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What changed in Hyperfine, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hyperfine, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+527 added−564 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-22)

Top changes in Hyperfine, Inc.'s 2023 10-K

527 paragraphs added · 564 removed · 395 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

186 edited+75 added−53 removed180 unchanged
Biggest changeAdditionally, each patient transport for imaging complicates the ICU workload, creating time-intensive patient care interruptions that require specialized nurses to remove and reattach life-sustaining equipment. • Risk of adverse events during transportation: According to Glavis et al., the workflow for imaging an ICU patient with conventional high-field MRI can take as long as 11.7 hours at their hospital, but other hospitals have anecdotally reported up to 24 11 hours.
Biggest changeAccording to Glavis et al., the conventional MRI workflow for imaging an ICU patient can take as long as 11.7 hours at their hospital, with other hospitals anecdotally reporting up to 24 hours. Intrahospital transport of patients is associated with cardiovascular and respiratory risks that may limit timely and safe neuroimaging for critically ill patients.
In addition, by conducting more in-patient MRI scans at the bedside, our Swoop® system can help free up capacity in the MRI suite for additional outpatient procedures, which generate higher revenues for hospitals or other healthcare facilities than in-patient imaging.
In addition, by conducting more in-patient MRI scans at the bedside, our Swoop® system can help free up capacity in the MRI suite for additional outpatient procedures, which can generate higher revenues for hospitals or other healthcare facilities than in-patient imaging.
Our mission is to provide affordable and accessible imaging and monitoring through MRI to revolutionize healthcare for people around the world.
Our mission is to provide accessible and affordable imaging and monitoring through MRI to revolutionize healthcare for people around the world.
However, if such a device would be considered low or moderate risk (in other words, it does not rise to the level of requiring PMA), it may be eligible for the De Novo classification process.
However, if such a device would be considered low or moderate risk (in other words, it does not rise to the level of requiring a PMA), it may be eligible for the De Novo classification process.
The commencement or completion of any of our clinical trials may be delayed or halted, or be inadequate to support approval of a PMA application (or FDA’s grant of a De Novo classification request or clearance of a 510(k) notification, as applicable), for numerous reasons, including, but not limited to, the following: • the FDA, the IRB(s), or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; • participants do not enroll in clinical trials at the expected rate; • participants do not comply with trial protocols; • participant follow-up is not at the expected rate; • patients experience adverse side effects; • participants die during a clinical trial, even though their death may not be related to the investigational products; 24 • IRBs and third-party clinical investigators may delay or reject the sponsor’s trial protocol; • third-party clinical investigators decline to participate in a trial or do not perform a trial on the sponsor’s anticipated schedule or consistent with the clinical trial protocol, GCPs or other FDA requirements; • the sponsor or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans; • third-party clinical investigators have significant financial interests related to the sponsor or the trial that the FDA deems to make the trial results unreliable, or the sponsor or investigators fail to disclose such interests; • unfavorable regulatory inspections of the sponsor’s clinical trial sites or manufacturing facilities, which may, among other things, require the sponsor to undertake corrective action or suspend or terminate the sponsor’s clinical trials; • changes in governmental regulations or administrative actions applicable to the sponsor’s trial protocols; • the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; and • the FDA concludes that the results from the sponsor’s trial and/or trial design are inadequate to demonstrate safety and effectiveness of the product.
The commencement or completion of any of our clinical trials may be delayed or halted, or be inadequate to support approval of a PMA application (or FDA’s grant of a De Novo classification request or clearance of a 510(k) notification, as applicable), for numerous reasons, including, but not limited to, the following: • the FDA, the IRB(s), or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; • participants do not enroll in clinical trials at the expected rate; • participants do not comply with trial protocols; • participant follow-up is not at the expected rate; • patients experience adverse side effects; • participants die during a clinical trial, even though their death may not be related to the investigational products; • IRBs and third-party clinical investigators may delay or reject the sponsor’s trial protocol; 24 • third-party clinical investigators decline to participate in a trial or do not perform a trial on the sponsor’s anticipated schedule or consistent with the clinical trial protocol, GCPs or other FDA requirements; • the sponsor or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans; • third-party clinical investigators have significant financial interests related to the sponsor or the trial that the FDA deems to make the trial results unreliable, or the sponsor or investigators fail to disclose such interests; • unfavorable regulatory inspections of the sponsor’s clinical trial sites or manufacturing facilities, which may, among other things, require the sponsor to undertake corrective action or suspend or terminate the sponsor’s clinical trials; • changes in governmental regulations or administrative actions applicable to the sponsor’s trial protocols; • the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; and • the FDA concludes that the results from the sponsor’s trial and/or trial design are inadequate to demonstrate safety and effectiveness of the product.
These general controls that must be met for all device classes include: • establishment registration and device listing; • the QSR, which requires manufacturers, including third-party manufacturers, to follow design, testing, control, storage, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures; • labeling regulations, which govern the mandatory elements of the device labels and packaging (including Unique Device Identifier markings for certain categories of products); • FDA’s prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses and other requirements related to promotional activities; • the MDR regulations, which require that manufacturers report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • voluntary and mandatory device recalls to address problems when a device is defective and/or could be a risk to health; 25 • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and • post-market surveillance regulations, which apply to certain Class II or III devices when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These general controls that must be met for all device classes include: • establishment registration and device listing; • the QSR, which requires manufacturers, including third-party manufacturers, to follow design, testing, control, storage, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures; • labeling regulations, which govern the mandatory elements of the device labels and packaging (including Unique Device Identifier markings for certain categories of products); • FDA’s prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses and other requirements related to promotional activities; • the MDR regulations, which require that manufacturers report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • voluntary and mandatory device recalls to address problems when a device is defective and/or could be a risk to health; • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and 25 • post-market surveillance regulations, which apply to certain Class II or III devices when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Additionally, a person who knowingly obtains or discloses PHI in violation of HIPAA may face a criminal penalties (including fines and imprisonment), which increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use PHI for commercial advantage, personal gain or malicious harm.
Additionally, a person who knowingly obtains or discloses PHI in violation of HIPAA may face criminal penalties (including fines and imprisonment), which increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use PHI for commercial advantage, personal gain or malicious harm.
Under the UK GDPR, companies not established in the United Kingdom but who process personal data in relation to the offering of goods or services to individuals in the United Kingdom, or monitor the behavior of individuals in the United Kingdom will be subject to the UK GDPR – the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to 17.5 million pounds sterling or 4% of global turnover, whichever is higher.
Under the UK GDPR, companies not established in the United Kingdom but which process personal data in relation to the offering of goods or services to individuals in the United Kingdom, or monitor the behavior of individuals in the United Kingdom will be subject to the UK GDPR – the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to 17.5 million pounds sterling or 4% of global turnover, whichever is higher.
Any such action by the FDA would have a material adverse effect on our business. We may be unable to comply with all applicable FDA regulations. 26 U.S. Fraud and Abuse Laws and Other Compliance Requirements Successfully commercializing a medical device or technology depends not on only FDA approval, but also on broad health insurance or third-party payor coverage.
Any such action by the FDA would have a material adverse effect on our business. We may be unable to comply with all applicable FDA regulations. U.S. Fraud and Abuse Laws and Other Compliance Requirements Successfully commercializing a medical device or technology depends not on only FDA approval, but also on broad health insurance or third-party payor coverage.
Benchmark may also terminate the agreement upon the filing of any petition against us under bankruptcy or similar laws, where such petition is not vacated within 10 days via court order. Competition Several large companies, such as General Electric, Siemens, Philips, Hologic, Varian, Fuji, Toshiba, Canon and Hitachi currently dominate the medical imaging market.
Benchmark may also terminate the agreement upon the filing of any petition against us under bankruptcy or similar laws, where such petition is not vacated within 10 days via court order. Competition Several large companies, such as General Electric, Siemens, Philips, Hologic, Fuji, Toshiba, Canon and Hitachi currently dominate the medical imaging market.
For applications where access to such infrastructure is unavailable, we also offer a secure cloud based PACS where healthcare professionals, including teleradiology service providers, can view images from anywhere in the world. We believe the combination of portable MRI, where scans can be obtained outside the conventional MRI suite, and teleradiology can significantly improve patient care and increase access.
For applications 15 where access to such infrastructure is unavailable, we also offer a secure cloud based PACS where healthcare professionals, including teleradiology service providers, can view images from anywhere in the world. We believe the combination of portable MRI, where scans can be obtained outside the conventional MRI suite, and teleradiology can significantly improve patient care and increase access.
The FDA evaluates compliance with the QSR through periodic pre-scheduled or unannounced inspections that may include registered manufacturing facilities of our subcontractors. Following such inspections, FDA may issue reports known as Forms FDA 483 or Notices of Inspectional Observations, which list instances where the FDA inspector believes the manufacturer has failed to comply with applicable regulations and/or procedures.
The FDA evaluates compliance with the QSR through periodic pre-scheduled or unannounced inspections that may include registered manufacturing facilities of our manufacturer. Following such inspections, FDA may issue reports known as Forms FDA 483 or Notices of Inspectional Observations, which list instances where the FDA inspector believes the manufacturer has failed to comply with applicable regulations and/or procedures.
Electromagnetic interference makes conventional MRI outside of a shielded room impossible. Conventional MRI scanners are permanently installed in a special room where the walls, floor, and ceiling are encased in copper or aluminum to provide an environment for conventional MRI machines to operate, in which all man-made and natural electromagnetic interference is prevented from entering.
Electromagnetic interference makes conventional MRI outside of a shielded room unsafe and impossible. Conventional MRI scanners are permanently installed in a special room where the walls, floor, and ceiling are encased in copper or aluminum to provide an environment for conventional MRI machines to operate, in which all man-made and natural electromagnetic interference is prevented from entering.
The MSA may also be terminated by either party by written notice upon the occurrence of (i) a breach by the other party under the agreement which is not cured within 30 days after written notice by the terminating party, (ii) the other party becomes insolvent, dissolves, liquidates or ceases to conduct business or (iii) the occurrence of payment-related breaches.
The MSA may also be terminated by either party by written notice upon the occurrence of (i) a breach by the other party under the agreement which is not cured within 30 days after written notice by the terminating party, (ii) the other party becomes 19 insolvent, dissolves, liquidates or ceases to conduct business or (iii) the occurrence of payment-related breaches.
Various states have enacted false claims laws analogous to the False Claims Act. Some of these state laws apply where a claim is submitted to any commercial payor, and not merely a government healthcare program, and some authorize private citizens to bring suit on the state’s behalf. 27 Federal Physician Self-Referral Law.
Various states have enacted false claims laws analogous to the False Claims Act. Some of these state laws apply where a claim is submitted to any commercial payor, and not merely a government healthcare program, and some authorize private citizens to bring suit on the state’s behalf. Federal Physician Self-Referral Law.
Professional growth of our employees leads to engagement, development and allows us to leverage opportunities so we can hire and promote key talent from within. Through development planning, we strive for employees at all levels to focus on strengthening the skills required in their current role and potentially their next role.
Professional growth of our employees leads to engagement, development and allows us to leverage opportunities so we can hire and promote key talent from within. Through 17 development planning, we strive for employees at all levels to focus on strengthening the skills required in their current role and potentially their next role.
To mitigate this risk, we typically carry a significant inventory of critical components. We are also working with our Swoop® system device manufacturer, Benchmark Electronics, Inc. ("Benchmark"), to add an additional magnet supplier to the manufacturing process to mitigate the risk to supply of our magnets by the current use of a single supplier.
To mitigate this risk, we typically carry a significant inventory of critical components. We are also working with our Swoop® system device manufacturer, Benchmark Electronics, Inc. (“Benchmark”), to add an additional magnet supplier to the manufacturing process to mitigate the risk to supply of our magnets by the current use of a single supplier.
Government and private payors institute coverage criteria to ensure the appropriate utilization of products and services and to control costs. Limited third-party payor coverage for a technology or procedure may limit adoption and commercial viability, while broader coverage supports optimal market uptake.
Government and private payors institute coverage criteria to ensure the appropriate utilization of 26 products and services and to control costs. Limited third-party payor coverage for a technology or procedure may limit adoption and commercial viability, while broader coverage supports optimal market uptake.
