|
|
$ |
3,321 |
|
|
|
28.9 |
% |
Service |
|
|
376 |
|
|
|
371 |
|
|
|
1.3 |
% |
|
|
1,224 |
|
|
|
1,302 |
|
|
|
(6.0 |
)% |
Cost of sales |
|
|
1,735 |
|
|
|
1,206 |
|
|
|
43.9 |
% |
|
$ |
5,504 |
|
|
$ |
4,623 |
|
|
|
19.1 |
% |
Gross margin |
|
|
1,908 |
|
|
|
1,124 |
|
|
|
69.8 |
% |
|
|
5,065 |
|
|
|
3,723 |
|
|
|
36.0 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
|
5,865 |
|
|
|
5,739 |
|
|
|
2.2 |
% |
|
$ |
17,394 |
|
|
$ |
16,531 |
|
|
|
5.2 |
% |
General and administrative |
|
|
4,510 |
|
|
|
4,615 |
|
|
|
(2.3 |
)% |
|
|
13,361 |
|
|
|
16,103 |
|
|
|
(17.0 |
)% |
Sales and marketing |
|
|
2,496 |
|
|
|
2,529 |
|
|
|
(1.3 |
)% |
|
|
6,769 |
|
|
|
7,575 |
|
|
|
(10.6 |
)% |
Total operating expenses |
|
|
12,871 |
|
|
|
12,883 |
|
|
|
(0.1 |
)% |
|
|
37,524 |
|
|
|
40,209 |
|
|
|
(6.7 |
)% |
Loss from operations |
|
|
(10,963 |
) |
|
|
(11,759 |
) |
|
|
(6.8 |
)% |
|
$ |
(32,459 |
) |
|
$ |
(36,486 |
) |
|
|
(11.0 |
)% |
Interest income |
|
|
585 |
|
|
|
1,021 |
|
|
|
(42.7 |
)% |
|
$ |
2,056 |
|
|
$ |
2,920 |
|
|
|
(29.6 |
)% |
Other income, net |
|
|
52 |
|
|
|
(19 |
) |
|
|
(373.7 |
)% |
|
|
73 |
|
|
|
12 |
|
|
|
508.3 |
% |
Loss before provision for income taxes |
|
|
(10,326 |
) |
|
|
(10,757 |
) |
|
|
(4.0 |
)% |
|
$ |
(30,330 |
) |
|
$ |
(33,554 |
) |
|
|
(9.6 |
)% |
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss and comprehensive loss |
|
$ |
(10,326 |
) |
|
$ |
(10,757 |
) |
|
|
(4.0 |
)% |
|
$ |
(30,330 |
) |
|
$ |
(33,554 |
) |
|
|
(9.6 |
)% |
23
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023 ($ Amounts shown in tables in thousands)
Sales
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Device |
|
$ |
3,033 |
|
|
$ |
1,728 |
|
|
$ |
1,305 |
|
|
|
75.5 |
% |
|
$ |
8,707 |
|
|
$ |
6,670 |
|
|
$ |
2,037 |
|
|
|
30.5 |
% |
Service |
|
|
610 |
|
|
|
602 |
|
|
|
8 |
|
|
|
1.3 |
% |
|
|
1,862 |
|
|
|
1,676 |
|
|
|
186 |
|
|
|
11.1 |
% |
Total sales |
|
$ |
3,643 |
|
|
$ |
2,330 |
|
|
$ |
1,313 |
|
|
|
56.4 |
% |
|
$ |
10,569 |
|
|
$ |
8,346 |
|
|
$ |
2,223 |
|
|
|
26.6 |
% |
Device sales increased by $1.3 million, or 75.5%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in device revenue is mainly due to an increase in units sold.
Service sales in absolute dollars remained flat for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Device sales increased by $2.0 million, or 30.5%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in device revenue is mainly due to an increase in units sold.
Service sales increased by $0.2 million, or 11.1%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was driven by increased install base.
Cost of sales
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Device |
|
$ |
1,359 |
|
|
$ |
835 |
|
|
$ |
524 |
|
|
|
62.8 |
% |
|
$ |
4,280 |
|
|
$ |
3,321 |
|
|
$ |
959 |
|
|
|
28.9 |
% |
Service |
|
|
376 |
|
|
|
371 |
|
|
|
5 |
|
|
|
1.3 |
% |
|
|
1,224 |
|
|
|
1,302 |
|
|
|
(78 |
) |
|
|
(6.0 |
)% |
Total cost of sales |
|
$ |
1,735 |
|
|
$ |
1,206 |
|
|
$ |
529 |
|
|
|
43.9 |
% |
|
$ |
5,504 |
|
|
$ |
4,623 |
|
|
$ |
881 |
|
|
|
19.1 |
% |
Percentage of revenue |
|
|
47.6 |
% |
|
|
51.8 |
% |
|
|
|
|
|
|
|
|
52.1 |
% |
|
|
55.4 |
% |
|
|
|
|
|
|
||||
Cost of device sales increased by $0.5 million, or 62.8%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was driven primarily by increased units sold.
