The Swoop system expands the fast growing (6% annual CAGR) $35 billion global imaging market. CONFIDENTIAL – PROPERTY OF HYPERFINE, INC. ©2023, All rights reserved. 10 Deep Foundation to Drive Long-term Success Rapid Innovation Clinical Proof Regulatory Excellence Ecosystem of Support 11 A First for Brain Health | --- | --- | |---------------------|----------------------------------------------------| | | | | | | | Hyperfine, Inc. has | | | 01 | reimagined brain imaging | | with the | Swoop system — | | | a ...

[Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements based on management's beliefs and assumptions, subject to **inherent risks, uncertainties, and assumptions** - This report contains forward-looking statements based on management's beliefs and assumptions, which are subject to **inherent risks, uncertainties, and assumptions**. These statements are **not guarantees of performance** and readers should not place **undue reliance** on them[9](index=9&type=chunk)[12](index=12&type=chunk) - Forward-looking statements include, but are not limited to, those concerning **product development, commercialization, regulatory approval, technology acquisition, competition, market size, pricing, financial performance, and global economic factors**[11](index=11&type=chunk)[13](index=13&type=chunk) [PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section provides the Company's unaudited condensed consolidated financial information [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Hyperfine, Inc. and its subsidiaries, prepared in accordance with U.S. GAAP [Condensed Consolidated Balance Sheets (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This statement provides a snapshot of the Company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Cash and cash equivalents | $85,424 | $117,472 | | Total current assets | $98,215 | $128,664 | | Total assets | $103,064 | $134,051 | | Total current liabilities | $8,211 | $8,803 | | Total liabilities | $9,297 | $10,329 | | Total stockholders' equity | $93,767 | $123,722 | [Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(unaudited)) This statement details the Company's revenues, expenses, and net loss over specific reporting periods Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total sales | $2,330 | $2,348 | $8,346 | $5,390 | | Gross margin | $1,124 | $688 | $3,723 | $607 | | Total operating expenses | $12,883 | $13,970 | $40,209 | $60,852 | | Loss from operations | $(11,759) | $(13,282) | $(36,486) | $(60,245) | | Net loss | $(10,757) | $(13,171) | $(33,554) | $(60,105) | | Net loss per share (basic & diluted) | $(0.15) | $(0.19) | $(0.47) | $(0.85) | [Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(unaudited)) This statement outlines changes in the Company's equity components, including net loss and stock-based compensation Metric (in thousands) | Metric (in thousands) | Balance, Dec 31, 2022 | Balance, Sep 30, 2023 | | :-------------------- | :-------------------- | :-------------------- | | Total Stockholders' Equity | $123,722 | $93,767 | | Net loss (9 months) | N/A | $(33,554) | | Stock-based compensation expense (9 months) | N/A | $3,453 | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This statement summarizes the Company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(31,871) | $(56,994) | | Net cash used in investing activities | $(546) | $(427) | | Net cash provided by financing activities | $146 | $2 | | Net decrease in cash, cash equivalents, and restricted cash | $(32,271) | $(57,419) | | Cash, cash equivalents and restricted cash, end of period | $85,972 | $133,741 | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide detailed information on the Company's organization, accounting policies, revenue, and other financial disclosures [1. Organization and Description of Business](index=9&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) This section describes Hyperfine, Inc.'s core business, its flagship Swoop® system, and recent program changes - Hyperfine, Inc. is an innovative health technology business focused on revolutionizing patient care globally through its **Swoop® Portable MR Imaging® System**, an **ultra-low-field (ULF)** magnetic resonance diagnostic brain imaging device[26](index=26&type=chunk) - The **Swoop® system** received initial **510(k) clearance** from the U.S. FDA in **2020**, with additional **AI-powered software updates cleared in February and October 2023**, significantly improving image quality[26](index=26&type=chunk) - The Company suspended its **Liminal program**, which focused on developing a device to non-invasively measure key vital signs in the brain, in **December 2022**[26](index=26&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the accounting principles and policies used in preparing the consolidated financial statements - The condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and include the accounts of Hyperfine, Inc. and its subsidiaries[27](index=27&type=chunk) - The Company relies on **single-source manufacturers and suppliers**, and disruptions could negatively impact its business[32](index=32&type=chunk) - The Company operates as a **single reportable segment (Legacy Hyperfine)** and adopted **ASU 2016-13 (Credit Losses)** effective **January 1, 2023**, with **no material impact**[35](index=35&type=chunk)[41](index=41&type=chunk) [3. Revenue Recognition](index=12&type=section&id=3.%20REVENUE%20RECOGNITION) This section details the Company's revenue streams, disaggregated by product type, and remaining performance obligations Disaggregated Revenue (in thousands) | Product Type | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Device | $1,728 | $1,945 | $6,670 | $4,305 | | Service | $602 | $403 | $1,676 | $1,085 | | **Total Revenue** | **$2,330** | **$2,348** | **$8,346** | **$5,390** | - Revenue recognized from deferred revenue balances at the beginning of the period was **$477 thousand** for the three months and **$1,119 thousand** for the nine months ended September 30, 2023[48](index=48&type=chunk) - As of September 30, 2023, remaining performance obligations amounted to **$5,499 thousand**, with approximately **11%** expected to be recognized in fiscal year 2023 and **89%** in fiscal year 2024 and thereafter[53](index=53&type=chunk) [4. Fair Value of Financial Instruments](index=13&type=section&id=4.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This section explains the Company's fair value measurement hierarchy for financial instruments - The Company measures fair value using a **three-tier hierarchy**, with all classified assets being **Level 1** (quoted prices in active markets)[55](index=55&type=chunk)[57](index=57&type=chunk) - As of September 30, 2023, **$85.96 million** in money market funds, demand deposit, and savings accounts were classified as **Level 1 assets**[59](index=59&type=chunk) [5. Inventories](index=14&type=section&id=5.%20INVENTORIES) This section provides a breakdown of the Company's inventory components, including raw materials and finished goods Inventories (in thousands) | Category | September 30, 2023 | December 31, 2022 | | :------------ | :----------------- | :---------------- | | Raw materials | $2,725 | $2,241 | | Finished goods | $4,215 | $2,381 | | **Total Inventories** | **$6,940** | **$4,622** | [6. Property and Equipment, Net](index=14&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT,%20NET) This section details the Company's property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net (in thousands) | Category | September 30, 2023 | December 31, 2022 | | :------------------------ | :----------------- | :---------------- | | Total historical cost | $6,106 | $5,570 | | Less: Accumulated depreciation and amortization | $(2,948) | $(2,322) | | **Property and equipment, net** | **$3,158** | **$3,248** | - Depreciation expense was **$278 thousand** for the three months and **$791 thousand** for the nine months ended September 30, 2023[61](index=61&type=chunk) [7. Accrued Expenses and Other Current Liabilities](index=15&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) This section itemizes the Company's accrued expenses and other current liabilities at period-end Accrued Expenses and Other Current Liabilities (in thousands) | Category | September 30, 2023 | December 31, 2022 | | :------------------------ | :----------------- | :---------------- | | Bonus | $2,340 | $2,674 | | Contracted services | $964 | $1,127 | | Legal fees | $284 | $261 | | Payroll and related benefits | $1,290 | $1,876 | | Other | $375 | $38 | | **Total** | **$5,253** | **$5,976** | [8. Equity Incentive Plan](index=15&type=section&id=8.%20EQUITY%20INCENTIVE%20PLAN) This section outlines the Company's stock option and restricted stock unit activity and related compensation expense Stock Option Activity (Number of Options) | Activity | Nine Months Ended Sep 30, 2023 | | :------------------------ | :----------------------------- | | Outstanding at January 1, 2023 | 10,719,564 | | Granted | 4,974,648 | | Exercised | (160,787) | | Forfeited / Cancelled / Expired | (879,190) | | **Outstanding at September 30, 2023** | **14,654,235** | Restricted Stock Unit (RSU) Activity (Number of RSUs) | Activity | Nine Months Ended Sep 30, 2023 | | :------------------------ | :----------------------------- | | Outstanding at January 1, 2023 | 1,585,359 | | Granted | 29,000 | | Vested | (754,679) | | Forfeited | (173,165) | | **Outstanding at September 30, 2023** | **686,515** | Stock-Based Compensation Expense by Functional Line Item (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of sales | $26 | $34 | $77 | $85 | | Research and development | $371 | $339 | $805 | $1,851 | | Sales and marketing | $44 | $79 | $139 | $291 | | General and administrative | $753 | $(2,806) | $2,432 | $6,632 | | **Total** | **$1,194** | **$(2,354)** | **$3,453** | **$8,859** | [9. Net Loss Per Share](index=16&type=section&id=9.