Some countries have adopted medical device regulatory regimes, such as the Classification Rules for Medical Devices published by the Hong Kong Department of Health, the Health Sciences Authority of Singapore regulation of medical devices under the Health Products Act, and Health Canada’s risk classification system for invasive devices, among others.
Some countries have adopted medical device regulatory regimes, such as the Classification Rules for Medical Devices published by the Hong Kong Department of Health, the Health Sciences Authority of Singapore regulation of medical devices under 31 the Health Products Act, and Health Canada’s risk classification system for invasive devices, among others.
In the EEA, medical devices were previously required to comply with the Essential Requirements defined in Annex I to the EU Medical Devices Directive (“MDD”) (applicable in the non-EU EEA Member States via the Agreement on the European Economic Area), a coordinated system for the authorization of medical devices.
In the EEA, medical devices were previously required to comply with the Essential Requirements defined in Annex I to the EU Medical Devices Directive (“MDD”) (applicable in 30 the non-EU EEA Member States via the Agreement on the European Economic Area), a coordinated system for the authorization of medical devices.
Our research activities in the EU currently implicate the GDPR and if we undertake commercial operations in the EU, offer products or services to individuals in the EU or monitor the behavior of individuals within the EU, we will have additional compliance obligations.
Our research activities in the EU currently implicate the GDPR and if we undertake commercial operations in the EU, offer products or services to individuals in the EEA or monitor the behavior of individuals within the EU, we will have additional compliance obligations.
The FDA requires each manufacturer to make the determination of whether a device modification requires a new 510(k) notification or PMA in the first instance, but the FDA may review any such decision.
The FDA requires each manufacturer to make the determination of whether a device modification requires a new 510(k) notification or PMA application in the first instance, but the FDA may review any such decision.
Each month, we have agreed to provide Benchmark with a binding purchase order for a period specified by the MSA, as well as a non-binding forecast for each month within 18 such period.
Each month, we have agreed to provide Benchmark with a binding purchase order for a period specified by the MSA, as well as a non-binding forecast for each month within such period.
Powered Using a Standard Wall Outlet Operable throughout any hospital environment, our Swoop® system plugs into a standard wall outlet (100-230 VAC, 50/60 Hz, 15A) and uses less than 900W of electricity. This ability is achieved with low-power electronics, including efficient power supplies and power amplifiers, coupled with a zero-power consumption permanent magnet.
Powered Using a Standard Wall Outlet Transportable throughout any hospital environment, our Swoop® system plugs into a standard wall outlet (100-230 VAC, 50/60 Hz, 15A) and uses less than 900W of electricity. This ability is achieved with low-power electronics, including efficient power supplies and power amplifiers, coupled with a zero-power consumption permanent magnet.
Each country may have its own processes and requirements for medical device licensing, approval/clearance, and regulation, therefore requiring the company to seek marketing authorizations on a country-by-country basis. In addition, as previously noted, the UK left the EU on January 31, 2020, with a transitional period that expired on December 31, 2020.
Each country may have its own processes and requirements for medical device licensing, approval/clearance, and regulation, therefore requiring the company to seek marketing authorizations on a country-by-country basis. In addition, as previously noted, the UK left the EU on January 31, 2020 (referred to as “Brexit”), with a transitional period that expired on December 31, 2020.
PMA approval may also be granted with post-approval requirements such as the need for additional patient follow-up for an indefinite period of time. New PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling, device specifications, materials or design of a device that is approved through the PMA process.
PMA approval may also be granted with post-approval requirements such as the need for additional clinical trials or patient follow-up for an indefinite period of time. New PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling, device specifications, materials or design of a device that is approved through the PMA process.
We may be subject to GDPR if we undertake operations in the EU, offer products or services to individuals in the EU or monitor the behavior of individuals within the EU.
We may be subject to the GDPR if we undertake operations in the EEA, offer products or services to individuals in the EU or monitor the behavior of individuals within the EEA.
The Swoop® system’s portability and accessibility at the bedside can further allow more time for healthcare professionals to focus on other important activities related to patient care, diagnosis, and treatment. • Our first in its class product provides an attractive return on investment for various care settings.
The Swoop® system’s portability and accessibility at the bedside can further allow more time for healthcare professionals to focus on other important activities related to patient care, diagnosis, and treatment. • Our first in its class product can provide an attractive return on investment for various care settings.
This field strength comes from a unique optimization of the magnet size, weight, field uniformity, and patented design of the permanent magnet structure that provides sufficient image clarity for diagnostic purposes. There are additional benefits to operating an MRI system with an ultra-low-field magnet.
This field strength and form factor comes from a unique optimization of the magnet size, weight, field uniformity, and patented design of the permanent magnet structure that provides sufficient image clarity for diagnostic purposes. There are additional benefits to operating an MRI system with an ultra-low-field magnet.
The FDA’s 510(k) clearance process generally takes from three to five months from the date the application is submitted, but it may take significantly longer if FDA has significant questions or needs more information about the new device or its manufacturing or quality controls.
The FDA’s 510(k) clearance process generally takes from three to 12 months from the date the application is submitted, but it may take significantly longer if FDA has significant questions or needs more information about the new device or its manufacturing or quality controls.
Installation of these shielded rooms typically costs more than $100,000. We have developed proprietary, patented noise-cancellation technology to enable portable MRI. Our technology measures the external electromagnetic interference and subtracts that from the interference that swamps the MRI signals.
Installation of these shielded rooms typically costs more than $100,000. We have developed proprietary, patented AI-powered noise-cancellation technology to enable portable MRI. Our technology measures the external electromagnetic interference and subtracts that from the interference that swamps the MRI signals.
Open Layout Designed to Potentially Reduce Patient Anxiety For an MRI scan in a traditional setting, a patient arrives at the radiology department of a hospital and typically enters through a door covered with radiation warnings and other hazard symbols.
Open Layout Designed to Improve the Patient Experience and Potentially Reduce Patient Anxiety For an MRI scan in a traditional setting, a patient arrives at the radiology department of a hospital and typically enters through a door covered with radiation warnings and other hazard symbols.
If we were to enter into a sublicense under either license agreement, we would be obligated to pay MGH a percentage in the mid-teens of certain consideration paid to us by the sublicensee. The aggregate amount we paid under these agreements was $98,000.
If we were to enter into a sublicense under either license agreement, we would be obligated to pay MGH a percentage in the mid-teens of certain consideration paid to us by the sublicensee. The aggregate amount we paid under these agreements was $159,000.
We could also be subject to evolving European Union laws on data export, for transfers of data outside the European Union to themselves, group companies or third parties. The GDPR only permits exports of data outside the European Union to jurisdictions that ensure an adequate level of data protection.
We could be subject to evolving European Union laws on data export, for transfers of data outside the EEA to themselves, group companies or third parties. The GDPR only permits exports of data outside the EEA to jurisdictions that ensure an adequate level of data protection.
Industry and Market MRI is a non-ionizing radiation risk imaging modality widely used by healthcare professionals across various clinical settings for the medical diagnosis of a patient, staging of disease, and continued assessment following treatment.
Industry and Market MRI is a non-ionizing radiation risk imaging modality widely used by healthcare professionals across various clinical settings for the medical diagnosis of patients, staging of disease, and continued assessment following treatment.
The aging population and rising prevalence of cancer, cardiovascular, neurological, and orthopedic conditions have augmented the demand for MRI. Healthcare professionals and insurers recognize imaging as a cost-effective and non-invasive diagnostic for prevention and ongoing monitoring.
The aging population and rising prevalence of cancer, cardiovascular, neurological, and orthopedic conditions have augmented the demand for MRI. Healthcare professionals and insurers recognize imaging as a cost-effective and non-invasive diagnostic for prevention, early detection and ongoing monitoring.
The GDPR sets out a number of requirements that must be complied with when handling the personal data of such European Union-based data subjects including: providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audit; and the new mandatory data breach regime.
The GDPR sets out a number of requirements that must be complied with when handling the personal data of such EEA-based data subjects including: providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audits; and a mandatory data breach regime.
On December 22, 2021, HealthCor, Legacy Hyperfine and Liminal completed the Business Combination, pursuant to which each of Legacy Hyperfine and Liminal became a wholly owned subsidiary of HealthCor, HealthCor’s corporate name was changed to Hyperfine, Inc., Legacy Hyperfine’s corporate name was changed to Hyperfine Operations, Inc., Liminal’s corporate name was changed to Liminal Operations, Inc.
On December 22, 2021, HealthCor, Legacy Hyperfine and Liminal completed the business combination (the “Business Combination”), pursuant to which each of Legacy Hyperfine and Liminal became a wholly owned subsidiary of HealthCor, HealthCor’s corporate name was changed to Hyperfine, Inc., Legacy Hyperfine’s corporate name was changed to Hyperfine Operations, Inc., Liminal’s corporate name was changed to Liminal Operations, Inc.
In this model, the Swoop® system is typically sold with a service and support agreement that begins in year one and is sold initially in either 36- or 60-month terms. In certain cases, the Swoop® system is sold without an accompanying service and support agreement.
In this model, the Swoop® system is typically sold with a service and support agreement that begins after a one year warranty and is sold initially in either 36- or 60-month terms. In certain cases, the Swoop® system is sold without an accompanying service and support agreement.
Such service providers are called "Business Associates." Under HIPAA, as amended by the HITECH Act, HHS has issued regulations to protect the privacy and security of PHI used or disclosed by Covered Entities and Business Associates.
Such service providers are called “Business Associates.” Under HIPAA, as amended by the HITECH Act, HHS has issued regulations to protect the privacy and security of PHI used or disclosed by Covered Entities and Business Associates.
The penalties for violating the federal Anti-Kickback Statute include imprisonment for up to ten years, fines of up to $100,000 per violation and possible exclusion from government healthcare programs such as Medicare and Medicaid.
The penalties for violating the federal Anti-Kickback Statute include imprisonment for up to 10 years, fines of up to $100,000 per violation and possible exclusion from government healthcare programs such as Medicare and Medicaid.
Controlled by an Easy-to-Use Wireless Tablet As we seek to reach new markets and users with our Swoop® system, we have sought to make the operation of the device as simple and easy to use as possible.
Controlled by an Easy-to-Use Wireless Tablet As we seek to reach new markets and users with our Swoop® system, we have sought to make the operation of the device as intuitive and easy to use as possible.
The Swoop® system can be wheeled directly to a patient’s bedside and offers a prompt solution for those patients who require an MRI scan but are too critically ill to be transported for a conventional MRI scanner and who may otherwise be forced to forego a scan or wait until their condition stabilizes.
The Swoop® system can be wheeled directly to a patient’s bedside and offers a prompt solution for those 8 patients who require an MRI scan but are too critically ill to be transported to a conventional MRI scanner and who may otherwise be forced to forego a scan, wait until a scanner is available, or wait until their condition stabilizes.
Conventional MRI scanners are sequenced by highly-trained technologists and can have variations in image resolution and contrast weighting across sites due to institutional policies and radiologist preferences.
Conventional MRI scanners are operated by highly-trained technologists and can have variations in image resolution and contrast weighting across sites due to institutional policies and radiologist preferences.
The CCPA, among other things, creates new data privacy obligations for covered companies and provides 29 new privacy rights to California residents, including the right to opt out of certain disclosures of their information. It also creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.
The CCPA, among other things, creates new data privacy obligations for covered businesses and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. It also creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.
In certain circumstances, such as in the management of patients with delirium or altered mental status, familiarity or keeping the surrounding environment as similar as possible can be critical, which we believe makes bedside devices like our Swoop® system particularly useful since patients do not need to move to distant radiology suites for conventional MRI scans.
In certain circumstances, such as in the management of patients with delirium or altered mental status, familiarity or keeping the surrounding environment as similar as possible can be critical, which we believe makes portable devices like our Swoop® system particularly valuable since patients do not need to move to distant radiology suites for conventional MRI scans.
We have commercially launched our Swoop® system, a point-of-care MRI device capable of producing diagnostic quality images at a lower magnetic field strength than conventional MRI scanners. Using an ultra-low-field magnetic force significantly reduces projectile safety concerns and, therefore, should reduce the length of pre-safety checks typically conducted by healthcare professionals.
