Business context and reporting period
This is HealthCor Catalio Acquisition Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021, filed November 18, 2021. HealthCor was a blank-check company seeking a business combination, with a stated focus on healthcare. It had no operating business or operating revenue. This filing reports the SPAC’s financials, not Hyperfine’s standalone operating results.
On July 7, 2021, HealthCor agreed to combine with Hyperfine and Liminal Sciences. The transaction remained subject to closing conditions. The announced PIPE financing was $126.1 million, subject to substantially concurrent closing of the transaction.
Financial results and liquidity
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 |
|---|---|---|
| Operating revenue | None | None |
| Operating and formation costs | $900,417 | $2,494,910 |
| Interest income | $2,664 | $14,497 |
| Net loss | $897,753 | $2,480,413 |
| Basic and diluted loss per share | $0.03 | $0.10 |
At September 30, total assets were $207.9 million, including $207.0 million in the Trust Account and $525,404 in cash outside it. Current liabilities were $1.95 million; total liabilities were $9.19 million, including a $7.245 million deferred underwriting fee payable if a business combination closes. Working capital deficit was $1.019 million. The filing reports no long-term debt.
For the nine-month period, operating cash use was $958,203; investing cash use was $207.0 million, principally the deposit into the Trust Account; financing provided $208.5 million. Ending cash outside the Trust Account was $525,404. The Trust Account was invested in money market funds primarily holding U.S. Treasury securities. The filing reports no material market or interest-rate exposure given the short-term investments.
Material changes and unusual items
- Management restated previously issued financial statements after determining that all 20.7 million redeemable public shares should be classified as temporary equity, rather than partly in permanent equity. The restatement changed balance-sheet equity classifications and loss-per-share presentation; the filing states it did not affect total assets, total liabilities, cash flows, or net loss.
- The restatement was deemed material and resulted in a material weakness in internal control over financial reporting. Management concluded disclosure controls were ineffective as of September 30 and described plans to strengthen accounting research and review processes, without assurance of successful remediation.
- Operating costs included $587,165 of legal expenses in the quarter and $1,954,548 for the nine months, primarily related to the business combination and ongoing operations.
- The company reported a $1.415 million portion of legal accruals contingent on closing, along with other contingent deal costs.
Outlook, risks, and contingencies
Management expected available working capital and borrowing capacity to cover needs through the earlier of a business combination or one year from filing. On November 13, 2021, the Sponsor agreed to provide up to $1 million in unsecured, non-interest-bearing loans through November 13, 2022, repayable upon a business combination; amounts may be forgiven if no transaction closes, subject to available funds outside the Trust Account. Management planned to use funds for payables, due diligence, and transaction costs.
HealthCor had until January 29, 2023 to complete a business combination; otherwise, public shares generally would be redeemed from the Trust Account, subject to stated terms and creditor claims. Key risks include failure or delay in closing the proposed transaction, competition for SPAC targets, COVID-19 uncertainty, potential creditor claims against Trust Account funds, and the identified control weakness. The filing also notes that target scarcity and rising directors’ and officers’ insurance costs could make a transaction more difficult or expensive.
Important facts for investors to verify
- Current status and final terms of the HealthCor-Hyperfine-Liminal business combination and the $126.1 million PIPE financing.
- Whether the Sponsor’s $1 million loan commitment was drawn and the company’s liquidity outside the Trust Account after September 30.
- Remediation progress for the material weakness and any subsequent control or reporting issues.
- Final transaction costs, redemption levels, and the amount of Trust Account funds available at closing.
- That the $7.245 million deferred underwriting fee is payable only if a business combination closes, and that the announced 10 million-share earnout depends on specified stock-price performance.