%20NET%20LOSS%20PER%20SHARE) This section presents the calculation of basic and diluted net loss per common share and anti-dilutive shares Net Loss Per Common Share (Basic and Diluted) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss (in thousands) | $(10,757) | $(13,171) | $(33,554) | $(60,105) | | Weighted-average shares | 71,464,315 | 70,509,639 | 71,178,769 | 70,398,103 | | **Basic and dilutive net loss per share** | **$(0.15)** | **$(0.19)** | **$(0.47)** | **$(0.85)** | Anti-Dilutive Common Equivalent Shares | Category | September 30, 2023 | September 30, 2022 | | :------------------------ | :----------------- | :----------------- | | Outstanding options | 14,654,235 | 8,544,480 | | Outstanding RSUs | 686,515 | 2,037,517 | | Earn-Out Shares | 9,357,835 | 9,450,862 | | **Total anti-dilutive common equivalent shares** | **24,698,585** | **20,032,859** | [10. Income Taxes](index=17&type=section&id=10.%20INCOME%20TAXES) This section discusses the Company's income tax rate and the valuation allowance against deferred tax assets - The Company's estimated annual effective income tax rate was **0.0%** for the three and nine months ended September 30, 2023 and 2022[73](index=73&type=chunk) - A **full valuation allowance** has been recorded against net deferred tax assets, as management believes it is more likely than not that the benefits will not be realized[74](index=74&type=chunk) [11. Related Party Transactions](index=18&type=section&id=11.%20RELATED%20PARTY%20TRANSACTIONS) This section discloses transactions with related parties, including sublease agreements and service arrangements - The Company subleases office and lab space from **4Catalyzer Corporation (4C)**, a related party, paying approximately **$122 thousand** (3 months) and **$255 thousand** (9 months) in rent during 2023[75](index=75&type=chunk) - The Company incurred expenses from **4C** of **$26 thousand** (3 months) and **$71 thousand** (9 months) in 2023 for services under a **Master Services Agreement**[78](index=78&type=chunk) - **Technology and Services Exchange Agreements (TSEA)** exist with other participant companies controlled by the Rothbergs, allowing use of non-core technologies[79](index=79&type=chunk) [12. Commitments and Contingencies](index=19&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) This section details the Company's commitments, grant funding, and absence of material legal proceedings - The Company did not make any matching contributions to its **401(k) plan** for the three and nine months ended September 30, 2023 or 2022[80](index=80&type=chunk) - The Company received an additional **$3.35 million grant** from the **Bill & Melinda Gates Foundation (BMGF)** in **May 2023** to develop a scalable approach to measuring neurodevelopment via low-field MRI in children in low-to-middle income countries[81](index=81&type=chunk) - The Company is **not currently a party to any material legal proceedings** and has **not recorded any liability** under indemnification provisions[84](index=84&type=chunk)[85](index=85&type=chunk) [13. Subsequent Events](index=20&type=section&id=13.%20SUBSEQUENT%20EVENTS) This section confirms the evaluation of events occurring after the balance sheet date for disclosure requirements - The Company has evaluated subsequent events through the financial statement issuance date and determined **no events require disclosure**[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including an overview of the business, key performance metrics, factors affecting results, and a detailed analysis of financial performance and liquidity [Overview](index=21&type=section&id=Overview) This section introduces Hyperfine's mission, the Swoop® system's market impact, and recent organizational changes - Hyperfine's mission is to revolutionize patient care globally with its **Swoop® Portable MR Imaging® System**, an **ultra-low-field (ULF)** magnetic resonance diagnostic brain imaging device[89](index=89&type=chunk) - The **Swoop® system** addresses the increasing demand for MR imaging, aiming to expand the **$35 billion imaging market** by providing accessible, cost-effective MRI in various care settings[90](index=90&type=chunk)[91](index=91&type=chunk) - The Company suspended its **Liminal brain sensing platform** development and underwent an **organizational restructuring** in **December 2022**, terminating approximately **13% of its global workforce** to decrease costs[95](index=95&type=chunk) [Key Performance Metrics](index=22&type=section&id=Key%20Performance%20Metrics) This section highlights the total installed base of Swoop® systems as a crucial indicator of business growth - The **total installed base of Swoop® systems** is a key metric for business growth, comprising commercial, grant fulfillment, and research units[97](index=97&type=chunk) Total Swoop® Systems Installed Units | Category | As of September 30, 2023 | As of September 30, 2022 | | :------------------------ | :----------------------- | :----------------------- | | Commercial system units | 91 | 57 | | Grant fulfillment units | 21 | 20 | | Research units | 21 | 23 | | **Total Installed Units** | **133** | **100** | [Factors Affecting Results of Operations](index=23&type=section&id=Factors%20Affecting%20Results%20of%20Operations) This section discusses the impact of technical innovation, commercialization strategies, and international expansion on financial performance - The Company continuously invests in **technical innovation**, improving **AI-powered image quality** and developing new imaging applications to broaden clinical uses and explore the **Swoop® system's** role as a clinical decision support platform[101](index=101&type=chunk) - Commercialization efforts are primarily focused on the **United States**, building direct sales and field support to increase adoption and routine use in hospital systems[102](index=102&type=chunk) - International expansion includes commercialization in **Canada, Australia, New Zealand, and Pakistan**, with grant funding from the **BMGF** supporting deployments in low-to-middle income countries[103](index=103&type=chunk)[104](index=104&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's revenues, costs, expenses, and net loss for the reporting periods Consolidated Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change % (3M) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change % (9M) | | :------------------------ | :------------------------------ | :------------------------------ | :------------ | :----------------------------- | :----------------------------- | :------------ | | Device Sales | $1,728 | $1,945 | (11.2)% | $6,670 | $4,305 | 54.9% | | Service Sales | $602 | $403 | 49.4% | $1,676 | $1,085 | 54.5% | | **Total Sales** | **$2,330** | **$2,348** | **(0.8)%** | **$8,346** | **$5,390** | **54.8%** | | Cost of Sales | $1,206 | $1,660 | (27.3)% | $4,623 | $4,783 | (3.3)% | | Gross Margin | $1,124 | $688 | 63.37% | $3,723 | $607 | 513.34% | | Research and development | $5,739 | $7,338 | (21.8)% | $16,531 | $22,937 | (27.9)% | | General and administrative | $4,615 | $3,198 | 44.3% | $16,103 | $26,570 | (39.4)% | | Sales and marketing | $2,529 | $3,434 | (26.4)% | $7,575 | $11,345 | (33.2)% | | **Total Operating Expenses** | **$12,883** | **$13,970** | **(7.8)%** | **$40,209** | **$60,852** | **(33.9)%** | | Loss from Operations | $(11,759) | $(13,282) | (11.5)% | $(36,486) | $(60,245) | (39.4)% | | Interest income | $1,021 | $170 | 500.6% | $2,920 | $203 | 1,338.4% | | Net Loss | $(10,757) | $(13,171) | (18.3)% | $(33,554) | $(60,105) | (44.2)% | - Device sales decreased by **$0.2 million (11.2%)** for the three months ended September 30, 2023, primarily due to decreased volume, but increased by **$2.4 million (54.9%)** for the nine months, driven by higher sales prices[106](index=106&type=chunk)[108](index=108&type=chunk) - Service sales increased by **$0.2 million (49.4%)** for the three months and **$0.6 million (54.5%)** for the nine months ended September 30, 2023, driven by an increase in commercial system units installed[107](index=107&type=chunk)[109](index=109&type=chunk) - Interest income significantly increased by **$0.9 million (500.6%)** for the three months and **$2.7 million (1,338.4%)** for the nine months ended September 30, 2023, due to higher interest rates and cash balances[120](index=120&type=chunk)[121](index=121&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the Company's cash position, funding outlook, and cash flow from operating activities - As of September 30, 2023, the Company had cash and cash equivalents of **$85.4 million**, with an accumulated deficit of **$243.0 million**[125](index=125&type=chunk) - The Company expects to incur **significant cash burn and recurring net losses**, but anticipates existing cash and sales proceeds will fund operations for at least the **next 12 months**[125](index=125&type=chunk)[126](index=126&type=chunk) - Net cash used in operating activities decreased to **$31.9 million** for the nine months ended September 30, 2023, from **$57.0 million** in the prior year, primarily due to a lower net loss and non-cash adjustments[132](index=132&type=chunk)[133](index=133&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section confirms no material changes to the Company's critical accounting policies and estimates - There have been **no material changes** to the Company's critical accounting policies and estimates as compared to those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022[143](index=143&type=chunk) [Recently