We have commercially launched our Swoop® system, a portable brain MRI device capable of producing diagnostic quality images at a lower magnetic field strength than conventional MRI scanners. Using an ultra-low-field magnetic force significantly reduces projectile safety concerns and, therefore, should reduce the length of pre-safety checks typically conducted by healthcare professionals.
Even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
Even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure could constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
In many cases, other imaging modalities, such as computerized tomography (“CT”) scanners, are used due to the lack of availability of MRI scanners or their lower cost profile, even though CT provides lower soft tissue contrast for evaluating abnormalities in the brain.
In many cases, other imaging modalities, such as CT scanners, are used due to the lack of availability of MRI scanners or their lower cost profile, even though CT provides lower soft tissue contrast for evaluating abnormalities in the brain.
The Medical Device Regulation changes several aspects of the existing regulatory framework for medical device marketing in Europe and is expected to result in increased regulatory oversight of all medical devices marketed in the EU, which may, in turn, increase the costs, time and requirements that need to be met in order to place an innovative or high-risk medical device on the European market.
The Medical Device Regulation changes several aspects of the existing regulatory framework for medical device marketing in Europe in order to increase regulatory oversight of all medical devices marketed in the EU, which may, in turn, increase the costs, time and requirements that need to be met in order to place an innovative or high-risk medical device on the European market.
Our point-of-care Swoop® system also helps avoid the risk of patient injury during transport through the ability to bring the system to the patient. By performing scans for urgent and critically ill patients at the bedside, we can help prevent the adverse incidents that occur with approximately 26–79% of critically ill patient cases during transport.
Our portable Swoop® system also helps avoid the risk of patient injury during transport through the ability to bring the system to the patient. By performing scans for urgent and critically ill patients at the bedside, we can help prevent the adverse incidents that occur with approximately 26–79% of critically ill patients during transport.
We have taken a different approach by developing our Swoop® system to have an ultra-low-field magnet of 0.064T, which enables MRI to become portable because, unlike conventional MRI scanners, the field strength of the magnet in our system does not require a specialized radio frequency room to house the MRI scanner safely.
We have taken a different approach by developing our Swoop® system to have an ultra-low-field magnet of 0.064T, which enables MRI to become portable because, unlike conventional MRI scanners, the field strength of the magnet in our system does not require a specialized room to house or use the MRI scanner safely.
If an FDA evaluation of a PMA application or manufacturing facilities is favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions which must be met in order to secure final approval of the PMA application. 23 When and if the conditions of the approvable letter have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of a device, subject to the conditions of approval and the limitations established in the approval letter.
If an FDA evaluation of a PMA application or manufacturing facilities is favorable, the FDA will either issue an approval letter, which authorizes commercial marketing of the device for specific indications for use, or an approvable letter, which usually contains a number of conditions which must be met in order to secure final approval of the PMA application. 23 When and if the conditions of the approvable letter have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of a device, subject to the conditions of approval and the limitations established in the approval letter.
The gold standard for neuroimaging is MRI, which can provide excellent high-resolution images of the soft tissues of the brain without being obscured by the skull. MRI can provide critical insight into brain trauma and disease but historically has not been available at the point of care.
The gold standard for neuroimaging is MRI, which can provide excellent high-resolution images of the soft tissues of the brain without being obscured by the skull. MRI can provide critical insight into brain trauma and disease but historically has not been portable and not available at multiple sites of care.
The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data and expands the application of the CCPA to all human resources personal information of California-based employees.
The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data and expands the application of the CCPA to personal information of our California-based employees.
Many low-resource countries recognize the benefit of investing in their healthcare infrastructure, and it is expected to cause a spur in growth for the global MRI market. For example, China is one of the fastest-growing markets building its healthcare infrastructure in rural areas.
Many low-resource countries recognize the benefit of investing in their healthcare infrastructure, and it is expected to cause a spur in growth for the global MRI market. For example, India and China are two of the fastest-growing markets building its healthcare infrastructure in rural areas.
Products and Services Our Swoop ® Portable MR Imaging ® System We designed our Swoop® system to address an unmet need in point-of-care medical imaging through a unique combination of hardware and AI-powered software services. Our hardware is powered using modern computational power and deep learning advances.
Products and Services Our Swoop ® Portable MR Imaging ® System We designed our Swoop® system to address an unmet need in accessible, affordable, portable medical imaging through a unique combination of hardware and AI-powered software services. Our hardware is powered using modern computational power and deep learning advances.
In the Consolidated Appropriations Act for 2023, Congress amended the FDCA to require the sponsor of any clinical trial for a medical device to develop a diversity action plan for such trial, and if submission of an IDE application is required, to submit such diversity action plan to the FDA.
In the Consolidated Appropriations Act for 2023, Congress amended the FDCA to require the sponsor of any pivotal clinical trial to support marketing authorization of a medical device to develop a diversity action plan for such trial, and if submission of an IDE application is required, to submit such diversity action plan to the FDA.
In dealing with health information for the development of our technology or for commercial purposes, we will be indirectly affected by HIPAA and state-imposed health information privacy and security laws because these laws regulate the ability of our customers and research collaborators to share health information with us.
In dealing with health information for the development of our technology or for commercial purposes, we are directly or indirectly affected by HIPAA and state-imposed health information privacy and security laws because these laws regulate the ability of our customers and research collaborators to share health information with us.
This decision (a) calls into question commonly relied upon data transfer mechanisms as between the European Union member states and the United States (such as the Standard Contractual Clauses) and (b) invalidates the EU-U.S. Privacy Shield on which many companies had relied as an acceptable mechanism for transferring such data from the EU to the United States.
This decision (a) called into question commonly relied upon data transfer mechanisms as between the European Union member states and the United States (such as the Standard Contractual Clauses) and (b) invalidated the EU-U.S. Privacy Shield on which many companies had relied as an acceptable mechanism for transferring such data from the EEA to the United States.
Operating at 0.064T means using lower energy radiofrequency pulses and significantly reducing associated safety risks. Motion Correction 13 Portable MRI at the point of care can provide MRI insights to more critically ill patients than previously possible.
Operating at 0.064T means using lower energy radiofrequency pulses and significantly reducing associated safety risks. 14 Motion Correction Portable MRI at the point of care can provide MRI insights to more patients than previously possible.
Corporate Information HealthCor was incorporated as a Cayman Islands exempted company on November 18, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses.
(“HealthCor”) was incorporated as a Cayman Islands exempted company on November 18, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses.
Studies show that 37% of patients report anxiety-related reactions in an isolated room for imaging. With our Swoop® system, we can offer a quieter, calmer experience with the option of a family member or other caregiver being present by the patient’s bedside during the scanning process.
Studies show that 37% of patients report anxiety-related reactions in an isolated room for imaging. With our Swoop® system, we can offer a quieter, calmer and more comfortable experience with the option of a family member or other caregiver being present by the patient’s side during the scanning process.
The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a “Notified Body,” an organization designated by an EU country to assess a product’s conformity with the applicable legal requirements.
The method of assessing conformity varies depending on the class of the product, but for most medical devices involves a combination of self-assessment by the manufacturer and a third-party assessment by a “Notified Body,” an organization designated by an EU country to assess a product’s conformity with the applicable legal requirements.
We have taken advantage of technological advances in electronics and computing to develop an MRI device that is not only portable but also uses an ultra-low-field 64mT (0.064T) magnet, which is much lower than the 1.5T or higher field strength of conventional MRI scanners.
We have taken advantage of technological advances in electronics, computing and AI to develop an MRI device that is not only portable but also uses an ultra-low-field 64mT (0.064T) permanent magnet, which is much lower than the 1.5T or higher field strength of conventional MRI scanners, and does not require cryogenic cooling.
Jonathan Rothberg, a serial entrepreneur that received the Presidential Medal of Technology and Innovation in 2016 for inventing a novel next generation DNA sequencing method and has founded more than 10 healthcare and technology companies, including 454 Life Sciences, Ion Torrent, CuraGen, Butterfly Network and Quantum-Si.
Legacy Hyperfine was founded in 2014 by Dr. Jonathan Rothberg, a serial entrepreneur that received the Presidential Medal of Technology and Innovation in 2016 for inventing a novel next generation DNA sequencing method and has founded more than 10 healthcare and technology companies, including 454 Life Sciences, Ion Torrent, CuraGen, Butterfly Network and Quantum-Si.
Further, the European Union member countries have emphasized a greater focus on healthcare fraud and abuse and have indicated greater attention to the industry by the European Anti-Fraud Office. Countries in Asia have also become more active in their enforcement of anti-bribery laws and with respect to procurement and supply chain fraud.
Further, the European Union member countries have emphasized a greater focus on healthcare fraud and abuse and have indicated greater attention to the industry by the European Anti-Fraud Office. Countries in Asia have also become more active in their enforcement of anti-bribery laws and with respect to procurement and supply chain fraud. Corporate Information HealthCor Catalio Acquisition Corp.
CT systems, while providing valuable information about hemorrhage and fractures, provide less soft tissue differentiation to inform clinical decisions when compared to MRI. As such, Swoop is well positioned to augment critical care and emergency departments with existing CT capabilities; and • Portable ultra-low field MRI systems with the same or better attributes, currently in development.
CT systems, while providing valuable information about hemorrhage and fractures, provide less soft tissue differentiation to inform clinical decisions when compared to MRI. As such, the Swoop® system is well positioned to augment critical care and emergency departments with existing CT capabilities; and • Portable ultra-low field brain MRI systems with similar attributes are currently in development.
The regulatory regime for medical devices in the UK will continue to be based on the requirements derived from EU legislation as of January 21, 2020, and the UK may choose to retain regulatory flexibility or align with the Medical Device Regulation going forward.
The regulatory regime for medical devices in the UK will continue to be based on the requirements derived from EU legislation, and the UK may choose to retain regulatory flexibility or align with the Medical Device Regulation going forward.
To a lesser extent, we are also commercializing our device through a subscription bundle model, in which we sell the use of our device and an off-the-shelf tablet for use with the scanner, plus the same service and support benefits provided in the ownership with service and support model.
To a lesser extent, we have also commercialized our device through a subscription bundle model in prior years, in which we sell the use of our device and an off-the-shelf tablet for use with the scanner, plus the same service and support benefits provided in the ownership with service and support model.
We offer our customers payment term options that include, among others, either an upfront payment for the Swoop® system and annual payment for service and support service or an annual payment option for the term of their agreement. The annual payment option contains a portion of interest for the Swoop® system over the term.
We offer our customers payment term options that include, among others, either an upfront payment for the Swoop® system and annual payment for service and support or an annual payment option for the term of their agreement.
We view high-field MRI more as a complementary than a competitive technology. Particularly in the U.S., we are seeing substantial interest among our customers for the implementation of Swoop® system to augment traditional, high-field MRI workflows and increase throughput of high-field scanners. Intellectual Property Protection of our intellectual property is a strategic priority for our business.
Particularly in the U.S., we are seeing substantial interest among our customers for the implementation of Swoop® system to augment traditional, high-field MRI workflows and increase throughput of high-field scanners. Intellectual Property Protection of our intellectual property is a strategic priority for our business.
The cost benefits of our Swoop® system are not limited to a customer’s initial purchase of the system. Our customers continue to benefit by not having to spend on additional cooling, power, and maintenance expenses throughout the lifetime of conventional MRI.
The cost benefits of our Swoop® system are not limited to a customer’s initial purchase of the system. Our customers can benefit by not having to spend on additional cooling, power, and high maintenance expenses typically required throughout the lifetime of conventional MRI scanners.
As healthcare costs continue to rise, we believe our Swoop® system will allow for significant potential cost reductions that can benefit the entire imaging ecosystem. Our Swoop® system has dramatically reduced hardware costs through design trade-offs, compensating using modern computational power and deep learning advances.
As healthcare costs continue to rise, we believe our Swoop® system has the potential to allow for significant potential cost reductions that can benefit the entire imaging ecosystem. Our Swoop® system has reduced hardware costs, using modern computational power and deep learning advances.
We also offer employees a health insurance package. Governance, Ethics, and Compliance: Our board of directors is committed to robust corporate governance practices, risk oversight, stockholder rights, diversity, equity and inclusion, corporate sustainability, ethics and compliance in order to protect the long term interests of our company, stockholders and the patients we serve.