Cost of service sales in absolute dollars remained flat for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Cost of device sales increased by $1.0 million, or 28.9%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was driven primarily by increased units sold.
Cost of service sales decreased by $0.1 million, or 6%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
24
Research and development
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Research and development |
|
$ |
5,865 |
|
|
$ |
5,739 |
|
|
$ |
126 |
|
|
|
2.2 |
% |
|
$ |
17,394 |
|
|
$ |
16,531 |
|
|
$ |
863 |
|
|
|
5.2 |
% |
Research and development expenses increased by $0.1 million, or 2.2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was driven primarily by a decrease in grant fulfillment credits of $0.2 million partially offset by a decrease of travel expenses of $0.1 million.
Research and development expenses increased by $0.9 million, or 5.2%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was driven primarily by an increase in personnel-related costs and stock-based compensation expenses of $1.6 million, partially offset by $0.7 million of a higher grant fulfillment credits.
General and administrative
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
General and administrative |
|
$ |
4,510 |
|
|
$ |
4,615 |
|
|
$ |
(105 |
) |
|
|
(2.3 |
)% |
|
$ |
13,361 |
|
|
$ |
16,103 |
|
|
$ |
(2,742 |
) |
|
|
(17.0 |
)% |
General and administrative expenses decreased by $0.1 million, or 2.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was driven primarily by a decrease in insurance expenses of $0.1 million.
General and administrative expenses decreased by $2.7 million, or 17.0%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was driven primarily by a decrease in personnel-related costs and stock-based compensation expenses of $1.5 million, a decrease in legal and patent expenses of $0.4 million, a decrease in insurance expenses of $0.3 million, and a decrease in subscriptions of $0.2 million.
Sales and marketing
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Sales and marketing |
|
$ |
2,496 |
|
|
$ |
2,529 |
|
|
$ |
(33 |
) |
|
|
(1.3 |
)% |
|
$ |
6,769 |
|
|
$ |
7,575 |
|
|
$ |
(806 |
) |
|
|
(10.6 |
)% |
Sales and marketing expenses in absolute dollars remained flat for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Sales and marketing expenses decreased by $0.8 million, or 10.6%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was driven primarily by a decrease in marketing research and advertising of $0.5 million, and a decrease in sales and marketing infrastructure of $0.3 million, while we continue to focus on sales and sales support activities.
Interest income
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Interest income |
|
$ |
585 |
|
|
$ |
1,021 |
|
|
$ |
(436 |
) |
|
|
(42.7 |
)% |
|
$ |
2,056 |
|
|
$ |
2,920 |
|
|
$ |
(864 |
) |
|
|
(29.6 |
)% |
25
Interest income decreased by $0.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was driven primarily by lower cash balances in money market funds and demand deposit accounts.
Interest income decreased by $0.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was driven primarily by lower cash balances in money market funds and demand deposit accounts.
Other income (expense), net
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||||||
Other income (expense), net |
|
$ |
52 |
|
|
$ |
(19 |
) |
|
$ |
71 |
|
|
|
(373.7 |
)% |
|
$ |
73 |
|
|
$ |
12 |
|
|
$ |
61 |
|
|
|
508 |
% |
Other income (expense), net increased by $71 thousand for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Other income, net during the three months ended September 30, 2024 was $52 thousand consisting primarily of interest income from customer financing of approximately $30 thousand, and a net realized gain on foreign currencies of approximately $25 thousand, offset by other expenses of $3 thousand.
Other income, net increased by $61 thousand the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Other income, net during the nine months ended September 30, 2024 was $73 thousand consisting primarily of interest income from customer financing of approximately $78 thousand, and a net realized gain on foreign currencies of approximately $6 thousand, offset by other expenses of $11 thousand.
Liquidity and Capital Resources
We have funded our operations primarily with proceeds from the issuance of common and preferred stock. We have incurred significant cash burn and recurring net losses, which includes a net loss of $30.3 million for the nine months ended September 30, 2024, and an accumulated deficit of $284.0 million as of September 30, 2024. As of September 30, 2024, we had cash and cash equivalents of $45.8 million. As we continue to invest in research and development of our products and sales and marketing, we expect to continue to incur a significant cash burn and recurring net losses for the foreseeable future until such time that our product and services sales generate enough gross profit to cover our operating expenses. However, we can provide no assurance that our product and service sales will generate a net profit in the future or that our cash resources will be sufficient to continue our commercialization and development activities.