Issued Accounting Pronouncements](index=30&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to disclosures regarding recently issued accounting pronouncements in the financial statement notes - A description of recently issued accounting pronouncements is provided in **Note 2** to the unaudited condensed consolidated financial statements[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to market risks, including interest rate risk, inflation risk, and foreign exchange risk, and management's approach to these exposures - The Company's primary market risk exposure is from fluctuations in **interest rates, inflation, and foreign exchange**[146](index=146&type=chunk) - A **0.5 percentage point decrease** in interest rates would decrease earnings before income taxes by **$0.4 million**, based on the balance sheet position at September 30, 2023[147](index=147&type=chunk) - Inflation affects manufacturing costs, and the Company may not be able to fully offset higher costs through price increases or efficiencies. Foreign exchange risk is **limited**, and **no hedging strategies** are utilized[148](index=148&type=chunk)[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - The principal executive officer and principal financial officer concluded that the Company's **disclosure controls and procedures were effective** at a reasonable assurance level as of September 30, 2023[150](index=150&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during the three months ended September 30, 2023[151](index=151&type=chunk) [PART II — OTHER INFORMATION](index=32&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section contains additional information not included in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms the Company's current status regarding legal proceedings - The Company is **not currently a party to any material legal proceedings**[153](index=153&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Company's risk factors as previously disclosed - There have been **no material changes** to the risk factors described in the Company's 2022 Annual Report on Form 10-K[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section reports on any unregistered sales of equity securities, use of proceeds, and issuer purchases of equity securities - The Company did not have any **unregistered sales of equity securities** or **issuer purchases of equity securities** during the three months ended September 30, 2023[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section addresses any defaults upon senior securities - This item is **not applicable** to the Company[157](index=157&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section provides mine safety disclosures - This item is **not applicable** to the Company[158](index=158&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This section covers other information not disclosed elsewhere - This item is **not applicable** to the Company[159](index=159&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q Exhibit Index Highlights | Exhibit Number | Exhibit Description | Filed Herewith | | :------------- | :------------------------------------------------------------------------------- | :------------- | | 10.1+ | Letter Agreement with Thomas Teisseyre, Ph.D. (July 17, 2023) | | | 10.4+ | Separation Agreement with Khan Siddiqui, M.D. (September 30, 2023) | | | 31.1 | Certification of the Principal Executive Officer pursuant to Section 302 | X | | 31.2 | Certification of the Principal Financial Officer pursuant to Section 302 | X | | 32* | Certifications of CEO and CFO pursuant to Section 906 | X | [Signatures](index=35&type=section&id=SIGNATURES) This section provides the official signatures for the Quarterly Report on Form 10-Q - The report was signed on **November 9, 2023**, by **Maria Sainz**, **President and Chief Executive Officer**, and **Brett Hale**, **Chief Administrative Officer, Chief Financial Officer, Treasurer and Corporate Secretary**[166](index=166&type=chunk)

Financial Performance - Device sales for the three months ended June 30, 2023, increased by $1.6 million, or 140.6%, compared to the same period in 2022, driven by strong international sales and higher sales prices [106]. - Total sales for the six months ended June 30, 2023, were $6.016 million, a 97.8% increase from $3.042 million in the same period of 2022 [106]. - The gross margin for the three months ended June 30, 2023, was $1.444 million, compared to a loss of $165, indicating a significant improvement in profitability [106]. - Service sales increased by $0.4 million, or 57.5%, for the six months ended June 30, 2023 compared to the same period in 2022, driven by an increase in the install base [108]. - Device sales increased by $2.6 million, or 109.4%, for the six months ended June 30, 2023 compared to the same period in 2022, attributed to higher sales volume and increased sales prices [108]. - The net loss for the three months ended June 30, 2023, was $10.637 million, a 54.1% reduction from a net loss of $23.159 million in the same period of 2022 [106]. - The company reported a net loss of $22.8 million for the six months ended June 30, 2023, with an accumulated deficit of $232.3 million as of the same date [124]. - The net loss for the six months ended June 30, 2023, was $22.8 million, compared to a net loss of $46.9 million for the same period in 2022 [131][132]. Expenses and Cost Management - Research and development expenses decreased by 31% to $10.792 million for the six months ended June 30, 2023, down from $15.599 million in the same period of 2022 [106]. - Operating expenses for the three months ended June 30, 2023, were reduced by 43% to $13.136 million compared to $23.027 million in the same period of 2022 [106]. - Research and development expenses decreased by $4.8 million, or 30.8%, for the six months ended June 30, 2023 compared to the same period in 2022, primarily due to reduced personnel and consulting costs [113]. - General and administrative expenses decreased by $11.9 million, or 50.8%, for the six months ended June 30, 2023 compared to the same period in 2022, driven by a reduction in personnel-related costs [116]. - Sales and marketing expenses decreased by $2.9 million, or 36.2%, for the six months ended June 30, 2023 compared to the same period in 2022, mainly due to lower personnel and marketing event costs [118]. - Total cost of sales increased by $294 thousand, or 9.4%, for the six months ended June 30, 2023 compared to the same period in 2022, with device sales costs rising by 14.1% [109]. Cash Flow and Financial Position - As of June 30, 2023, the company had cash and cash equivalents of $93.9 million, which is expected to support operations for at least the next 12 months [125]. - For the six months ended June 30, 2023, net cash used in operating activities was $23.2 million, a decrease from $44.2 million in the same period of 2022 [131][132]. - Net cash used in investing activities remained consistent at $0.3 million for both the six months ended June 30, 2023, and 2022, attributed to fixed asset purchases [133][134]. - Net cash provided by financing activities increased to $0.1 million in the first half of 2023 from $2,000 in the same period of 2022, primarily from option exercises [135][136]. - As of June 30, 2023, the company had $95 million in cash, cash equivalents, and restricted cash, primarily in money market funds and savings accounts [146]. Market and Product Development - The total installed base of the Swoop® system reached 131 units as of June 30, 2023, up from 92 units in the same period of 2022, representing a growth of 42.4% [97]. - The company received FDA clearance for the latest update of the Swoop® system software in February 2023, which significantly improves diffusion-weighted imaging (DWI) quality [94]. - The Swoop® system is positioned to expand the $32 billion imaging market by increasing access to MRI technology in various healthcare settings [91]. - The company has deployed 20 Swoop® system units to hospitals in low-middle income settings through funding from the Bill & Melinda Gates Foundation [104]. - The company received a $3.4 million grant from the BMGF in May 2023 to develop a scalable approach to measuring neurodevelopment in low-to-middle income countries, with $0.5 million received by June 30, 2023 [138]. Risks and Future Outlook - The company anticipates continued cash burn and net losses until product and service sales generate sufficient gross profit to cover operating expenses [124]. - A 0.5 percentage point decrease in interest rates would decrease earnings before income taxes by $0.5 million based on the balance sheet position at June 30, 2023 [146]. - Inflationary pressures may increase manufacturing costs, which could adversely affect the company's financial condition and results of operations [147]. - The company operates primarily in U.S. dollars and does not have significant exposure to foreign exchange risk [148].

Hyperfine, Inc. (NASDAQ:HYPR) Q1 2023 Earnings Conference Call May 11, 2023 6:00 PM ET Company Participants Maria Sainz - President, Chief Executive Officer Brett Hale - Chief Administrative Officer, Incoming Chief Financial Officer Marissa Bych - Investor Relations, The Gilmartin Group Conference Call Participants Larry Biegelsen - Wells Fargo Vijay Kumar - Evercore ISI Neil Chatterji - B. Riley Operator At this time all participants are in listen-only mode. After the speakers presentation there will be a ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ FORM 10-Q _________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39949 _________________ Hyperfine, Inc. (Exact name of registrant as specified in its chart ...