Governance, Ethics, and Compliance: Our board of directors is committed to robust corporate governance practices, risk oversight, stockholder rights, diversity, equity and inclusion, corporate sustainability, ethics and compliance in order to protect the long term interests of our company, stockholders and the patients we serve.
These laws overlap with HIPAA and may differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. The State of California, for example, has implemented comprehensive laws and regulations.
These laws overlap with HIPAA and may differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.
We believe the Swoop® system can expand the existing $28 billion global imaging market (expected to grow at a 4.9% CAGR from 2022 to 2030) by making MRI available to a more extensive set of patients in both developed and emerging markets, as well as improve the utilization of conventional MRI scanners through decreased wait times and facilitation of patient flow.
We believe the Swoop® system can expand the existing $35 billion global imaging market (expected to grow at a 5.7% CAGR from 2022 to 2030) by making MRI available to a broader set of patients in both developed and emerging markets, as well as improve the utilization of conventional MRI scanners through decreased wait times and more efficient patient flow.
Our advanced technology in imaging is supported by an internal team of scientists and engineers dedicated to continuous innovation. Our pace of AI-powered software iterations allows further improvements of image quality, consistency, and image sequences for the clinical uses of our technology.
Our advanced technology has been developed by an internal team of engineers and AI scientists dedicated to continuous innovation. Our pace of AI-powered software iterations allows further improvements of image quality, consistency, and image sequences for the clinical uses of our technology.
The MRI technician uses the motorized bed to push the patient into the long tube of the large superconducting magnet, leaves the room, closes the metal door to the scan room, and tells the patient over an intercom that the scan is about to start.
The MRI technician uses the motorized bed to push the patient into the long tube of the large superconducting magnet, leaves the room, closes the metal door to the scan room, and tells the patient over an intercom that the scan is about to start. The patient experiences an extremely loud environment throughout the scanning experience.
To support adoption of our product and in addition to our simplified product interface, we are in the process of developing a training curriculum and tutorials and have 17 built a team of clinically trained clinical support specialists to guide and coach clinicians on the unique features of our device and on the specific clinical application of our technologies.
To support adoption of our product and in addition to our simplified product interface, we have built a team of clinically trained clinical support specialists to guide and coach clinicians on the unique features of our device and on the specific clinical application of our technologies.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese fluctuations may occur due to a variety of factors, many of which are outside our control, including, but not limited to: • the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our sales team and our facilities; • changes affecting our customers that impact budgets or budget cycles; • pricing actions, such as the pricing adjustments we made to our subscription plus ownership model during the first quarter of 2022 and during the first quarter of 2023 in which we increased the price of the device while lowering the price of the monthly subscription; • seasonal spending patterns of our customers; • the timing of when we recognize any revenues; • future accounting pronouncements or changes in our accounting policies; • the outcome of any future litigation or governmental investigations involving the Company, our industry or both; • higher than anticipated service, replacement and warranty costs; • the impact of the COVID-19 pandemic on the economy, investment in the life sciences and medical technology industries, our business operations, and resources and operations of our suppliers, future distributors and current and potential customers; 34 • the impact of political instability and military conflict, such as the conflict in Ukraine, which has resulted in instability in the global financial markets and export controls, and which has contributed to the increased cost of the magnet that is a key custom-made component in our Swoop® system and is manufactured by a single source supplier in Europe, and could result in further supply impacts on our business and have a material adverse impact on our sales in affected markets; and • general industry, economic and market conditions and other factors, including factors unrelated to our operating performances or the operating performance of our competitors.
Biggest changeThese fluctuations may occur due to a variety of factors, many of which are outside our control, including, but not limited to: • the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our sales team and our facilities; • the budgets, budget cycles and approval processes of our customers and potential customers and any changes affecting such budgets, budget cycles and approval processes; • pricing actions, such as the pricing adjustments we made to our business model during the first quarters of 2022 and 2023 in which we increased the price of the device while lowering the price of the service and support annual charges; • seasonal spending patterns of our customers; • the timing of when we recognize any revenues; 34 • future accounting pronouncements or changes in our accounting policies; • the outcome of any future litigation or governmental investigations involving the Company, our industry or both; • higher than anticipated service, replacement and warranty costs; • the impact of political instability and military conflict, such as the conflicts in Ukraine and the Middle East, which has resulted in instability in the global financial markets and export controls, and which has contributed to the increased cost of the magnet that is a key custom-made component in our Swoop® system and is manufactured by a single source supplier in Europe, and could result in further supply impacts on our business and have a material adverse impact on our sales in affected markets; and • general industry, economic and market conditions and other factors, including factors unrelated to our operating performances or the operating performance of our competitors.
Our Charter provides that, unless we consent to the selection of an alternative forum, any (i) derivative action or proceeding brought on behalf of us; (ii) action asserting a claim of breach of a fiduciary duty owed by, or any other wrongdoing by, any current or former director, officer, other employee or stockholder of us; (iii) action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law ("DGCL") or our Charter or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery; (iv) action to interpret, apply, enforce, or determine the validity of any provisions in the certificate of incorporation of bylaws; or (v) action asserting a claim governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware.
Our Charter provides that, unless we consent to the selection of an alternative forum, any (i) derivative action or proceeding brought on behalf of us; (ii) action asserting a claim of breach of a fiduciary duty owed by, or any other wrongdoing by, any current or former director, officer, other employee or stockholder of us; (iii) action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law ("DGCL") or our Charter or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery; (iv) action to interpret, apply, enforce, or determine the validity of any provisions in the certificate of incorporation of bylaws; or (v) action asserting a claim governed by the internal affairs doctrine, shall, to the fullest extent permitted 64 by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware.
If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by the FDA, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • customer notification, or orders for repair, replacement or refunds; • voluntary or mandatory recall or seizure of our current or future products; • administrative detention by the FDA of medical devices believed to be adulterated or misbranded; • operating restrictions, suspension or shutdown of production; • refusal of our requests for 510(k) clearance or PMA of new products, new intended uses or modifications to existing products; • rescission of 510(k) clearance or suspension or withdrawal of PMAs that have already been granted; and • criminal prosecution.
If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by the FDA, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • customer notification, or orders for repair, replacement or refunds; • voluntary or mandatory recall or seizure of our current or future products; • administrative detention by the FDA of medical devices believed to be adulterated or misbranded; • operating restrictions, suspension or shutdown of production; • refusal of our requests for 510(k) clearance or PMA of new products, new intended uses or modifications to existing products; 45 • rescission of 510(k) clearance or suspension or withdrawal of PMAs that have already been granted; and • criminal prosecution.
Because we currently also rely on Benchmark to manufacture, test and ship all of the Swoop® systems and on a limited number of suppliers to supply our components, including Benchmark to purchase the magnet used in the scanner from a single source supplier, such pricing pressures from a third party such as Benchmark have and could increase our costs and could force us to increase the prices of our products if we are unable to enter into alternative arrangements with other suppliers or manufacturers, potentially leading to decreased customer demand.
Because we currently also rely on Benchmark to manufacture, test and ship all of the Swoop® systems and on a limited number of suppliers to 39 supply our components, including Benchmark to purchase the magnet used in the scanner from a single source supplier, such pricing pressures from a third party such as Benchmark have and could increase our costs and could force us to increase the prices of our products if we are unable to enter into alternative arrangements with other suppliers or manufacturers, potentially leading to decreased customer demand.
Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (ii) manufacturing standards; (iii) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or (iv) laws that require the true, complete 46 and accurate reporting of financial information or data.
Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (ii) manufacturing standards; (iii) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or (iv) laws that require the true, complete and accurate reporting of financial information or data.
Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure, which could materially and adversely impact our ability to establish or maintain a competitive advantage in the market, and our business, financial condition, results of operations and prospects.
Such agreements may not be enforceable or may not provide meaningful protection for 55 our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure, which could materially and adversely impact our ability to establish or maintain a competitive advantage in the market, and our business, financial condition, results of operations and prospects.
It is unclear at this time whether and how various activities initiated or announced by the FDA to modernize the U.S. medical device 47 regulatory system could affect our business, as some of the FDA’s new medical device safety and innovation initiatives have not been formalized and remain subject to change.
It is unclear at this time whether and how various activities initiated or announced by the FDA to modernize the U.S. medical device regulatory system could affect our business, as some of the FDA’s new medical device safety and innovation initiatives have not been formalized and remain subject to change.
Rothberg has the ability to influence the determination of the amount and timing of our investments and dispositions, cash expenditures, indebtedness, issuances of shares of common stock, tax liabilities and amounts of reserves. 65 Delaware law and provisions in our Charter and bylaws could make a takeover proposal more difficult. Our organizational documents are governed by Delaware law.
Rothberg has the ability to influence the determination of the amount and timing of our investments and dispositions, cash expenditures, indebtedness, issuances of shares of common stock, tax liabilities and amounts of reserves. Delaware law and provisions in our Charter and bylaws could make a takeover proposal more difficult. Our organizational documents are governed by Delaware law.
For these purposes, an ownership change generally occurs where the equity ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a three-year period (calculated on a rolling basis).
For these purposes, an ownership change generally 43 occurs where the equity ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a three-year period (calculated on a rolling basis).
If any of our trade secrets were to be disclosed to or independently discovered by a competitor or other third party, it could materially and adversely affect our business, financial condition, results of operations and prospects. 57 We may be subject to claims challenging the inventorship and ownership of our patents and other intellectual property.
If any of our trade secrets were to be disclosed to or independently discovered by a competitor or other third party, it could materially and adversely affect our business, financial condition, results of operations and prospects. We may be subject to claims challenging the inventorship and ownership of our patents and other intellectual property.
Our primary competitors include several large companies which currently dominate the medical imaging market, including General Electric, Siemens, Philips, Hologic, Varian, Fuji, Toshiba, Canon and Hitachi. In addition, our competitors, some of which are well-established manufacturers with significant resources, may engage in aggressive marketing tactics.
Our primary competitors include several large companies which currently dominate the medical imaging market, including General Electric, Siemens, Philips, Hologic, Fuji, Toshiba, Canon and Hitachi. In addition, our competitors, some of which are well-established manufacturers with significant resources, may engage in aggressive marketing tactics.
Data localization laws in some countries generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. We could be subject to audits in Europe and around the world, particularly in the areas of consumer and 51 data protection, as we continue to grow and expand our operations.
Data localization laws in some countries generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. We could be subject to audits in Europe and around the world, particularly in the areas of consumer and data protection, as we continue to grow and expand our operations.
The America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Various courts, including the U.S.
The America Invents Act and its 53 implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Various courts, including the U.S.
The enactment of legislation implementing changes in the U.S. Taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies in jurisdictions outside of the United States could materially impact our results of operations and financial condition. 43 We are subject to income tax in the numerous jurisdictions in which we operate.
The enactment of legislation implementing changes in the U.S. Taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies in jurisdictions outside of the United States could materially impact our results of operations and financial condition. We are subject to income tax in the numerous jurisdictions in which we operate.
With respect to the validity of our patents, 56 for example, we cannot be certain that there is no invalidating prior art of which we, our licensors, our patent counsel and the patent examiner were unaware during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable.
With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our licensors, our patent counsel and the patent examiner were unaware during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable.
There can be no assurance that our defenses of non-infringement, invalidity or unenforceability will succeed. 59 Third parties, including our competitors, could be infringing, misappropriating or otherwise violating our solely owned and/or in-licensed intellectual property rights. Monitoring unauthorized use of intellectual property is difficult and costly.
There can be no assurance that our defenses of non-infringement, invalidity or unenforceability will succeed. Third parties, including our competitors, could be infringing, misappropriating or otherwise violating our solely owned and/or in-licensed intellectual property rights. Monitoring unauthorized use of intellectual property is difficult and costly.
These laws include, among others, the federal Anti-Kickback Statute, the federal civil False Claims Act, other federal healthcare false statement and fraud statutes, the Open Payments program, the Civil Monetary Penalties Law, and analogous fraud and abuse and transparency laws in most states, as described in “ Item 1.