In November 2023, we filed a shelf registration statement on Form S-3 with the SEC pursuant to which we registered for sale up to $150 million of any combination of our Class A common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine. Our shelf registration statement on Form S-3 also includes a prospectus (the “Sales Agreement Prospectus”) covering up to an aggregate of $50.0 million in shares of Class A common stock that we may issue and sell from time to time, through B. Riley Securities, Inc. (“B. Riley”) acting as our sales agent, pursuant to the sales agreement that we entered into with B. Riley in November 2023 (the “Sales Agreement”), for our “at-the-market” equity program. We are not obligated to make any sales of Class A common stock under the Sales Agreement. As of the filing of our 2023 Annual Report on Form 10-K, we are subject to the SEC general instructions of Form S-3 known as the “baby shelf rules.” Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we are limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3, including under the Sales Agreement, until such time as our public float exceeds $75 million. On March 22, 2024, we filed an amendment to the Sales Agreement Prospectus, pursuant to which, as of such date, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $22.8 million from time to time through or to B. Riley. As of September 30, 2024 and during the three months ended September 30, 2024, a total of 728,188
26
shares of our Class A common stock, for total gross and net proceeds of $0.8 million, have been issued and sold under the Sales Agreement.
Our ability to access capital when needed is not assured and, if capital is not available when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs, commercialization of our products, and other operations which could materially harm our operations, financial condition and operating results. We expect that our existing cash and cash equivalents, together with proceeds from the sales of our products and services, will enable us to conduct our planned operations for at least the next 12 months. Factors that could accelerate cash needs include: (i) delays in achieving scientific and technical milestones; (ii) unforeseen capital expenditures and fabrication costs related to manufacturing; (iii) changes we may make in our business or commercialization and hiring strategy; (iv) costs of running a public company; (v) higher inflation and increases in product transportation and labor costs; and (vi) other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions.
We expect to use our cash to further invest in the development of our products and services, commercial expansion, and for working capital and general corporate purposes.
Our future cash requirements will depend on many factors, including market adoption of our products; the cost and timing of establishing additional sales, marketing and distribution capabilities; the cost of our research and development activities; our ability to enter into and maintain collaborations; the cost and timing of potential future regulatory clearances or approvals for our products; and the effect of competing technological and market developments. We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products and services or cease operations.
Cash
As of September 30, 2024, we had cash and cash equivalents of $45.8 million. Our future capital requirements may vary from those currently planned and will depend on various factors including further development costs, commercialization strategy, international expansion, and regulatory costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to curtail significantly our product development and commercialization efforts to provide sufficient funds to continue our operations, which could adversely affect our business prospects.
Cash flows
The following table summarizes our cash flows for the periods indicated:
|
|
Nine Months Ended |
|
|||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(30,410 |
) |
|
$ |
(31,871 |
) |
Net cash used in investing activities |
|
|
(375 |
) |
|
|
(546 |
) |
Net cash provided by financing activities |
|
|
965 |
|
|
|
146 |
|
Net decrease in cash, cash equivalents, and restricted cash |
|
$ |
(29,820 |
) |
|
$ |
(32,271 |
) |
Net cash used in operating activities
For the nine months ended September 30, 2024, net cash used in operating activities of $30.4 million was due primarily to a net loss of $30.3 million and changes in operating assets and liabilities of $4.3 million, partially offset
27
by non-cash items of $4.2 million. Non-cash items were primarily stock-based compensation expense of $3.3 million, depreciation expense of $0.8 million and loss on disposal of property and equipment, net of $0.2 million. Changes in operating assets and liabilities were driven primarily by an increase in accounts receivable and unbilled receivables of $4.9 million driven primarily by increased revenue, an increase in inventory of $0.6 million, and an increase in prepaid expenses and other current assets of $0.3 million, partially offset by an increase in accrued expense and other current liabilities of $0.9 million and a decrease in prepaid inventory of $0.7 million.
For the nine months ended September 30, 2023, net cash used in operating activities of $31.9 million was due primarily to a net loss of $33.6 million and changes in operating assets and liabilities of $2.6 million, partially offset by non-cash items of $4.4 million. Non-cash items were primarily stock-based compensation expense of $3.5 million and depreciation expense of $0.8 million. Changes in operating assets and liabilities were driven primarily by an increase in inventory of $2.5 million, a decrease in accrued expenses and other liabilities of $0.8 million, a decrease in deferred revenue of $0.4 million, an increase in accounts receivable of $0.3 million, and an increase in unbilled receivables of $0.2 million, partially offset by a decrease in prepaid expenses and other current assets of $1.0 million, a decrease in prepaid inventory of $0.3 million, and an increase in accounts payable of $0.2 million.