Market Opportunity - The Swoop® system targets a $28 billion imaging market, expected to grow at a 4.9% CAGR from 2022 to 2030[29] - The global imaging market is estimated to exceed $20 billion, with over 100,000 potential installation sites for the Swoop® system[40] - The aging population and rising prevalence of neurological conditions are driving increased demand for MRI technology[40] - The Swoop® system aims to improve access to MRI for 90% of the world's population who have limited or no access to conventional MRI[59] Product Features and Benefits - The Swoop® system reduces the average conventional MRI process time from 11.7 hours to between 0.5 to 5.3 hours, achieving a workflow time reduction of 55% or greater[35] - The Swoop® system can potentially improve access to MRI for approximately 15 million new stroke sufferers annually, avoiding the risks associated with ionizing radiation from CT scans[34] - The use of the Swoop® system has resulted in a 20% increase in the utilization of existing MRI suites for additional outpatient procedures[35] - The Swoop® system is designed to be user-friendly, requiring minimal training and allowing operation via a tablet or smartphone[35] - The Swoop® system provides diagnostic-quality images with higher contrast resolution than conventional portable medical neuroimaging systems, achieving image resolution of 1.5 x 1.5 x 5 mm compared to 1.0 x 1.0 x 5 mm for traditional MRI[59] - The Swoop® system operates with an ultra-low-field magnet of 0.064T, allowing for portable MRI without the need for specialized facilities[52] - Approximately 30% of conventional MRI scans suffer from moderate to severe image quality issues due to patient motion, which the Swoop® system addresses with motion compensation technology[55] - The Swoop® system's design allows for easy mobility within hospitals, featuring a powered drive system and a zero-turn radius for positioning in tight spaces[65] Regulatory Approvals and Compliance - The company has received multiple regulatory approvals, including Medical Device License from Health Canada and CE marking in the EU, to expand its international market presence[38] - The company must develop a diversity action plan for clinical trials as mandated by the Consolidated Appropriations Act for 2023[131] - The medical devices developed by the company are subject to extensive regulation by the FDA and other international regulatory agencies, requiring compliance with various laws governing development and marketing[110][111] - The company is subject to the Physician Payments Sunshine Act, requiring annual reporting of payments to U.S.-licensed physicians, with significant penalties for violations[149] Financial Performance and Funding - The company has raised over $160 million in equity investments and partnership milestones from institutional investors and grants, including a $1.6 million grant from the Bill & Melinda Gates Foundation[28] - The company incurred net losses of $73.2 million and $64.9 million for the years ended December 31, 2022 and 2021, respectively, with an accumulated deficit of $209.5 million as of December 31, 2022[175] - The company has generated limited revenue from product sales to date and has not achieved wide market acceptance for its products, making future performance predictions uncertain[176] - The company may need to raise additional capital to fund commercialization plans, including manufacturing and sales activities, as well as research and development[178] Competition and Market Position - The company views competition in the medical imaging market as significant, with major players like General Electric and Siemens, but sees its technology as complementary to existing high-field MRI systems[99] - The company faces significant competition from established players in the medical imaging market, including General Electric, Siemens, and Philips, which may affect its market position[190] - The company’s future success depends on the acceptance of its products in the healthcare market, which may not be receptive compared to conventional MRI systems[184] Supply Chain and Manufacturing Risks - The company relies on a limited number of suppliers, increasing risks associated with potential interruptions in supply[211] - The company relies on a single contract manufacturer, Benchmark Electronics, which poses risks if they fail to meet obligations[210] - The company has incurred increased costs for the magnet, a key component in the Swoop® system, due to reliance on a single source supplier in Europe[196] - The company is working to add an additional magnet supplier to mitigate risks associated with reliance on a single supplier[93] Research and Development - The company plans to continue developing its technology to expand into new imaging applications and enhance its MRI system for broader diagnostic capabilities[37] - The market is characterized by rapid technological changes and evolving customer demands, necessitating substantial investment in research and development[222] - The introduction of new technologies may render existing products obsolete, impacting marketability and revenue[222] Compliance and Legal Risks - Non-compliance with various state and federal fraud and abuse laws can lead to substantial fines and criminal sanctions, increasing the risk of litigation[146] - The federal Anti-Kickback Statute prohibits remuneration to induce referrals for services payable under government healthcare programs, with penalties including imprisonment and fines up to $100,000 per violation[141] - The company must maintain a robust compliance program to meet diverse regulatory requirements, which increases the risk of potential violations and associated penalties[150] Workforce and Organizational Changes - As of February 15, 2023, the company employed 136 full-time employees, with 92 in research, development, manufacturing, and operations, and 133 located in the United States[72] - Approximately 13% of the global workforce was terminated as part of an organizational restructuring aimed at decreasing costs and streamlining operations[203] - Attracting and retaining key personnel is critical for the company's future success, given the intense competition in the medical device industry[204]

Hyperfine, Inc. (NASDAQ:HYPR) Q4 2022 Earnings Conference Call March 21, 2023 4:30 PM ET Company Participants Maria Sainz - President, Chief Executive Officer Brett Hale - Chief Administrative Officer, Incoming Chief Financial Officer Marissa Bych - Investor Relations, The Gilmartin Group Conference Call Participants Larry Biegelsen - Wells Fargo Kevin Joaquin - Evercore ISI Neil Chatterji - B. Riley Operator Thank you for standing by and welcome to Hyperfine’s Fourth Quarter and Full Year 2022 Conference C ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $2.3 million, a significant increase from $0.37 million in Q3 2021 [28] - Gross profit for Q3 2022 was $0.69 million, reflecting a gross margin of 29.3%, compared to a gross loss of $0.34 million in Q3 2021 [28] - Net loss for Q3 2022 was $13.2 million, equating to a net loss of $0.19 per share, an improvement from a net loss of $16.4 million or $8.70 per share in the same period of the prior year [29] - Cash burn in Q3 was $12.6 million, with cash and cash equivalents at $132.5 million at the end of the quarter [30] Business Line Data and Key Metrics Changes - The company placed 10 Swoop systems in Q3 2022, contributing to record quarterly revenue [10][20] - The average selling price (ASP) for Q3 was $194,000, up from $130,000 in Q2, with expectations to reach $200,000 [68] Market Data and Key Metrics Changes - The company anticipates installing between 35 and 45 commercial systems in 2022, maintaining a full-year revenue expectation of $7 million to $8 million [31] - The company has received letters of intent for seven units from BJC HealthCare and 20 units from King's College, with shipments expected to occur over the next several quarters [24][45] Company Strategy and Development Direction - The company aims to transform healthcare by expanding access to diagnostics with its Swoop portable MRI system, focusing on neurocritical care and stroke [12][13] - The management is prioritizing R&D, clinical, and commercialization spending to drive near-term growth while extending the cash runway [25] - The company is actively assessing strategic options for its Liminal brain sensing platform to maximize shareholder value [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the elongated sales cycle and staffing constraints in hospitals as challenges but remains confident in the pipeline and market opportunities [54] - The company expects continued growth in 2023 and 2024, with a focus on improving gross margins and expanding its clinical applications [74] Other Important Information - The company is refining its software programs and enhancing AI capabilities to optimize its MRI sequences [19] - Management is committed to being responsive to market feedback to drive adoption and use of Swoop across multiple applications [23] Q&A Session Summary Question: What are the priorities over the next 12 months? - Management is focusing on clinical use cases in neurocritical care and stroke, while scrutinizing operational complexity to extend cash runway [42] Question: What is the timing for the orders from BJC HealthCare and King's College? - Shipments for these units are expected to occur over the next several quarters, with a steady cadence throughout 2023 [45] Question: Is there any conservatism in the Q4 guidance? - The guidance reflects a realistic expectation given the elongated sales cycle and holiday schedules, not conservatism [52] Question: How does the elongated sales cycle impact workflow changes? - The company is focusing on training and implementation to facilitate workflow changes post-deployment [61] Question: What are the significant enhancements and approvals expected in the next six to nine months? - Key software improvements and AI tools aimed at enhancing image quality for stroke detection are anticipated [80]

HYPERFINE Defining the Future of Diagnostics at the Point of Care Corporate Presentation | November 2022 © 2022 Hyperfine, Inc. Forward Looking Statements This presentation includes forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-lookin ...