These laws include, among others, the federal Anti-Kickback Statute, the federal civil False Claims Act, other federal healthcare false statement and fraud statutes, the Open Payments program, the Civil Monetary Penalties Law, and analogous fraud and abuse and transparency laws in most states, as described in “ Item 49 1.
Our success depends in large part on our and our licensors’ ability to obtain and maintain protection of the intellectual property we may own solely or jointly with, or license from, third parties, particularly patents, in the United States and other countries directed to our products and technologies.
Our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely or jointly with, or license from, third parties, particularly patents, in the United States and other countries directed to our products and technologies.
We could also be required to pay damages, which could be significant, including treble damages and attorneys’ fees if we are found to have willfully infringed such patents. We could also be required to obtain a license to such patents in order to continue the development and commercialization of the infringing product or technology.
We could also be required to pay damages, which could be significant, including treble damages and attorneys’ fees if we are found to have 57 willfully infringed such patents. We could also be required to obtain a license to such patents in order to continue the development and commercialization of the infringing product or technology.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. 61 We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all.
If we fail to comply with these regulations, we could be subject to civil sanctions, including fines and penalties for noncompliance. In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States.
If we fail to comply with these regulations, we could be subject to civil sanctions, including fines and penalties for noncompliance. 50 In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business, financial condition, results of operations and prospects may be adversely affected.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, 56 then we may not be able to compete effectively, and our business, financial condition, results of operations and prospects may be adversely affected.
Certain of our in-licensed patents are, and our future owned and in-licensed patents may be, subject to a reservation of rights by one or more third parties, including government march-in rights, that may limit our ability to exclude third parties from commercializing products similar or identical to ours.
Certain of our future owned and in-licensed patents may be, subject to a reservation of rights by one or more third parties, including government march-in rights, that may limit our ability to exclude third parties from commercializing products similar or identical to ours.
Doing business internationally involves a number of risks, including: • Difficulties in staffing and managing our international operations; • Multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • Reduced or varied protection for intellectual property rights in some countries; • Obtaining regulatory clearance where required for our products in various countries; • Requirements to maintain data and the processing of that data on servers located within such countries; • Limits on our ability to penetrate international markets if we are required to manufacture our products locally; • Financial risks, such as longer payment cycles, difficulty collecting accounts receivable, foreign tax laws and complexities of foreign value-added tax systems, the effect of local and regional financial pressures on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; • Restrictions on the site-of-service for use of our products and the economics related thereto for physicians and other healthcare practitioners; • Natural disasters and economic instability, including outbreak of disease, boycotts, curtailment of trade and other market restrictions; • Wars, terrorism and political unrest, such as the conflict in Ukraine, which has resulted in instability in the global financial markets and export controls, and which could result in supply disruptions for us, including because one key custom-made component in our Swoop® system is the magnet, which is manufactured by a single source supplier in Europe, and which could also have a material adverse impact on our sales in affected markets; and • Regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the U.S.
Doing business internationally involves a number of risks, including: • Difficulties in staffing and managing our international operations; • Multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • Reduced or varied protection for intellectual property rights in some countries; • Obtaining regulatory clearance where required for our products in various countries; • Requirements to maintain data and the processing of that data on servers located within such countries; • Limits on our ability to penetrate international markets if we are required to manufacture our products locally; • Financial risks, such as longer payment cycles, difficulty collecting accounts receivable, foreign tax laws and complexities of foreign value-added tax systems, the effect of local and regional financial pressures on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; • Restrictions on the site-of-service for use of our products and the economics related thereto for physicians and other healthcare practitioners; • Natural disasters and economic instability, including outbreak of disease, boycotts, curtailment of trade and other market restrictions; 42 • Wars, terrorism and political unrest, such as the conflicts in Ukraine and the Middle East, which has resulted in instability in the global financial markets and export controls, and which could result in supply disruptions for us, including because one key custom-made component in our Swoop® system is the magnet, which is manufactured by a single source supplier in Europe, and which could also have a material adverse impact on our sales in affected markets; and • Regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the U.S.
Because of the technical nature of our products and the dynamic market in which we compete, any failure to attract, recruit, train, retain, motivate and integrate qualified personnel could materially harm our operating results and growth prospects.
Because of the technical nature of 38 our products and the dynamic market in which we compete, any failure to attract, recruit, train, retain, motivate and integrate qualified personnel could materially harm our operating results and growth prospects.
We may 54 not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner or in all jurisdictions.
We may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner or in all jurisdictions.
In certain circumstances, we rely on our licensors to pay these fees due to the U.S. and non-U.S. patent agencies and to take the necessary action to comply with these requirements with respect to our licensed intellectual property.
In certain circumstances, we 58 rely on our licensors to pay these fees due to the U.S. and non-U.S. patent agencies and to take the necessary action to comply with these requirements with respect to our licensed intellectual property.
Recent court decisions have impacted the FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations, although there are still significant risks in this area in part due to potential False Claims Act exposure. Further, this area is subject to ongoing policy changes at the federal level, resulting in 49 some degree of uncertainty for regulated businesses.
Recent court decisions have impacted the FDA’s enforcement activity 48 regarding off-label promotion in light of First Amendment considerations, although there are still significant risks in this area in part due to potential False Claims Act exposure. Further, this area is subject to ongoing policy changes at the federal level, resulting in some degree of uncertainty for regulated businesses.
In addition, the CARES Act eliminates the limitation on the deduction of NOLs to 80 percent of 44 current year taxable income for taxable years beginning before January 1, 2021.
In addition, the CARES Act eliminates the limitation on the deduction of NOLs to 80 percent of current year taxable income for taxable years beginning before January 1, 2021.
At the Closing, we, the Sponsor, certain affiliates of the Sponsor and certain stockholders of Legacy Hyperfine and Liminal entered into the Registration Rights Agreement, pursuant to which, among other things, the parties to the Registration Rights Agreement were granted certain registration rights (including demand and piggy-back rights, subject to cooperation and cut-back provisions) with respect to their respective shares of our common stock, in each case, on the terms and subject to the conditions therein.
At the Closing, we, HC Sponsor LLC (the "Sponsor"), certain affiliates of the Sponsor and certain stockholders of Legacy Hyperfine and Liminal entered into the Registration Rights Agreement, pursuant to which, among other things, the parties to the Registration Rights Agreement were granted certain registration rights (including demand and piggy-back rights, subject to cooperation and cut-back provisions) with respect to their respective shares of our common stock, in each case, on the terms and subject to the conditions therein.
Over the next several years, we expect to continue to devote substantially all of our resources towards continuing development and commercialization of our products and research and development efforts for additional products. These efforts may prove more costly than we currently anticipate. We are generating product revenue but may never generate revenue sufficient to offset our expenses, or at all.
Over the next several years, we expect to continue to devote substantially all of our resources towards continuing development and commercialization of our products and research and development efforts for additional products. These efforts may prove more costly than we currently anticipate. We are generating product revenue but may never generate revenue sufficient to offset our expenses.
In December 2022, we received written notice from Nasdaq notifying us that, because the closing bid price for our Class A common stock has fallen below $1.00 per share for 30 consecutive business days, we no longer meet the minimum bid price requirement for continued inclusion on The Nasdaq Global Market.
In December 2022, we received written notice from Nasdaq notifying us that, because the closing bid price for our Class A common stock has fallen below $1.00 per share for 30 consecutive business days, we no longer met the minimum bid price requirement for continued inclusion on The Nasdaq Global Market.
So long as more than 50% of the voting power for the election of our directors is held by an individual, a group or another company, we will qualify as a “controlled company” under the Nasdaq listing rules. As of February 15, 2023, Dr. Rothberg controls approximately 85% of the voting power of our outstanding capital stock.
So long as more than 50% of the voting power for the election of our directors is held by an individual, a group or another company, we will qualify as a “controlled company” under the Nasdaq listing rules. As of February 15, 2024, Dr. Rothberg controls approximately 85% of the voting power of our outstanding capital stock.
Further, a recent ruling by the Court of Chancery in Delaware introduced uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”) required a separate vote in favor of at least a majority of the outstanding shares of Class A common stock, in addition to a vote in favor of at least a majority of the outstanding shares of Class A and Class B common stock, voting together as a single class, to properly authorize shares of Class A common stock.
Further, a prior ruling by the Court of Chancery in Delaware introduced uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”) required a separate vote in favor of at least a majority of the outstanding shares of Class A common stock, in addition to a vote in favor of at least a majority of the outstanding shares of Class A and Class B common stock, voting together as a single class, to properly authorize shares of Class A common stock.
The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. 68 The obligations associated with being a public company will involve significant expenses and will require significant resources and management attention, which may divert from our business operations.
The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations.
If our assumptions regarding these risks and uncertainties, which we will use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations, and our business, financial condition and results of operations could be adversely affected. 33 We may need to raise additional capital to fund commercialization plans for our products, including manufacturing, sales and marketing activities, expand our investments in research and development, and commercialize new products and applications.
If our assumptions regarding these risks and uncertainties, which we will use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations, and our business, financial condition and results of operations could be adversely affected. 33 We may need to raise additional capital to fund commercialization plans for our products, including manufacturing, sales and marketing activities, expand our investments in research and development, develop clinical evidence, and commercialize new products and applications.
A TSEA by and among Butterfly Network, Inc., AI Therapeutics, Inc., Quantum-Si Incorporated, 4Bionics, identifeye HEALTH Inc. (f/k/a Tesseract Health, Inc.), Detect, Inc.
A TSEA by and among Butterfly Network, Inc., AI Therapeutics, Inc., Quantum-Si Incorporated, 4Bionics LLC, identifeye Health Inc. (f/k/a Tesseract Health, Inc.), Detect, Inc.
We began selling our Swoop® system in 2020 and currently sell the device directly to customers through direct sales. Future sales of our products will depend in large part on our ability to effectively market and sell our products and services, successfully manage and expand our sales force, and increase the scope of our marketing efforts.
We began selling our Swoop® system in 2020 and currently sell the device primarily to customers through direct sales. Future sales of our products will depend in large part on our ability to effectively market and sell our products and services, successfully manage and expand our sales force, and increase the scope of our marketing efforts.
There can be no assurance that we will not be subject to cybersecurity incidents that bypass our security measures, impact the integrity, availability or privacy of health information or other data subject to privacy laws or disrupt our information systems, devices or business, including our ability to deliver services to our users.
There can be no assurance that we will not be subject to cybersecurity incidents that bypass our security measures, impact the integrity, availability or privacy of health information or other data subject to privacy laws, or disrupt our information systems, devices or business, including our ability to deliver services to our customers.
Notwithstanding the presence of maximum redemption thresholds or charter provisions common in SPACs that provide a limitation on redemptions that would cause a SPAC’s net tangible assets to be less than $5,000,001, in accordance with SEC Staff guidance on redeemable equity instruments, ASC 480-10-S99, “ Distinguishing Liabilities from Equity ”, and EITF Topic D-98, “ Classification and Measurement of Redeemable Securities ”, and, according to the SEC Staff communications with certain independent auditors, redemption provisions not solely within the control of the issuing company require ordinary shares subject to redemption to be classified outside of permanent equity.
Notwithstanding the presence of maximum redemption thresholds or charter provisions common in special purpose acquisition companies ("SPACs") that provide a limitation on redemptions that would cause a SPAC’s net tangible assets to be less than $5,000,001, in accordance with SEC Staff guidance on redeemable equity instruments, ASC 480-10-S99, “ Distinguishing Liabilities from Equity ”, and EITF Topic D-98, “ Classification and Measurement of Redeemable Securities ”, and, according to the SEC Staff communications with certain independent auditors, redemption provisions not solely within the control of the issuing company require ordinary shares subject to redemption to be classified outside of permanent equity.
This resulted in a restatement of the initial carrying value of the Class A ordinary shares subject to possible redemption, with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and ordinary shares. The foregoing represents material weaknesses in our internal controls over financial reporting.
This resulted in a restatement of the initial carrying value of the Class A ordinary shares subject to possible redemption, with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and ordinary shares. The foregoing represented material weaknesses in our internal controls over financial reporting.
As we seek to expand into international markets, the conflict in Ukraine and any related economic or other sanctions or related countermeasures could limit our ability to expand our business and have a material adverse impact on demand for our products and sales in affected markets.
