Hyperfine, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The financial statements combine Legacy Hyperfine and Liminal; the Business Combination with HealthCor closed on December 22, 2021 and was accounted for as a reverse recapitalization. The 2020 comparison is the companies’ combined results, not a full-year comparison for the post-combination public company.
Business context
Hyperfine is an early-stage medical technology company commercializing the Swoop portable, low-field MRI system, cleared by the FDA in 2020 for specified head imaging uses. It received authorization in Canada in 2021 and in New Zealand and Pakistan; additional international authorizations, including in the United Kingdom and Australia, were being pursued. BrainInsight software also received FDA clearance, and advanced image reconstruction received clearance in November 2021. Liminal’s non-invasive brain-sensing platform remained in development and had no commercial revenue.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Device revenue | $0.715 million | $0.200 million |
| Service revenue | $0.781 million | $0.094 million |
| Total revenue | $1.496 million | $0.294 million |
| Gross loss | $1.167 million | $0.477 million |
| Operating expenses | $63.701 million | $23.014 million |
| Operating loss | $64.868 million | $23.491 million |
| Net loss | $64.851 million | $23.427 million |
| Net cash used in operations | $47.182 million | $21.525 million |
FY2021 gross margin was approximately negative 78%. Revenue grew 408.8%, but cost of sales was $2.663 million, exceeding revenue. Research and development expense was $25.842 million, general and administrative expense $27.497 million, and sales and marketing expense $10.362 million. Net loss per share was $17.57, versus $15.38 in 2020.
At year-end, cash and cash equivalents were $188.498 million, restricted cash was $2.662 million, current assets were $197.485 million, and current liabilities were $15.736 million. Total liabilities were $16.246 million; no notes payable remained outstanding. The Business Combination provided $141.471 million of net proceeds, while FY2021 financing activities provided $176.767 million in total. Accumulated deficit was $136.320 million.
Management reported 70 Swoop units installed by year-end 2021: 27 commercial installations, 18 grant-funded installations, and 25 research units, compared with 19 total installations in 2020. Remaining performance obligations were $2.8 million, with approximately 43% expected to be recognized in 2022 and the remainder in 2023 or later.
Changes versus the prior period
- Revenue increased by $1.202 million, reflecting higher device volume and service revenue from a larger installed base.
- Net loss widened by $41.424 million. Operating expenses rose $40.687 million, including higher personnel, professional services, legal, stock-based compensation, recruiting, advertising, and commercialization costs.
- Operating cash use increased by $25.657 million, while year-end cash and cash equivalents rose to $188.498 million, principally following Business Combination financing.
- The installed base increased from 19 to 70 systems, including grant and research placements that do not all generate commercial revenue.
Outlook, risks, and unusual items
- Outlook: No numerical revenue or earnings guidance is provided. Management expects continued losses and significant cash use while investing in R&D, sales and marketing, and inventory. It stated that available cash and expected product and service proceeds should fund planned operations for at least the next 12 months, while cautioning that additional capital may be needed.
- Pricing: In Q1 2022, the company raised the device price and lowered the monthly subscription price for its subscription-plus-ownership model; management expected higher device revenue and lower service revenue per unit under that model.
- Commercial and supply risks: Sales remain small relative to expenses. COVID-19 restrictions impeded in-person demonstrations and customer access, and component shortages, longer lead times, and rising input costs affected operations. Benchmark is the sole contract manufacturer, and a custom magnet comes from a single-source European supplier.
- Accounting controls: The company disclosed two material weaknesses in internal control over financial reporting, relating to inadequate finance-function review of outsourced accounting and the SPAC’s classification of redeemable shares. Disclosure controls were not effective at year-end; management was developing remediation measures. The auditor did not provide an opinion on internal control effectiveness.
- Business Combination and governance: Up to 10 million earn-out shares may be issued if specified $15 share-price or transaction conditions are met. Class B shares carry 20 votes each; Jonathan Rothberg controlled approximately 84.8% of voting power as of February 15, 2022. The company identified no material legal proceedings.
- Other notable items: FY2021 included a $0.984 million write-off of a related-party asset. The company received BMGF grants, including a further $3.3 million award in 2021; $2.662 million of grant funds was restricted at year-end, and unused or uncommitted funds may need to be returned.
Important facts for investors to verify
- Whether commercial Swoop placements and recurring subscriptions grow fast enough to improve gross margin and offset the company’s high operating expenses.
- Cash consumption, inventory and working-capital needs, and whether the stated minimum 12-month funding outlook remains adequate.
- Progress and independent evidence of remediation of the two material weaknesses and the effectiveness of financial reporting controls.
- Actual regulatory progress and clinical adoption, especially for international markets and the uncommercialized brain-sensing platform.
- Exposure to Benchmark and single-source component suppliers, including any effects of shortages, pricing, or replacement delays.
- Potential dilution from earn-out shares, equity compensation, and other securities, alongside the implications of concentrated voting control.