[Explanatory Note](index=2&type=section&id=Explanatory%20Note) This note explains the December 2021 business combination forming Hyperfine, Inc. and its Nasdaq listing under 'HYPR' - On December 22, 2021, HealthCor Catalio Acquisition Corp. (now Hyperfine, Inc.) consummated a business combination with Legacy Hyperfine and Liminal Sciences, Inc., which became wholly-owned subsidiaries[8](index=8&type=chunk) - Following the Business Combination, HealthCor changed its name to 'Hyperfine, Inc.', and its Class A common stock is listed on the Nasdaq Global Market under the symbol 'HYPR'[8](index=8&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This statement warns that the report contains forward-looking statements subject to inherent risks and uncertainties, detailed in risk factors - This report contains forward-looking statements regarding the company's future events and financial performance, based on management's beliefs and assumptions[10](index=10&type=chunk) - Forward-looking statements are subject to inherent risks, uncertainties, and assumptions, including those detailed under 'Risk Factors' in the Annual Report on Form 10-K and this quarterly report[10](index=10&type=chunk)[13](index=13&type=chunk) - Key areas of forward-looking statements include anticipated benefits of the Business Combination, product development, commercialization, regulatory approvals, market size, financial performance, and the impact of COVID-19[12](index=12&type=chunk)[14](index=14&type=chunk) [PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed combined and consolidated financial statements, including balance sheets, income statements, equity changes, cash flows, and detailed notes [Condensed Combined and Consolidated Balance Sheets (unaudited)](index=5&type=section&id=Condensed%20Combined%20and%20Consolidated%20Balance%20Sheets%20(unaudited)) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of September 30, 2022, and December 31, 2021 | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cash and cash equivalents | $132,482 | $188,498 | | Total current assets | $143,716 | $197,485 | | Total assets | $148,331 | $202,473 | | Total current liabilities | $12,459 | $15,736 | | Total liabilities | $13,348 | $16,246 | | Accumulated deficit | $(196,425) | $(136,320) | | Total stockholders' equity | $134,983 | $186,227 | [Condensed Combined and Consolidated Statements of Operations and Comprehensive Loss (unaudited)](index=6&type=section&id=Condensed%20Combined%20and%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(unaudited)) This table presents the company's revenues, costs, and net loss for the three and nine months ended September 30, 2022 and 2021 | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total sales | $2,348 | $371 | $5,390 | $1,060 | | Total cost of sales | $1,660 | $709 | $4,783 | $1,774 | | Gross margin | $688 | $(338) | $607 | $(714) | | Total operating expenses | $13,970 | $16,052 | $60,852 | $38,067 | | Loss from operations | $(13,282) | $(16,390) | $(60,245) | $(38,781) | | Net loss and comprehensive loss | $(13,171) | $(16,392) | $(60,105) | $(38,766) | | Net loss per common share, basic and diluted | $(0.19) | $(8.66) | $(0.85) | $(22.56) | [Condensed Combined and Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited)](index=7&type=section&id=Condensed%20Combined%20and%20Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)%20(unaudited)) This table details changes in the company's equity, including net loss and stock-based compensation, from December 31, 2021, to September 30, 2022 | Metric (in thousands) | Balance, Dec 31, 2021 | Net Loss (9 months ended Sep 30, 2022) | Stock-based Compensation Expense (9 months ended Sep 30, 2022) | Balance, Sep 30, 2022 | | :-------------------- | :-------------------- | :------------------------------------- | :------------------------------------------------------------- | :-------------------- | | Additional paid-in capital | $322,540 | N/A | $8,859 | $331,401 | | Accumulated deficit | $(136,320) | $(60,105) | N/A | $(196,425) | | Total stockholders' equity | $186,227 | $(60,105) | $8,859 | $134,983 | [Condensed Combined and Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Combined%20and%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(56,994) | $(29,047) | | Net cash used in investing activities | $(427) | $(1,736) |\n| Net cash provided by financing activities | $2 | $35,439 | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(57,419) | $4,656 | | Cash, cash equivalents and restricted cash, end of period | $133,741 | $68,942 | [Notes to Condensed Combined and Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Combined%20and%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and disclosures supporting the condensed combined and consolidated financial statements [1. ORGANIZATION AND DESCRIPTION OF BUSINESS](index=9&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) Hyperfine, Inc. was formed through a business combination in December 2021, aiming to provide affordable and accessible MRI with its Swoop® Portable MR Imaging System. The system is FDA-cleared and commercially available in the US, Canada, Australia, New Zealand, and Pakistan. The company is also developing a device for non-invasive brain vital sign measurement - Hyperfine, Inc. was formed on December 22, 2021, through a business combination with Legacy Hyperfine and Liminal Sciences, Inc.[27](index=27&type=chunk) - The company's mission is to provide affordable and accessible MRI, with its Swoop® Portable MR Imaging System™ commercially available in the U.S. (FDA 510(k) clearance in 2020), Canada, New Zealand, Pakistan, and Australia[28](index=28&type=chunk) - Hyperfine is in the early research and development stage of a new device to non-invasively measure key vital signs in the brain[28](index=28&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the basis of financial statement presentation, accounting policies, COVID-19 impact, segment information, use of estimates, and recent accounting pronouncements [COVID-19 Outbreak](index=10&type=section&id=COVID-19%20Outbreak) The COVID-19 pandemic continues to adversely impact operations, affecting personnel, manufacturing, material availability, and hiring, with uncertain future financial impact - The COVID-19 pandemic has adversely impacted operations, including personnel, third-party manufacturing, and material availability, creating uncertainty for future financial results[33](index=33&type=chunk)[34](index=34&type=chunk) - No significant impairment losses on assets have been incurred due to the COVID-19 pandemic[35](index=35&type=chunk) [Segment Information](index=10&type=section&id=Segment%20Information) The company aggregates Legacy Hyperfine and Liminal into a single reporting segment, with all long-lived assets and most revenue generated in the U.S - Legacy Hyperfine and Liminal are aggregated into a single reporting segment, as both focus on developing and commercializing products and services[36](index=36&type=chunk) - All long-lived assets are located in the United States[36](index=36&type=chunk) Non-U.S. Revenue | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :----- | :--------------------------------------------- | :-------------------------------------------- | | Non-U.S. Revenue | $784 | $1,947 | [Use of Estimates](index=10&type=section&id=Use%20of%20Estimates) Financial statement preparation requires significant management estimates for revenue, doubtful accounts, inventory, deferred tax assets, and stock-based compensation, which may differ from actual results - Significant estimates are made for revenue recognition, allowance for doubtful accounts, inventory valuation, deferred tax assets, and stock-based compensation expense[42](index=42&type=chunk) - Estimates are based on historical and anticipated results, but actual results could differ materially[39](index=39&type=chunk) [Recent Accounting Pronouncements](index=11&type=section&id=Recent%20Accounting%20Pronouncements) The company is evaluating the impact of new accounting pronouncements on Leases and Credit Losses, with the Leases pronouncement not expected to be material - ASU 2016-02, Leases (Topic 842), is effective for interim reporting periods within annual periods beginning January 1, 2023; its adoption is not expected to be material[40](index=40&type=chunk) - ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), is effective for the annual reporting period beginning January 1, 2023; the company is evaluating its impact[41](index=41&type=chunk) [3. REVENUE RECOGNITION](index=12&type=section&id=3.%20REVENUE%20RECOGNITION) This section details the company's revenue recognition policies, disaggregating revenue by product type, managing contract balances, and clarifying leasing arrangements and contract costs [Disaggregation of Revenue](index=12&type=section&id=Disaggregation%20of%20Revenue) Revenue is disaggregated by device and service, both showing significant growth for the three and nine months ended September 30, 2022, compared to 2021 | Revenue Type | Pattern of Recognition | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :----------- | :--------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Device | Point in time | $1,945 | $200 | $4,305 | $521 | | Service | Over time | $403 | $171 | $1,085 | $539 | | Total revenue| | $2,348 | $371 | $5,390 | $1,060 | [Contract Balances](index=12&type=section&id=Contract%20Balances) Contract balances, including accounts receivable and deferred revenue, increased significantly from December 2021 to September 2022, with substantial growth in recognized deferred revenue Contract Balances (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Accounts receivable, net | $2,702 | $553 | | Unbilled receivables | $1,475 | $91 | | Deferred revenue | $1,449 | $730 | | Long term deferred revenue | $889 | $510 | Revenue Recognized from Deferred Revenue (in thousands) | Revenue Recognized from Deferred Revenue (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | From beginning-of-period balance | $118 | $43 | $501 | $157 | [Costs of Obtaining or Fulfilling Contracts](index=13&type=section&id=Costs%20of%20Obtaining%20or%20Fulfilling%20Contracts) Incremental costs of obtaining contracts, such as commissions, are capitalized and amortized over the period consistent with the transfer of related goods and services Capitalized Costs in Other Long Term Assets (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Capitalized costs in Other long term assets | $251 | $158 | [Transaction price allocated to remaining performance obligations](index=13&type=section&id=Transaction%20price%20allocated%20to%20remaining%20performance%20obligations) Remaining performance obligations increased to $5.1 million as of September 30, 2022, with most expected to be recognized as revenue in fiscal year 2023 and thereafter Remaining Performance Obligations (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Remaining performance obligations | $5,101 | $2,800 | - Approximately **9%** of remaining performance obligations are expected to be recognized in fiscal year 2022, and **91%** in fiscal year 2023 and thereafter[51](index=51&type=chunk) [4. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=13&type=section&id=4.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The company measures fair value using a three-tier hierarchy, with cash equivalents and short-term items approximating fair value, and no Level 2 or 3 assets/liabilities - Fair value is measured using a three-tier hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - The company had no assets or liabilities valued with Level 3 inputs, and no transfers between fair value measurement levels occurred[55](index=55&type=chunk)[56](index=56&type=chunk) Money Market Funds (Level 1) (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Money market funds (Level 1) | $38,007 | $48,625 | [5. INVENTORIES](index=14&type=section&id=5.%20INVENTORIES) Total inventories slightly decreased to $4.0 million at September 30, 2022, comprising raw materials and finished goods, with manufacturing overhead including allocated labor costs Inventories (in thousands) | Inventory Type (in thousands) | September 30, 2022 | December 31, 2021 | | :---------------------------- | :----------------- | :---------------- | | Raw materials | $2,366 | $2,355 | | Finished goods | $1,636 | $1,955 | | Total inventories | $4,002 | $4,310 | - Manufacturing overhead costs include management's estimate and allocation of labor costs for warehousing, logistics, material sourcing, and production planning[58](index=58&type=chunk) [6. PROPERTY AND EQUIPMENT, NET](index=14&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) Property and equipment, net, decreased to $3.4 million at September 30, 2022, while depreciation expense increased for both the three and nine months ended September 30, 2022 Property and Equipment, Net (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Property and equipment, net | $3,448 | $3,753 | Depreciation Expense (in thousands) | Depreciation Expense (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Depreciation expense | $238 | $172 | $754 | $389 | [7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=14&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities increased to $8.9 million at September 30, 2022, primarily driven by a significant rise in payroll and related benefits Accrued Expenses and Other Current Liabilities (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Total accrued expenses and other current liabilities | $8,949 | $8,115 | | Payroll and related benefits | $2,896 | $441 | | SPAC bonus and other costs | $0 | $1,071 | [8. EQUITY INCENTIVE PLAN](index=15&type=section&id=8.%20EQUITY%20INCENTIVE%20PLAN) This section details activity for stock options and RSUs under the 2021 Equity Incentive Plan, including grants, exercises, forfeitures, and a stock option repricing [Stock option activity](index=15&type=section&id=Stock%20option%20activity) Outstanding stock options decreased to 8.5 million at September 30, 2022, due to forfeitures, including 3.1 million from the former CEO, with a repricing approved in September 2022 Stock Option Activity | Metric | Outstanding at Jan 1, 2022 | Granted | Exercised | Forfeited | Outstanding at Sep 30, 2022 | | :----- | :------------------------- | :------ | :-------- | :-------- | :-------------------------- | | Options | 7,522,136 | 5,053,663 | (16,375) | (3,714,944) | 8,544,480 | - Forfeitures include **3,124,252** options from the former CEO[62](index=62&type=chunk) - A one-time stock option repricing was approved on September 26, 2022, effective October 31, 2022, for options held by employees other than Dr. Rothberg[67](index=67&type=chunk) [Restricted stock unit activity](index=15&type=section&id=Restricted%20stock%20unit%20activity) Outstanding RSUs decreased to 2.0 million at September 30, 2022, due to vesting and forfeitures, including 150,000 from the former CEO, resulting in a $4.5 million compensation recapture Restricted Stock Unit Activity | Metric | Outstanding at Jan 1, 2022 | Granted | Vested | Forfeited | Outstanding at Sep 30, 2022 | | :----- | :------------------------- | :------ | :----- | :-------- | :-------------------------- | | RSUs | 117,516 | 2,464,840 | (222,096) | (322,738) | 2,037,517 | - Forfeitures include **150,000** RSUs from the former CEO[64](index=64&type=chunk) - A **$4,501 thousand** stock-based compensation expense related to the former CEO's forfeited awards was recaptured as a credit to general and administrative expense[66](index=66&type=chunk) [Stock-based compensation expenses by functional line item](index=16&type=section&id=Stock-based%20compensation%20expenses%20by%20functional%20line%20item) Total stock-based compensation expense for the nine months ended September 30, 2022, was $8.9 million, with a $2.8 million credit to G&A for the three months due to forfeited awards Stock-based Compensation Expenses by Functional Line Item (in thousands) | Functional Line Item (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of sales | $34 | $24 | $85 | $24 | | Research and development | $339 | $207 | $1,851 | $829 | | Sales and marketing | $79 | $15 | $291 | $52 | | General and administrative | $(2,806) | $1,129 | $6,632 | $2,226 | | Total | $(2,354) | $1,375 | $8,859 | $3,131 | - The negative General and administrative expense for the three months ended September 30, 2022, is due to the recapture of **$4.5 million** in previously recognized expense related to the former CEO's forfeited awards[66](index=66&type=chunk)[68](index=68&type=chunk) [9. NET LOSS PER SHARE](index=16&type=section&id=9.%20NET%20LOSS%20PER%20SHARE) Basic and diluted net loss per share were identical due to the company's net loss position, with weighted-average shares significantly increasing in 2022 Net Loss Per Share Data | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss | $(13,171) | $(16,392) | $(60,105) | $(38,766) | | Weighted-average common stock | 70,509,639 | 1,892,208 | 70,398,103 | 1,718,489 | | Basic and dilutive net loss per share | $(0.19) | $(8.66) | $(0.85) | $(22.56) | Anti-Dilutive Common Equivalent Shares | Anti-Dilutive Common Equivalent Shares | September 30, 2022 | September 30, 2021 | | :------------------------------------- | :----------------- | :----------------- | | Outstanding options to purchase common stock | 8,544,480 | 7,597,120 | | Outstanding Legacy Hyperfine convertible preferred stock | 0 | 46,084,168 | | Outstanding RSUs | 2,037,517 | 0 | | Earn-Out Shares | 9,450,862 | 0 | | Total anti-dilutive common equivalent shares | 20,032,859 | 53,681,288 | - Earn-Out Shares (up to **10,000,000** Class A common stock) are contingent on the Class A common stock price reaching **$15.00** within three years of the Closing Date[71](index=71&type=chunk) [10. INCOME TAXES](index=17&type=section&id=10.%20INCOME%20TAXES) The company's effective income tax rate was 0.0% for the periods presented, with a full valuation allowance against deferred tax assets due to its earnings history - The estimated annual effective income tax rate was **0.0%** for the three and nine months ended September 30, 2022 and 2021[73](index=73&type=chunk) - A full valuation allowance is recorded against net deferred tax assets, as realization is not considered more likely than not due to the company's earnings history[75](index=75&type=chunk) [11. RELATED PARTY TRANSACTIONS](index=18&type=section&id=11.%20RELATED%20PARTY%20TRANSACTIONS) This section details transactions with related parties, including subleases from 4Catalyzer, expense allocations, a forgiven Promissory Note, and various service agreements - The company subleases office and lab space from 4Catalyzer Corporation (4C), a related party[76](index=76&type=chunk) Related Party Balances (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Due to related parties (4C) | $58 | $1,872 | | Due from related parties | $0 | $14 | - A **$90 thousand** Promissory Note with an employee was forgiven on January 11, 2022[78](index=78&type=chunk) [12. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines commitments, including a 401(k) plan and grants from the Bill & Melinda Gates Foundation, and addresses contingencies, noting no material legal proceedings [Commitments](index=19&type=section&id=Commitments) The company has no 401(k) matching contributions and received $4.9 million in BMGF grants to deploy 25 Swoop devices for a multi-site study - No matching contributions were made to the 401(k) plan for the three and nine months ended September 30, 2022 and 2021[83](index=83&type=chunk) - Received grants totaling **$4.9 million** from the Bill & Melinda Gates Foundation (BMGF) for the provision and equipping of **25** sites with Swoop systems for a multi-site study[84](index=84&type=chunk)[144](index=144&type=chunk) Restricted Cash (BMGF Grants) (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Restricted cash (BMGF grants) | $1,259 | $2,662 | [Contingencies](index=19&type=section&id=Contingencies) The company is not involved in material legal proceedings, has no recorded liabilities for indemnification, and a $1.0 million Earn-Out Shares payment is not considered probable - The company is not currently a party to any material legal proceedings[85](index=85&type=chunk) - No liability has been recorded for indemnification obligations due to limited history and no awareness of material claims[87](index=87&type=chunk) - A **$1,000 thousand** payment to a third-party service provider for Earn-Out Shares is not considered probable, so no liability was recognized[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results, covering business overview, COVID-19 impact, key metrics, and detailed financial performance [Overview](index=21&type=section&id=Overview) Hyperfine is a digital health company providing affordable MRI with its FDA-cleared Swoop® system, integrating AI, and developing a brain sensing platform for international expansion - Hyperfine's mission is to provide affordable and accessible imaging and monitoring through MRI, with its Swoop® Portable MR Imaging System™[90](index=90&type=chunk) - The Swoop system is FDA 510(k) cleared (2020) and commercially available in the US, Canada, Australia, New Zealand, and Pakistan[93](index=93&type=chunk) - The company is optimizing its software ecosystem with Artificial Intelligence (AI) for clinical decision support and plans to develop a brain sensing platform[92](index=92&type=chunk) [COVID-19](index=22&type=section&id=COVID-19) The COVID-19 pandemic continues to adversely impact operations, causing sales restrictions, decreased hospital spending, and supply chain disruptions, leading to increased costs and extended lead times - COVID-19 has created commercial challenges, restricting salesforce visits to healthcare providers and slowing product demonstrations[96](index=96&type=chunk) - The supply chain has been adversely affected, leading to increased product costs and dramatically extended lead times for certain