As we seek to expand into international markets, the conflict in Ukraine and the Middle East and any related economic or other sanctions or related countermeasures could limit our ability to expand our business and have a material adverse impact on demand for our products and sales in affected markets.
We have a limited operating history, which may make it difficult to evaluate the prospects for our future viability and predict our future performance. As such, you cannot rely upon our historical operating performance to make an investment or voting decision regarding us.
We have a limited operating history, which may make it difficult to evaluate the prospects for our future viability and predict our future performance. As such, you cannot rely upon our historical operating performance to make an investment decision regarding us.
If we do not successfully continue our sales efforts and promotional activities, particularly to health systems and large institutions, or if existing users decrease their level of engagement, our revenue, financial results and business may be significantly harmed.
If we do not successfully continue our sales efforts and promotional activities, particularly to health systems and large institutions, or if existing customers decrease their level of engagement, our revenue, financial results and business may be significantly harmed.
Our existing NOLs may be subject to limitations arising out of previous ownership changes and we may be limited as to the amount that can be utilized each year as a result of such previous ownership changes, including the Business Combination and related transactions.
Our existing NOLs may be subject to limitations arising out of previous ownership changes and we may be limited as to the amount that can be utilized each year as a result of such previous ownership changes, including our December 2021 business combination and related transactions.
We have implemented multiple layers of security measures to protect the confidentiality, integrity and availability of these data and the systems and devices that store and transmit such data. We utilize current security technologies, including encryption and data depersonalization, and our defenses are monitored and routinely tested.
We have implemented multiple layers of security measures to protect the confidentiality, integrity and availability of data and the systems and devices that store and transmit data. We utilize current security technologies, including encryption and data depersonalization, and our defenses are monitored and routinely tested.
In addition, sanctions imposed on Russia and others in response to such conflict may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by Russia and others could exacerbate market and economic instability.
In addition, sanctions imposed on Russia and others in response to the conflict in Ukraine may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by Russia and others could exacerbate market and economic instability.
Rothberg, Ph.D., Vice Chairperson of our board of directors and the Founder of Legacy Hyperfine and Liminal, which will limit an investor’s ability to influence the outcome of important transactions, including a change in control. Shares of our Class B common stock have 20 votes per share, while shares of our Class A common stock have one vote per share.
Rothberg, Ph.D., the Founder of Legacy Hyperfine and Liminal and a member of our board of directors, which will limit an investor’s ability to influence the outcome of important transactions, including a change in control. Shares of our Class B common stock have 20 votes per share, while shares of our Class A common stock have one vote per share.
Risks Related to Our Financial Condition and Capital Requirements We are an early-stage life sciences technology company with a history of net losses, which we expect to continue, and we may not be able to generate meaningful revenues or achieve and sustain profitability in the future.
Risks Related to Our Financial Condition and Capital Requirements We are an early-stage health technology company with a history of net losses, which we expect to continue, and we may not be able to generate meaningful revenues or achieve and sustain profitability in the future.
To the extent that we engage in enterprise sales, we may be subject to procurement discounts, which could have a negative impact on the prices of our products. We are undertaking internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.
To the extent that we engage in enterprise sales, we may be subject to procurement discounts, which could have a negative impact on the prices of our products. We have undertaken internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.
If we are unable to attract, recruit, train, retain, motivate and integrate key personnel and expand our organization, our operations may be disrupted and we may not achieve our goals. Our future success depends on our ability to attract, recruit, train, retain, motivate and integrate key personnel, including our Vice Chairperson and the Founder of Legacy Hyperfine and Liminal, Dr.
If we are unable to attract, recruit, train, retain, motivate and integrate key personnel and expand our organization, our operations may be disrupted and we may not achieve our goals. Our future success depends on our ability to attract, recruit, train, retain, motivate and integrate key personnel, including the Founder of Legacy Hyperfine and Liminal and our director, Dr.
We expect to generate an increasing portion of our revenue internationally in the future and may become subject to various additional risks relating to our international activities, which could adversely affect our business, operating results and financial condition. Revenue from non-U.S. countries was 37% of total revenue for the year ended December 31, 2022.
We expect to generate an increasing portion of our revenue internationally in the future and may become subject to various additional risks relating to our international activities, which could adversely affect our business, operating results and financial condition. Revenue from non-U.S. countries was 40% of total revenue for the year ended December 31, 2023.
In addition, as a public company, we will continue to incur significant legal, accounting, administrative, insurance and other expenses that we did not incur as a private company. Accordingly, we cannot assure you that we will achieve profitability in the future or that, if we become profitable, will sustain profitability.
In addition, as a public company, we will continue to incur significant legal, accounting, administrative, insurance and other expenses. Accordingly, we cannot assure you that we will achieve profitability in the future or that, if we become profitable, will sustain profitability.
If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.
If that happens, the market price of our Class A common stock could decline, and stockholders may lose all or part of their investment.
Dr. Rothberg and his permitted transferees hold all of the issued and outstanding shares of our Class B common stock, and as of February 15, 2023, Dr.
Dr. Rothberg and his permitted transferees hold all of the issued and outstanding shares of our Class B common stock, and as of February 15, 2024, Dr.
If we fail to maintain a high quality of service or a high quality of device technology, we may fail to retain existing users or add new users.
If we fail to maintain a high quality of service or a high quality of device technology, we may fail to retain existing customers or add new customers.
Risks Related to Our Businesses Our success depends upon market acceptance of our products and services, our ability to develop and commercialize existing and new products and services and generate revenues, and our ability to identify new markets for our technology. We have developed, and are engaged in the development of, MRI solutions and non-invasive neural monitoring technology.
Risks Related to Our Businesses Our success depends upon market acceptance of our products and services, our ability to develop and commercialize existing and new products and services and generate revenues, and our ability to identify new markets for our technology. We have developed, and are engaged in the development of, MRI solutions.
Pricing pressures from contract suppliers or manufacturers on which we rely may impose pricing pressures. 39 Third-party suppliers utilized by our manufacturer such as Benchmark have and may continue to impose pricing pressures.
We have experienced and may continue to experience pricing pressures from contract suppliers or manufacturers on which we rely. Third-party suppliers utilized by our manufacturer such as Benchmark have and may continue to impose pricing pressures.
Rothberg has the ability to influence our business and affairs through his ownership of the high vote shares of our common stock, his general ability to elect our board of directors, and provisions in the Charter requiring his approval for certain corporate actions (in addition to approval by our board of directors).
Rothberg has the ability to influence our business and affairs through his ownership of the high vote shares of our common stock, his general ability to elect our board of directors, and provisions in our certificate of incorporation, as amended (the "Charter"), requiring his approval for certain corporate actions (in addition to approval by our board of directors).
We believe this re-prioritized strategic focus is the best way to optimize our financial and other resources to advance our goal of developing and commercializing our products and services. There can be no assurance that our restructuring will achieve the cost savings, operating efficiencies or other benefits that we may initially expect.
We believe this re-prioritized strategic focus was the best way to optimize our financial and other resources to advance our goal of developing and commercializing our products and services. There can be no assurance that our restructuring will achieve the cost savings, operating efficiencies or other benefits that we may have initially expected.
For example, the general data privacy regulation (“GDPR”) imposes requirements in the EEA relating to, among other things, consent to process personal data of individuals, the information provided to individuals regarding the processing of their personal data, the security and confidentiality of personal data, notifications in the event of data breaches and use of third-party processors.
For example, the GDPR imposes requirements in the EEA relating to, among other things, consent to process personal data of individuals, the information provided to individuals regarding the processing of their personal data, the security and confidentiality of personal data, notifications in the event of data breaches and use of third-party processors.
We are commercializing our Swoop® system to address limitations of current imaging technologies. Our success will depend on the acceptance of our products and services in the U.S. and international healthcare markets.
We are commercializing our Swoop® system to address limitations of current imaging technologies. Our success will depend on the acceptance of our products and services in the United States. and international healthcare markets.
(f/k/a Homodeus Inc.), Legacy Hyperfine and Liminal was signed in November 2020; a TSEA by and among Quantum-Si Incorporated, AI Therapeutics, Inc., 4Bionics, identifeye HEALTH Inc., Detect, Inc., Legacy Hyperfine and Liminal was signed in February 2021 (and which Protein Evolution, Inc. joined in August 2021); and a TSEA by and among Legacy Hyperfine, Liminal, AI Therapeutics, Inc., identifeye HEALTH Inc. and Detect, Inc. was signed in July 2021 and became effective upon the Closing.
(f/k/a Homodeus Inc.), Legacy Hyperfine and Liminal was signed in November 2020; a TSEA by and among Quantum-Si Incorporated, AI Therapeutics, Inc., 4Bionics LLC, identifeye Health Inc., Detect, Inc., Legacy Hyperfine and Liminal was signed in February 2021 (and which Protein Evolution, Inc. joined in August 2021); and a TSEA by and among Legacy Hyperfine, Liminal, AI Therapeutics, Inc., identifeye Health Inc. and Detect, Inc. was signed in July 2021 and became effective upon the closing of our December 2021 business combination.
If we are held to have breached the terms of an open source software license, we could be subject to damages or be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition, results of operations and prospects. 62 Intellectual property rights do not necessarily address all potential threats.
If we are held to have breached the terms of an open source software license, we could be subject to damages or be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition, results of operations and prospects.
If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees or costs and expenses and royalties, which could adversely affect our ability to offer products or services, our ability to continue operations and our business, financial condition, results of operations and prospects.
Litigation could result in substantial costs and distract our management. If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees or costs and expenses and royalties, which could adversely affect our ability to offer products or services, our ability to continue operations and our business, financial condition, results of operations and prospects.
In addition, the GDPR, which took effect in May 2018, governs the collection and use of personal data of European Union residents.
In addition, the GDPR, which took effect in May 2018, governs the collection and use of personal data of EEA residents.
The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, we are incurring, and will continue to incur significant legal, accounting and other expenses that Legacy Hyperfine and Liminal did not previously incur.
The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, we are incurring, and will continue to incur significant legal, accounting and other expenses.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
Intellectual property rights do not necessarily address all potential threats. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
We are an early-stage life sciences technology company, and have incurred significant losses since Legacy Hyperfine and Liminal formed in 2014 and 2018, respectively, and expect to continue to incur losses in the future. We incurred net losses of $73.2 million and $64.9 million for the years ended December 31, 2022 and 2021, respectively.
We are an early-stage health technology company, and have incurred significant losses since Legacy Hyperfine and Liminal formed in 2014 and 2018, respectively, and expect to continue to incur losses in the future. We incurred net losses of $44.2 million and $73.2 million for the years ended December 31, 2023 and 2022, respectively.
Moreover, the Medical Device Regulation includes elements intended to strengthen the conformity assessment procedures, assert greater control over notified bodies and their standards, increase overall system transparency, and impose more robust device vigilance requirements on manufacturers and distributors.
The Medical Device Regulation became fully effective on May 26, 2021.The Medical Device Regulation includes elements intended to strengthen the conformity assessment procedures, assert greater control over notified bodies and their standards, increase overall system transparency, and impose more robust device vigilance requirements on manufacturers and distributors.
Whenever possible, we work with de-identified information and employ additional measures such as encryption tools to protect the privacy of our users and their patients’ data. However, hackers may attempt to penetrate our computer systems, and, if successful, misappropriate personal or confidential business information.
Whenever possible, we work with de-identified information and employ additional measures such as encryption tools to protect the privacy of individuals, including our customers, and patient data and employee data. However, hackers may attempt to penetrate our computer systems, and, if successful, misappropriate personal or confidential business information.
Claims may be made by patients, healthcare providers or others selling our products. The risk of product liability claims may also increase if our products are subject to a product recall or seizure. Product liability claims may be brought by individuals or by groups seeking to represent a class.
Claims may be made by patients, healthcare providers or others selling our products. The risk of product liability claims may also increase if our products are subject to a product recall or seizure.
As of December 31, 2022, we had an accumulated deficit of $209.5 million. These losses and accumulated deficit were primarily due to the substantial investments made to develop and improve our technology and products.
As of December 31, 2023, we had an accumulated deficit of $253.7 million. These losses and accumulated deficit were primarily due to the substantial investments made to develop and improve our technology and products.