Net cash used in investing activities
For the nine months ended September 30, 2024, net cash used in investing activities of $0.4 million was from fixed assets purchased.
For the nine months ended September 30, 2023, net cash used in investing activities of $0.5 million was from fixed assets purchased.
Net cash provided by financing activities
For the nine months ended September 30, 2024, net cash provided by financing activities of $1.0 million consisting primarily of proceeds from issuance of Class A common stock under the Sales Agreement of $0.8 million and proceeds from stock options exercises of $0.2 million.
For the nine months ended September 30, 2023, net cash provided by financing activities of $0.1 million was proceeds from option exercises.
Contractual obligations
We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. We did not make any matching contributions to the 401(k) plan for the three and nine months ended September 30, 2024 and 2023.
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. 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.
Our 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 we have 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 us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
We had no other significant contractual obligations as of September 30, 2024.
28
For information on contingencies, refer to Note 13 in the notes to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Except as described in Note 2 “Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements”, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our 2023 Annual Report on Form 10-K.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2024 and 2023 included elsewhere in this Quarterly Report on Form 10-Q.
29
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our results of operations or financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates, inflation risk, and foreign exchange risk. We do not hold, issue or enter into any financial instruments for speculative or trading purposes. We do not have significant exposure to foreign currencies.
Interest Rate Risk
Our cash, cash equivalents and restricted cash as of September 30, 2024 consisted of $46.0 million in money market funds, demand deposit and savings accounts. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash equivalents. Based on our balance sheet position at September 30, 2024, the annualized effect of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by $0.2 million.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations, other than its impact on the general economy. Nonetheless, if our costs were to become subject to inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Foreign Exchange Risk
We operate our business primarily within the United States and currently execute the majority of our transactions in U.S. dollars. We have not utilized hedging strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our condensed consolidated financial statements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2024. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2024, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
30
PART II — OTHER INFORMATION
Item1. Legal Proceedings
We are not currently a party to any material legal proceedings.
Item 1A. Risk Factors
Our business, results of operations and financial condition are subject to various risks and uncertainties including the risk factors described under the caption “Risk Factors” in our 2023 Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. There have been no material changes in our risk factors from those described in our 2023 Annual Report on Form 10-K or our Quarterly Report on Form 10-Q referenced above. We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
10b5-1 Trading Arrangements
From time to time, our officers (as defined in Rule 16a-1(f) of the Exchange Act) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). During the three and nine months ended September 30, 2024, none of our officers or directors
31
Item 6. Exhibits
See Exhibit Index.
EXHIBIT INDEX
Exhibit Number |
|
Exhibit Description |
|
Filed Herewith |
|
Incorporated by Reference herein from Form or Schedule |
|
Filing Date |
|
SEC File/ Reg. Number |
31.1 |
|
|
X |
|
|
|
|
|
|
|
31.2 |
|
|
X |
|
|
|
|
|
|
|
32* |
|
|
X |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document. |
|
X |
|
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
X |
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
|
X |
|
|
|
|
|
|
* The certifications attached as Exhibit 32 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Hyperfine, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
HYPERFINE, INC. |
|
Date: November 12, 2024 |
|
By: /s/ Maria Sainz |
|
|
|
Maria Sainz |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
Date: November 12, 2024 |
|
By: /s/ Brett Hale |
|
|
|
Brett Hale |
|
|
|
Chief Administrative Officer, Chief Financial Officer, Treasurer and Corporate Secretary |
|
33
Exhibit 31.1
CERTIFICATIONS UNDER SECTION 302
I, Maria Sainz, certify that:
Date: November 12, 2024
/s/ Maria Sainz |
|
Maria Sainz |
|
President and Chief Executive Officer (principal executive officer) |
|
Exhibit 31.2
CERTIFICATIONS UNDER SECTION 302
I, Brett Hale, certify that:
Date: November 12, 2024
/s/ Brett Hale |
|
Brett Hale |
|
Chief Administrative Officer, Chief Financial Officer, Treasurer and Corporate Secretary |
|
Exhibit 32
CERTIFICATIONS UNDER SECTION 906
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Hyperfine, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report for the quarter ended September 30, 2024 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 12, 2024 |
/s/ Maria Sainz |
|
|
Maria Sainz |
|
|
President and Chief Executive Officer |
|
|
(principal executive officer) |
|
|
|
|
Dated: November 12, 2024 |
/s/ Brett Hale |
|
|
Brett Hale |
|
|
Chief Administrative Officer, Chief Financial Officer, Treasurer and Corporate Secretary |
|
|
(principal financial officer) |
|