Hyperfine, Inc. — FY2022 Form 10-K Summary
Business and reporting period: Hyperfine develops and commercializes the Swoop portable, ultra-low-field MRI system for point-of-care brain imaging. This annual report covers the fiscal year ended December 31, 2022, compared with FY2021. The company also reported that its Swoop system had FDA clearance and authorizations in several international markets.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $6.814 million | $1.496 million |
| Gross profit (loss) | $0.907 million | $(1.167) million |
| Operating expenses | $74.781 million | $63.701 million |
| Operating loss | $(73.874) million | $(64.868) million |
| Net loss | $(73.164) million | $(64.851) million |
| Net cash used in operating activities | $(72.339) million | $(47.182) million |
- Revenue increased 355.5%, primarily from higher device sales. Device revenue was $5.246 million; service revenue was $1.568 million.
- Cash and cash equivalents were $117.472 million at year-end; restricted cash was a further $0.771 million. Total current assets were $128.664 million and current liabilities were $8.803 million.
- Total liabilities were $10.329 million. The balance sheet reports no debt balance; the company disclosed no other significant contractual obligations as of year-end.
- Management said existing cash and expected product and service proceeds should fund planned operations for at least the next 12 months. The company nevertheless expects significant cash burn and losses for the foreseeable future.
Changes and material developments
- Commercial system installations increased to 62 from 27; total Swoop units installed, including grant and research units, rose to 107 from 70.
- Gross profit improved from a loss in FY2021, but operating and net losses widened. Operating cash use also increased.
- Cost of sales rose 121.8%, driven by higher manufacturing, labor, and supply-chain costs. Research and development expense rose 9.0%; general and administrative expense rose 17.9%; and sales and marketing expense rose 37.2%.
- In December 2022, Hyperfine suspended development of its non-invasive brain-sensing program to focus resources on Swoop. It also began a restructuring that eliminated approximately 13% of its global workforce, including Liminal employees. It recorded about $1.0 million of restructuring and impairment costs and estimated total costs of up to $1.7 million, with completion expected in Q1 2023.
- Non-U.S. revenue was 37% of FY2022 revenue. The company received $2.6 million in research and development expense credits related to Bill & Melinda Gates Foundation grant milestones.
Outlook, risks, and unusual items
- No formal revenue, earnings, or margin guidance is provided. Management plans to prioritize U.S. commercialization in 2023 while continuing international sales and product development.
- Management cited COVID-related limits on hospital access and demonstrations, inflation, higher component costs, and supply-chain constraints. A single contract manufacturer builds all Swoop systems, and a key custom magnet comes from a single-source European supplier.
- The company has a history of substantial losses and limited commercialization experience; profitability depends on adoption, recurring service revenue, and the ability to control costs. Additional capital may be needed, and financing could dilute shareholders or impose restrictive terms.
- Management reported two material weaknesses in internal control over financial reporting; disclosure controls were not effective as of December 31, 2022. Remediation is underway, but the weaknesses were not considered remediated.
- Dr. Jonathan Rothberg controlled approximately 85% of voting power as of February 15, 2023 through the dual-class structure. Nasdaq bid-price compliance was regained in February 2023 after a deficiency notice in December 2022.
- The company reported no material ongoing legal proceedings. It terminated its MGH license agreements in Q4 2022, stating the licensed patents were not used in current products and were not expected to be used in future products.
Important facts for investors to verify
- Whether the commercial installed base is translating into sustained device sales, service renewals, and improving gross margins.
- Cash runway against operating cash use, restructuring costs, and management’s stated minimum 12-month funding outlook.
- Progress on manufacturing capacity and qualification of an additional magnet supplier, including the effect of component cost and lead-time changes.
- Whether internal-control remediation is completed and tested effective, and whether future filings remain timely and reliable.
- Potential dilution from equity awards, earn-out shares, and future financing, alongside the voting-control implications of the dual-class stock.