Foreign Corrupt Practices Act, and comparable laws and regulations in other countries. 42 Any of these factors could significantly harm our future international expansion and operations and, consequently, have a material adverse effect on our business, financial condition and results of operations.
Foreign Corrupt Practices Act, and comparable laws and regulations in other countries. Any of these factors could significantly harm our future international expansion and operations and, consequently, have a material adverse effect on our business, financial condition and results of operations. Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
In the ordinary course of our business, we collect and store sensitive data, and intellectual property and proprietary business information owned or controlled by us or our users. This data encompasses a wide variety of business-critical information, including research and development information, commercial information, and business and financial information.
In the ordinary course of our business, we collect and store sensitive data, personally identifiable information of individuals, and intellectual property and proprietary business information owned or controlled by us, our customers and other third parties. This data encompasses a wide variety of business-critical information, including research and development information, commercial information, and business and financial information.
If our remediation measures are ineffective, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to report our financial condition or results of operations accurately or in a timely manner and we may be unable to maintain compliance with applicable stock exchange listing requirements, which may adversely affect investor confidence in us and, as a result, materially and adversely affect our business and the value of our Class A common stock.
Risks Related to Our Securities and to Being a Public Company If we experience material weaknesses in our internal control over financial reporting or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to report our financial condition or results of operations accurately or in a timely manner and we may be unable to maintain compliance with applicable stock exchange listing requirements, which may adversely affect investor confidence in us and, as a result, materially and adversely affect our business and the value of our Class A common stock.
If additional shares of our Class B common stock are issued, your shares and your votes may be significantly diluted. Potential conflicts of interest may arise among the holders of our Class B common stock and the holders of our Class A common stock. Dr. Rothberg and his permitted transferees hold all of our Class B common stock.
If additional shares of our Class B common stock are issued, your shares of Class A common stock and your votes may be significantly diluted. 63 Potential conflicts of interest may arise among the holders of our Class B common stock and the holders of our Class A common stock. Dr.
As a result, conflicts of interest may arise among Dr. Rothberg, on the one hand, and the Company and holders of our Class A common stock on the other hand. Dr.
Rothberg and his permitted transferees hold all of our Class B common stock. As a result, conflicts of interest may arise among Dr. Rothberg, on the one hand, and the Company and holders of our Class A common stock on the other hand. Dr.
Unless otherwise agreed to by us and the other participant company, all rights, title and interest in and to any inventions, works-of-authorship, idea, data or know-how invented, made, created or developed by the personnel (employees, contractors or consultants) in the course of conducting services for a participant company (“Created IP”) will be owned by the participant company for which the work was performed, and the recipient participant company grants to the party that had its personnel provide the services that resulted in the creation of the Created IP a royalty-free, perpetual, limited, worldwide, non-exclusive, sub-licensable (and with respect to software, sub-licensable in object code only) license to utilize the Created IP only in the core business field of the originating participant company, including a license to create and use derivative works based on the Created IP in the originating participant’s core business field, subject to any agreed upon restrictions. 41 The technology and personnel-sharing arrangements under the TSEA may prevent us from fully utilizing our personnel if such personnel are also being used by the other participant companies and may also cause our personnel to enter into agreements with or provide services to other companies that interfere with their obligations to us.
Unless otherwise agreed to by us and the other participant company, all rights, title and interest in and to any inventions, works-of-authorship, idea, data or know-how invented, made, created or developed by the personnel (employees, contractors or consultants) in the course of conducting services for a participant company (“Created IP”) will be owned by the participant company for which the work was performed, and 41 the recipient participant company grants to the party that had its personnel provide the services that resulted in the creation of the Created IP a royalty-free, perpetual, limited, worldwide, non-exclusive, sub-licensable (and with respect to software, sub-licensable in object code only) license to utilize the Created IP only in the core business field of the originating participant company, including a license to create and use derivative works based on the Created IP in the originating participant’s core business field, subject to any agreed upon restrictions.
As our business model is predicated on device hardware sales, software subscriptions, and subscriptions for use of device hardware and software, there is risk that any decline in sales, subscriptions and subscription renewal rates will adversely impact our business.
As our business model is predicated on device hardware sales, and service and support agreements for use of device hardware and services, there is risk that any decline in sales, service and support renewal rates will adversely impact our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. P ROPERTIES We currently maintain our principal executive offices at 351 New Whitfield Street, Guilford, Connecticut 06437. We also occupy office and laboratory space in Palo Alto, California. We lease office space under operating leases. We consider our current office space adequate for our current operations. Item 3.
Biggest changeItem 2. PROPERTIES We currently maintain our principal executive offices at 351 New Whitfield Street, Guilford, Connecticut 06437. We also occupy office and laboratory space in Palo Alto, California. We lease office space under operating leases. We consider our current office space adequate for our current operations.
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LEGAL PROCEEDINGS We are not currently a party to any material legal proceedings. Item 4. MINE SAFE TY DISCLOSURES Not applicable. 69 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStockholders As of March 1, 2023, we had 55,991,074 outstanding shares of Class A common stock held by approximately 144 holders of record, 15,055,288 outstanding shares of Class B common stock held by approximately six holders of record, and no outstanding shares of preferred stock. Unregistered Sales of Securities Not applicable. Issuer Purchases of Equity Securities Not applicable.
Biggest changeStockholders As of March 1, 2024, we had 56,895,145 outstanding shares of Class A common stock held by approximately 117 holders of record, 15,055,288 outstanding shares of Class B common stock held by approximately six holders of record, and no outstanding shares of preferred stock. Unregistered Sales of Securities Not applicable. Issuer Purchases of Equity Securities Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis increase was driven primarily by an increase in insurance cost due to operating as a public company of $3.0 million; an increase in stock-based compensation expense of $2.4 million when compared to the prior year, which was mainly driven by $2.5 million of expense related to the costs associated with RSU awards granted to our former CEO and $0.5 million related to incremental cost of repricing vested options, partially offset by a reversal of $1.1 million related to an earnout expense for our former CEO; an increase in personnel related expenses of $0.8 million due to increased headcount; an increase in accounting and compliance related fees of $1.2 million; an increase in technology and subscription related costs of $0.8 million; an increase related to restructuring and severance cost of $0.6 million; and an increase in recruitment cost $0.5 million; partially offset by a decrease of $3.9 million in professional costs related to cost of outsourced accounting and financial reporting as compared to 2021.
Biggest changeThis decrease was driven primarily by a decrease in personnel related costs and stock-based compensation expenses of $6.8 million as a result of a lean executive team and decreased headcount, a decrease in accounting, auditing and SEC expenses of $1.7 million, a decrease in insurance expenses of $1.3 million, a decrease in restructuring expenses of $0.7 million which was completed in the first quarter of 2023, a decrease in legal expenses and patent fees of $0.7 million, and a decrease in recruitment expenses of $0.4 million.
Any grant funds, plus any income, that have not been used for, or committed to, the project must be returned promptly to BMGF upon expiration of or termination of the agreement.
Any grant funds, plus any income, that have not been used for, or committed to, the project must be returned promptly to the BMGF upon expiration of or termination of the agreement.
Inventories Inventories primarily consist of finished goods which are produced by our third-party contract manufacturers and raw materials ordered in advance by the third-party contract manufacturer due to long delivery-lead time and were billed to the Company. Inventories are stated at the lower of actual cost, determined using the average cost method, or net realizable value (“NRV”).
Inventories Inventories primarily consist of finished goods which are produced by our third-party contract manufacturer and raw materials ordered in advance by the third-party contract manufacturer due to long delivery-lead time and were billed to the Company. Inventories are stated at the lower of actual cost, determined using the average cost method, or net realizable value (“NRV”).
Consulting expenses are related to research and development activities as well as clinical and regulatory activities. Fabrication services include certain third-party engineering costs. Research and development expenses are expensed as incurred. We expect to continue to make substantial investments in product development.
Consulting expenses are related to research and development activities as well as clinical and regulatory activities. Fabrication services include certain third-party engineering costs. Research and development expenses are expensed as incurred. We expect to continue to make substantial investments in research and development.
The determination of NRV involves numerous judgments including estimating selling prices, existing customer orders, and estimated costs of disposal and transportation. If actual market conditions differ from our estimates, future results of operations could be materially affected. 80 The valuation of inventory also requires us to estimate excess and obsolete inventory.
The determination of NRV involves numerous judgments including estimating selling prices, existing customer orders, and estimated costs of disposal and transportation. If actual market conditions differ from our estimates, future results of operations could be materially affected. 79 The valuation of inventory also requires us to estimate excess and obsolete inventory.
Our future cash requirements will depend on many factors, including market acceptance of our products, the cost and timing of establishing additional sales, marketing and distribution capabilities; the cost of our research and development activities; our ability to enter into and maintain collaborations; the cost and timing of potential future regulatory clearances or approvals for our products; and the effect of competing technological and market developments.
Our future cash requirements will depend on many factors, including market adoption of our products; the cost and timing of establishing additional sales, marketing and distribution capabilities; the cost of our research and development activities; our ability to enter into and maintain collaborations; the cost and timing of potential future regulatory clearances or approvals for our products; and the effect of competing technological and market developments.
A valuation allowance is established against net deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some or all of the net deferred tax assets will not be realized. We recorded a full valuation allowance as of December 31, 2022 and 2021.
A valuation allowance is established against net deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some or all of the net deferred tax assets will not be realized. We recorded a full valuation allowance as of December 31, 2023 and 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HYPERFINE The following discussion and analysis of the financial condition and results of operations Hyperfine, Inc. and its subsidiaries (for purposes of this section, collectively referred as the “Company”, “we,” “us” and “our”) should be read together with the audited combined and consolidated financial statements as of and for the years ended December 31, 2022 and 2021, together with the related notes thereto, included elsewhere in this Annual Report on Form 10-K.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HYPERFINE The following discussion and analysis of the financial condition and results of operations Hyperfine, Inc. and its subsidiaries (for purposes of this section, collectively referred as the “Company”, “we,” “us” and “our”) should be read together with the audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022, together with the related notes thereto, included elsewhere in this Annual Report on Form 10-K.
Our revenue recognition policies are discussed in more detail under “ Summary of Significant Accounting Policies ” in Note 2 to our combined and consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K. Device: Device sales primarily consist of sales of our MRI devices.
Our revenue recognition policies are discussed in more detail under “ Summary of Significant Accounting Policies ” in Note 2 to our consolidated financial statements and notes thereto for the years ended December 31, 2023 and 2022 included elsewhere in this Annual Report on Form 10-K. Device: Device sales primarily consist of sales of our MRI devices.
While our significant accounting policies are described in more detail in Note 2 in our combined and consolidated financial statements for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
While our significant accounting policies are described in more detail in Note 2 in our consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Factors that could accelerate cash needs include: (i) delays in achieving scientific and technical milestones; (ii) unforeseen capital expenditures and fabrication costs related to manufacturing; (iii) changes we may make in our business or commercialization and hiring strategy; (iv) the impact of the COVID-19 pandemic; (v) costs of running a public company; (vi) higher inflation and increases in product transportation and labor costs; and (vii) other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions.
Factors that could accelerate cash needs include: (i) delays in achieving scientific and technical milestones; (ii) unforeseen capital expenditures and fabrication costs related to manufacturing; (iii) changes we may make in our business or commercialization and hiring strategy; (iv) costs of running a public company; (v) higher inflation and increases in product transportation and labor costs; and (vi) other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions.
Research and development Research and development costs consist of production costs for prototype, test and pre-production units, lab supplies, consulting and personnel costs, including salaries, stock-based compensation, bonuses and benefit costs. Most of our research and development expenses are related to developing new products and services as well as to enhance our current product and software capabilities.
Research and development Research and development costs consist of production costs for prototype, test and pre-production units, lab supplies, clinical study cost, consulting and personnel costs, including salaries, stock-based compensation, bonuses and benefit costs. Most of our research and development expenses are related to developing new products and services as well as to enhancing our current product and software capabilities.
Revenue recognition We make judgments including determination of the timing and pattern of satisfaction of performance obligations, determination of the standalone selling price (“SSP”) of performance obligations and estimation of variable consideration if any. We offer alternative payment structures and “as-a-service” offerings that are assessed to determine whether an embedded lease arrangement exists.