components, particularly semiconductors[98](index=98&type=chunk) - The company mitigated impacts by shifting to domestic suppliers, increasing communication, and providing advanced forecasts, but future waves could still cause greater negative impacts[98](index=98&type=chunk) [Key Performance Metrics](index=23&type=section&id=Key%20Performance%20Metrics) The company evaluates business performance using key metrics, primarily focusing on the 'Installed Base' of its Swoop systems, indicating business growth [Installed Base](index=23&type=section&id=Installed%20Base) The total installed base of Swoop systems reached 100 units as of September 30, 2022, including commercial, grant fulfillment, and research installations, doubling from the prior year Installed Base of Swoop Systems | Installation Type | As of September 30, 2022 | As of September 30, 2021 | | :---------------- | :----------------------- | :----------------------- | | Commercial systems installations | 57 | 20 | | Grant fulfillment installations | 20 | 8 | | Research units | 23 | 22 | | Total Installed Units | 100 | 50 | - Commercial system installations and RTA sales generate revenue, while grant fulfillment and research units expand clinical use cases, often at no cost to institutions[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) [Factors Affecting Results of Operations](index=24&type=section&id=Factors%20Affecting%20Results%20of%20Operations) Key factors influencing future results include strategic partnerships, accelerated international expansion, and technical innovation focusing on AI integration and new imaging applications [Strategic partnerships and accelerated international expansion](index=24&type=section&id=Strategic%20partnerships%20and%20accelerated%20international%20expansion) Market expansion through direct sales and distribution partners in target regions, alongside a BMGF partnership for research, are key growth drivers - The company is building an international sales strategy with direct sales and distribution partners in target regions, including Canada, Australia, New Zealand, Pakistan, and potentially larger EU countries[108](index=108&type=chunk) - A partnership with the Bill & Melinda Gates Foundation (BMGF) involves deploying **20** Swoop systems (out of **25** funded) for a multi-site study to validate use in maternal anemia, malnutrition, infection, and birth-related injury[108](index=108&type=chunk)[144](index=144&type=chunk) [Technical innovation](index=24&type=section&id=Technical%20innovation) The company focuses on enhancing the Swoop system with AI, new imaging applications, and a brain sensing platform, expecting increased R&D expenses but positive future profitability - Focus on integrating the Swoop system into clinical workflows and developing automated image analysis using Artificial Intelligence (AI)[109](index=109&type=chunk) - Plans to develop an enhanced MRI system for neuroimaging and other extremities, and a brain sensing platform for neuromonitoring[109](index=109&type=chunk) - These technical innovation activities are expected to increase research and development expenses but positively impact future results and profitability[109](index=109&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section details the company's financial performance for the three and nine months ended September 30, 2022, versus 2021, covering sales, costs, gross margin, and operating expenses [Sales](index=25&type=section&id=Sales) Total sales increased significantly by 532.9% for the three months and 408.5% for the nine months ended September 30, 2022, driven by higher device volume and service sales Sales (in thousands) | Sales (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Device | $1,945 | $200 | 872.5% | $4,305 | $521 | 726.3% | | Service | $403 | $171 | 135.7% | $1,085 | $539 | 101.3% | | Total sales | $2,348 | $371 | 532.9% | $5,390 | $1,060 | 408.5% | - Device sales increase was driven by higher volume and sales price, following a pricing action in Q1 2022[112](index=112&type=chunk) - Service sales growth was driven by an increase in the volume of installed devices, as service revenue is recurring[113](index=113&type=chunk) [Cost of sales](index=26&type=section&id=Cost%20of%20sales) Total cost of sales increased by 134.1% for the three months and 169.6% for the nine months ended September 30, 2022, due to higher manufacturing, hardware, and labor costs Cost of Sales (in thousands) | Cost of Sales (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :--------------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Device | $1,215 | $508 | 139.2% | $3,511 | $1,420 | 147.3% | | Service | $445 | $201 | 121.4% | $1,272 | $354 | 259.3% | | Total cost of sales | $1,660 | $709 | 134.1% | $4,783 | $1,774 | 169.6% | - Increase in device cost of sales was driven by third-party manufacturing costs, product hardware costs, and labor costs due to increased sales volume[116](index=116&type=chunk)[118](index=118&type=chunk) - Increase in service cost of sales was primarily due to higher internal overheads and labor costs[117](index=117&type=chunk)[119](index=119&type=chunk) [Research and development](index=26&type=section&id=Research%20and%20development) R&D expenses increased by 14.0% for the three months and 35.3% for the nine months ended September 30, 2022, due to higher personnel, stock-based compensation, and consulting costs Research and Development Expenses (in thousands) | R&D Expenses (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Research and development | $7,338 | $6,438 | 14.0% | $22,937 | $16,949 | 35.3% | - The increase was driven by higher personnel-related costs (**$5.8 million** for 9 months), stock-based compensation (**$1.0 million** for 9 months), and consulting costs (**$0.9 million** for 9 months)[121](index=121&type=chunk)[122](index=122&type=chunk) - Partially offset by grant fulfillments recorded as credits to R&D expenses (**$1.8 million** for 9 months)[122](index=122&type=chunk) [General and administrative](index=27&type=section&id=General%20and%20administrative) G&A expenses decreased by 53.2% for the three months due to a $4.5 million compensation recapture, but increased 73.1% for nine months due to higher personnel and insurance costs General and Administrative Expenses (in thousands) | G&A Expenses (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | General and administrative | $3,198 | $6,827 | (53.2)% | $26,570 | $15,348 | 73.1% | - The 3-month decrease was primarily due to a **$4.5 million** credit from recaptured stock-based compensation related to the former CEO's forfeited awards[123](index=123&type=chunk) - The 9-month increase was driven by higher stock-based compensation (**$4.4 million** net), personnel costs (**$3.6 million**), insurance (**$2.4 million**), and recruitment expenses[124](index=124&type=chunk) [Sales and marketing](index=27&type=section&id=Sales%20and%20marketing) Sales and marketing expenses increased by 23.2% for the three months and 96.6% for the nine months ended September 30, 2022, driven by higher personnel, stock-based compensation, and travel costs Sales and Marketing Expenses (in thousands) | S&M Expenses (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Sales and marketing | $3,434 | $2,787 | 23.2% | $11,345 | $5,770 | 96.6% | - The increase was primarily due to higher personnel-related expenses (**$4.2 million** for 9 months), stock-based compensation (**$0.2 million** for 9 months), travel (**$0.7 million** for 9 months), and consulting expenses (**$0.4 million** for 9 months)[126](index=126&type=chunk) - Partially offset by a decrease in marketing costs and marketing events for the three months ended September 30, 2022[125](index=125&type=chunk) [Interest income](index=28&type=section&id=Interest%20income) Interest income increased significantly to $170 thousand for the three months and $203 thousand for the nine months ended September 30, 2022, primarily due to higher interest rates Interest Income (in thousands) | Interest Income (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (%) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (%) | | :----------------------------- | :------------------------------ | :------------------------------ | :--------- | :----------------------------- | :----------------------------- | :--------- | | Interest income | $170 | $3 | 5,567% | $203 | $13 | 1,462% | - The increase in interest income was primarily driven by higher interest rates during the periods[128](index=128&type=chunk)[129](index=129&type=chunk) [Other income (expense), net](index=28&type=section&id=Other%20income%20(expense)%2C%20net) Other income (expense), net, showed an unfavorable increase in expense for both periods, primarily due to realized losses on foreign currencies Other Income (Expense), Net (in thousands) | Other Income (Expense), net (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (unfavorable) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change (unfavorable) | | :----------------------------------------- | :------------------------------ | :------------------------------ | :------------------- | :----------------------------- | :----------------------------- | :------------------- | | Other income (expense), net | $(59) | $(5) | $(54) | $(63) | $2 | $(65) | - The unfavorable changes were primarily driven by realized losses on foreign currencies[130](index=130&type=chunk)[131](index=131&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company funds operations primarily through stock issuance, with $132.5 million cash as of September 30, 2022, expecting to cover operations for at least 12 months despite continued cash burn [Cash](index=29&type=section&id=Cash) Cash and cash equivalents totaled $132.5 million as of September 30, 2022, with future capital requirements uncertain and dependent on development, commercialization, and regulatory costs - Cash and cash equivalents totaled **$132.5 million** as of September 30, 2022[136](index=136&type=chunk) - Future capital requirements are dependent on development costs, commercialization strategy, international expansion, and regulatory costs[136](index=136&type=chunk) - Inability to obtain additional funds on a timely basis could lead to delays in product development or commercialization efforts[135](index=135&type=chunk)[136](index=136&type=chunk) [Cash flows](index=29&type=section&id=Cash%20flows) The company experienced a net decrease in cash of $57.4 million for the nine months ended September 30, 2022, driven by increased operating cash use and reduced financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(56,994) | $(29,047) | | Net cash used in investing activities | $(427) | $(1,736) | | Net cash provided by financing activities | $2 | $35,439 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(57,419) | $4,656 | [Net cash used in operating activities](index=29&type=section&id=Net%20cash%20used%20in%20operating%20activities) Net cash used in operating activities increased to $57.0 million for the nine months ended September 30, 2022, due to a higher net loss and negative changes in operating assets and liabilities - Net cash used in operating activities increased to **$57.0 million** for the nine months ended September 30, 2022, from **$29.0 million** in 2021[138](index=138&type=chunk)[140](index=140&type=chunk) - The increase in cash used was primarily due to a net loss of **$60.1 million** and negative changes in operating assets and liabilities of **$6.5 million**[138](index=138&type=chunk) - Non-cash items, including **$8.9 million** in stock-based compensation expense, partially offset the cash used[138](index=138&type=chunk) [Net cash used for investing activities](index=30&type=section&id=Net%20cash%20used%20for%20investing%20activities) Net cash used in investing activities decreased to $0.4 million for the nine months ended September 30, 2022, from $1.7 million in 2021, primarily due to reduced purchases of property and equipment - Net cash used in investing activities decreased to **$0.4 million** for the nine months ended September 30, 2022, from **$1.7 million** in 2021[141](index=141&type=chunk) - This was primarily due to lower purchases of property and equipment[141](index=141&type=chunk) [Net cash provided by financing activities](index=30&type=section&id=Net%20cash%20provided%20by%20financing%20activities) Net cash provided by financing activities significantly decreased to $2 thousand for the nine months ended September 30, 2022, compared to $35.4 million in 2021, which included stock issuance proceeds - Net cash provided by financing activities was **$2 thousand** for the nine months ended September 30, 2022, a significant decrease from **$35.4 million** in 2021[142](index=142&type=chunk) - The 2021 financing activities included **$30.5 million** from Series D convertible preferred stock and **$3.5 million** from 4Bionics, LLC[142](index=142&type=chunk) [Contractual obligations](index=30&type=section&id=Contractual%20obligations) The company has no significant contractual obligations beyond its 401(k) plan and $4.9 million in BMGF grants for deploying Swoop devices - No significant contractual obligations as of September 30, 2022[145](index=145&type=chunk) - The company did not make any matching contributions to its 401(k) plan for the three and nine months ended September 30, 2022 and 2021[143](index=143&type=chunk) - BMGF grants totaling **$4.9 million** support the deployment of **25** Swoop devices for a multi-site study, with **20** units and **10** baby cradles provisioned by September 30, 2022[144](index=144&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statements rely on estimates for revenue, doubtful accounts, inventory, deferred tax assets, and stock-based compensation, with no material changes reported except for recent pronouncements - Financial statements require estimates and assumptions for revenue recognition, allowance for doubtful accounts, inventory, deferred tax assets, and stock-based compensation[146](index=146&type=chunk) - No material changes to critical accounting policies and estimates were reported compared to the 2021 Annual Report on Form 10-K, except for recent accounting pronouncements[147](index=147&type=chunk) [Recently Issued Accounting Pronouncements](index=31&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 2 of the financial statements for details on recently issued accounting pronouncements that may impact the company's financial position - Refer to Note 2 of the condensed combined and consolidated financial statements for details on recently issued accounting pronouncements[148](index=148&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, inflation, and foreign exchange, but believes its overall exposure is limited and does not use financial instruments for speculation [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) Cash equivalents, including $38.0 million in money market funds, are subject to interest rate risk, but a 10% change is not expected to materially affect cash flows due to short-term nature - Cash equivalents include **$38.0 million** in money market funds as of September 30, 2022[150](index=150&type=chunk) - The company's investment policy prioritizes liquidity and capital preservation[150](index=150&type=chunk) - A hypothetical **10%** change in interest rates is not expected to have a material effect on cash flows or operating results due to the short-term nature of cash equivalents[150](index=150&type=chunk) [Inflation Risk](index=31&type=section&id=Inflation%20Risk) Inflation has not materially affected the company's business, but inability to offset higher costs through price increases or efficiencies could cause harm - Inflation has not had a material effect on the company's business, financial condition, or results of operations, other than its impact on the general economy[151](index=151&type=chunk) - Inability to fully offset higher costs from inflationary pressures through price increases or manufacturing efficiencies could harm the business[151](index=151&type=chunk) [Foreign Exchange Risk](index=32&type=section&id=Foreign%20Exchange%20Risk) The company primarily transacts in U.S. dollars, limiting foreign currency translation risk, and does not use hedging strategies, so material impact is not expected - The company primarily operates and executes transactions in U.S. dollars[153](index=153&type=chunk) - Foreign currency translation risk is limited and not expected to have a material impact on financial statements[153](index=153&type=chunk) - The company has not utilized hedging strategies for foreign exchange exposure[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to identified material weaknesses in internal control over financial reporting. These weaknesses relate to limited accounting personnel post-Business Combination and misclassification of Class A ordinary shares subject to redemption. Management is actively implementing a remediation plan, including hiring experienced finance personnel [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective as of September 30, 2022, solely due to identified material weaknesses in internal control over financial reporting - Disclosure controls and procedures were not effective as of September 30, 2022[154](index=154&type=chunk) - The ineffectiveness was due to material weaknesses in internal control over financial reporting[154](index=154&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=32&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) Two material weaknesses were identified: limited accounting personnel post-Business Combination and misclassification of Class A ordinary shares subject to redemption - Identified material weakness: limited accounting and financial reporting personnel and resources post-Business Combination, leading to insufficient supervision and review of outsourced accounting information[156](index=156&type=chunk) - Identified material weakness: misclassification of Class A ordinary shares subject to possible redemption, which was quantitatively material and required restatement[157](index=157&type=chunk) - Despite these weaknesses, management concluded that the financial statements are fairly stated in all material respects[159](index=159&type=chunk) [Plan for Remediation of the Material Weaknesses in Internal Control Over Financial Reporting](index=33&type=section&id=Plan%20for%20Remediation%20of%20the%20Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) Management is actively remediating material weaknesses by hiring experienced accounting and finance personnel, providing training, and increasing communication with third-party professionals - Remediation plan includes hiring experienced accounting and finance resources, such as a Chief Financial Officer and Vice President, Controller[160](index=160&type=chunk) - The plan also involves providing accounting training, literature, research materials, and increased communication with outsourced third-party professionals[160](index=160&type=chunk) - Material weaknesses will not be considered remediated until effective controls are designed, implemented, and tested over a sufficient period[160](index=160&type=chunk) [Changes in Internal Control Over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the three months ended September 30, 2022, other than those made for remediation - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2022, other than changes made to remediate the material weaknesses[161](index=161&type=chunk) [PART II — OTHER INFORMATION](index=34&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This part covers other information including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[164](index=164&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new risks related to attracting key personnel, reliance on suppliers, pricing pressures, and potential Nasdaq delisting due to low stock price - The company's business is subject to various risks and uncertainties, including those described in its 2021 Annual Report on Form 10-K[165](index=165&type=chunk) - Key risks include the inability to attract and retain key personnel, reliance on a limited number of suppliers, and pricing pressures from contract suppliers[166](index=166&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk) - The Class A common stock is trading below **$1.00** per share, posing a risk of delisting from Nasdaq if compliance is not regained[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not engage in any unregistered sales of equity securities or repurchase any equity securities during the three months ended September 30, 2022 - No unregistered sales of equity securities occurred during the three months ended September 30, 2022[174](index=174&type=chunk) - The company did not repurchase any of its equity securities during the three months ended September 30, 2022[175](index=175&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not applicable[176](index=176&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - Not applicable[177](index=177&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company for the reporting period - Not applicable[178](index=178&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including offer letters, severance plans, certifications, and XBRL documents - Exhibits include the Offer Letter for Maria Sainz, Executive Severance Plan, and certifications (Section 302 and 906 of Sarbanes-Oxley Act)[181](index=181&type=chunk)[183](index=183&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension documents are also filed[181](index=181&type=chunk)[182](index=182&type=chunk) [Signatures](index=38&type=section&id=Signatures) The report was signed by Maria Sainz, President and Chief Executive Officer, and Alok Gupta, Chief Financial Officer, on November 10, 2022 - The report was signed by Maria Sainz, President and Chief Executive Officer, and Alok Gupta, Chief Financial Officer[186](index=186&type=chunk) - The signing date for the report was November 10, 2022[186](index=186&type=chunk)