Revenue recognition We make judgments including determination of the timing and pattern of satisfaction of performance obligations and determination of the standalone selling price (“SSP”) of performance obligations. We offer alternative payment structures and “as-a-service” offerings that are assessed to determine whether an embedded lease arrangement exists.
This has resulted in higher device revenue per unit and lower service revenue per unit for sales under the subscription plus ownership model. Cost of sales Cost of sales consists of product and service costs including personnel cost and benefits including stock-based compensation, product costs, production setup expenses, depreciation and amortization expenses, inventory excess and obsolescence expenses.
This has resulted in higher device revenue per unit and lower service revenue per unit for sales under this business model. Cost of sales Cost of sales consists of product and service costs including personnel cost and benefits including stock-based compensation, product costs, production setup expenses, depreciation and amortization expenses, inventory excess and obsolescence expenses.
Net cash provided by financing activities For the year ended December 31, 2022, net cash provided by financing activities of $7 thousand was proceeds from option exercises.
Net cash provided by financing activities For the year ended December 31, 2023, net cash provided by financing activities of $0.2 million was proceeds from option exercises. For the year ended December 31, 2022, net cash provided by financing activities of $7 thousand was proceeds from option exercises.
As part of the prioritization of our projects and expenditures, in December 2022, we suspended the development of our brain sensing platform, which was in the early stages of development to non-invasively measure key vital signs in the brain.
As part of the prioritization of our projects and expenditures, in December 2022, we suspended and ceased business operations for the development of our Liminal brain sensing platform, which was the focus of Liminal and was in the early stages of development to non-invasively measure key vital signs in the brain.
Net cash used for investing activities For the year ended December 31, 2022, net cash used in investing activities of $0.6 million was from fixed assets purchased. For the year ended December 31, 2021, net cash used in investing activities of $2.7 million was from fixed assets purchased.
Net cash used for investing activities For the year ended December 31, 2023, net cash used in investing activities of $0.8 million was from fixed assets purchased. For the year ended December 31, 2022, net cash used in investing activities of $0.6 million was from fixed assets purchased.
At December 31, 2022, 20 Swoop® system units and 10 baby cradles were provisioned and delivered to BMGF and the majority of the milestones for service deliverables were also met. The ongoing investigation is designed to provide data to validate the potential use of the Swoop® system in measuring the impact of maternal anemia, malnutrition, infection, and birth-related injury.
As of December 31, 2023, 22 Swoop® system units were provisioned and delivered to the BMGF and the majority of the milestones for service deliverables were also met. The ongoing investigation is designed to provide data to validate the potential use of the Swoop® system in measuring the impact of maternal anemia, malnutrition, infection, and birth-related injury.
Refer to Note 14 in the notes to our combined and consolidated financial statements for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K for a discussion of the BMGF grant.
Refer to Note 13 in the notes to our consolidated financial statements for the years ended December 31, 2023, and 2022 included elsewhere in this Annual Report on Form 10-K for a discussion of the BMGF grants.
GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
We calculate the expected term for employee and non-employee directors awards that take into account the effects of expected employee or non-employee director exercise and post-vesting employment termination behavior. • Expected volatility: We determined expected annual volatility based on the historical stock volatility of a group of similar companies that are publicly traded over a period equivalent to the expected term of the stock-based awards.
We calculate the expected term for employee and non-employee directors awards that take into account the effects of expected employee or non-employee director exercise and post-vesting employment termination behavior. • Expected volatility: We determined expected annual volatility based on the historical stock volatility of a group of similar companies that are publicly traded over a period equivalent to the expected term of the stock-based awards, as we do not have sufficient historical data to provide a reasonable basis for an estimate of the expected volatility.
The Swoop® system is a bedside magnetic resonance imaging device for producing images that display the internal structure of the head where full diagnostic examination is not clinically practical, When interpreted by a trained physician, these images provide information that can be useful in determining a diagnosis.
The Swoop® system is a portable, ULF MRI device for producing images that display the internal structures of the head where full diagnostic examination is not clinically practical. When interpreted by a trained physician, these images provide information that can be useful in determining a diagnosis.
While we will maintain our commercial focus in the U.S. in 2023, our commitment to the vision of providing affordable and accessible imaging that enables earlier detection and remote management of health conditions worldwide is in part made possible by grant funding from the BMGF.
While we will maintain our commercial focus in the United States in 2024, our commitment to the vision of providing affordable and accessible imaging that enables earlier detection and timely management of health conditions worldwide is currently made possible by grant funding from the BMGF.
For contracts that are in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, we apply the practical expedient in ASC 842 to combine the lease component (the device itself in device as a service, ("DaaS") contracts) and non-lease (maintenance and SaaS) components, and to account for the combined components as a single lease component.
Upon adoption of ASC 842, for contracts in which we act as a lessor and in which the lease component is an operating lease, we apply the practical expedient in ASC 842 to combine the lease component (the device itself in DaaS contracts) and non-lease (maintenance and SaaS) components, and to account for the combined components as a single lease component.
We have incurred significant cash burn and recurring net losses, which includes a net loss of $73.2 million for the year ended December 31, 2022, and an accumulated deficit of $209.5 million as of December 31, 2022.
We have incurred significant cash burn and recurring net losses, which includes a net loss of $44.2 million for the year ended December 31, 2023, and an accumulated deficit of $253.7 million as of December 31, 2023. As of December 31, 2023, we had cash and cash equivalents of $75.2 million.
Through our engagement with nonprofit organizations, we deployed the Swoop® system to low-middle resource settings without readily-accessible MRI technology. The multiple grants provided by the BMGF, which commenced funding in the spring of 2020, support the deployment of 45 Swoop® systems to investigators.
Through our engagement with the BMGF, we have deployed and continue to deploy the Swoop® system in low-middle income settings without readily-accessible MRI technology. The multiple grants provided by our research partnership with the BMGF, which commenced funding in the spring of 2020, support the deployment of 25 Swoop® system and accessories to investigators.
In connection with the Closing of the Business Combination, all replacement preferred stock awards were accelerated to fully vest. 81 Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our combined and consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K.
Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements and notes thereto for the years ended December 31, 2023 and 2022 included elsewhere in this Annual Report on Form 10-K. 80
General and administrative General and administrative expenses primarily consist of personnel costs and benefits including stock-based compensation, patent and filing fees, office expenses, technology expenses and outside services. Outside services consist of professional services, legal and other professional fees.
General and administrative General and administrative expenses primarily consist of personnel costs and benefits, including stock-based compensation, patent and filing fees, office expenses, technology expenses and outside services. Outside services consist of professional services, legal and other professional fees. Other related costs include additional facilities expenses and general corporate overhead to support the employee base.
Cash flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (In thousands) 2022 2021 Net cash used in operating activities $ (72,339 ) $ (47,182 ) Net cash used in investing activities (585 ) (2,711 ) Net cash provided by financing activities 7 176,767 Net (decrease) increase in cash and cash equivalents and restricted cash $ (72,917 ) $ 126,874 Net cash used in operating activities For the year ended December 31, 2022, net cash used in operating activities of $72.3 million was due primarily to a net loss of $73.2 million, non-cash items of $11.8 million and changes in operating assets and liabilities of $10.9 million.
Cash flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (In thousands) 2023 2022 Net cash used in operating activities $ (41,809 ) $ (72,339 ) Net cash used in investing activities (804 ) (585 ) Net cash provided by financing activities 174 7 Net decrease in cash and cash equivalents and restricted cash $ (42,439 ) $ (72,917 ) Net cash used in operating activities For the year ended December 31, 2023, net cash used in operating activities of $41.8 million was due primarily to a net loss of $44.2 million, non-cash items of $6.0 million and changes in operating assets and liabilities of $3.6 million.
This unfavorable increase in other expense was driven primarily by realized loss on foreign currencies. Liquidity and Capital Resources We have funded our operations primarily with proceeds from the issuance of common and preferred stock.
This favorable increase in other income was driven primarily by an increase in net realized gain on foreign currencies of approximately $47 thousand and an increase in interest income from customer financing of approximately $38 thousand. Liquidity and Capital Resources We have funded our operations primarily with proceeds from the issuance of common and preferred stock.
The increase was driven primarily by higher average cash balances and higher interest rates during the year ended December 31, 2022 compared to the year ended December 31, 2021.
The increase was driven primarily by a higher interest rates and higher cash balances in money market funds and demand deposit accounts during the year ended December 31, 2023 compared to the year ended December 31, 2022.
For the year ended December 31, 2021, net cash used in operating activities of $47.2 million was due primarily to a net loss of $64.9 million, non-cash items of $8.7 million and changes in operating assets and liabilities of $9.0 million. Non-cash items were primarily stock-based compensation expense of $6.9 million.
For the year ended December 31, 2022, net cash used in operating activities of $72.3 million was due primarily to a net loss of $73.2 million, non-cash items of $11.8 million and changes in operating assets and liabilities of $10.9 million.
Overview We are an innovative digital health business with a mission to provide affordable and accessible imaging and monitoring through magnetic resonance imaging (“MRI”) to revolutionize healthcare for people around the world. Our Swoop® Portable Magnetic Resonance (“MR”) Imaging® System TM (“Swoop® system”) produces high-quality images at a lower magnetic field strength than conventional MRI scanners.
Overview We are an innovative health technology business with a mission to revolutionize patient care globally through accessible, affordable, clinically relevant ultra-low-field (“ULF”) magnetic resonance (“MR”) brain imaging. Our Swoop® Portable MR Imaging® System (“Swoop® system”) produces high-quality images at a lower magnetic field strength than conventional magnetic resonance imaging (“MRI”) scanners.
We obtained a Medical Device License issued by Health Canada, UKCA certification in the United Kingdom, CE marking in the EU and regulatory authorization in Australia, New Zealand and Pakistan.
Expand sales in international markets The countries in which we have begun commercializing our Swoop® system include Canada, Australia, and New Zealand. We obtained a Medical Device License issued by Health Canada, UKCA certification in the United Kingdom, CE certification in the EU and regulatory authorization in Australia and New Zealand.
Sales and marketing Year Ended December 31, Change 2022 2021 Amount % Sales and marketing $ 14,219 $ 10,362 $ 3,857 37.2 % Sales and marketing expenses increased by $3.9 million, or 37.2%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Sales and marketing Year Ended December 31, Change 2023 2022 Amount % Sales and marketing $ 10,103 $ 14,219 $ (4,116 ) (28.9 )% Sales and marketing expenses decreased by $4.1 million, or 28.9%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Therefore, there are no income tax effects to be recognized in the combined and consolidated financial statements for the years ended December 31, 2022 and 2021. 75 Results of Operations The following is a discussion of our results of operations for the periods shown below, and our accounting policies are described under "Summary of Significant Accounting Policies" in Note 2 in our combined and consolidated financial statements for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K.
Based on available evidence, we believe that it is more-likely-than-not that we will be unable to utilize all of our deferred tax assets in the future. 74 Results of Operations The following is a discussion of our results of operations for the periods shown below, and our accounting policies are described under "Summary of Significant Accounting Policies" in Note 2 in our consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Annual Report on Form 10-K.
General and administrative Year Ended December 31, Change 2022 2021 Amount % General and administrative $ 32,406 $ 27,497 $ 4,909 17.9 % General and administrative expenses increased by $4.9 million, or 17.9%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
General and administrative Year Ended December 31, Change 2023 2022 Amount % General and administrative $ 20,276 $ 32,406 $ (12,130 ) (37.4 )% General and administrative expenses decreased by $12.1 million, or 37.4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Description of Certain Components of Financial Data Sales We derive our sales from the following sources: device sales and service sales as described in more detail below.
As of February 15, 2024, we completed the delivery and deployment of a total of 25 Swoop® system devices related to BMGF grants. 73 Description of Certain Components of Financial Data Sales We derive our sales from the following sources: device sales and service sales as described in more detail below.
If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations. 78 Cash As of December 31, 2022, we had cash and cash equivalents of $117.5 million.
We also may have to reduce marketing, customer support or other resources devoted to our products and services or cease operations. 77 Cash As of December 31, 2023, we had cash and cash equivalents of $75.2 million.
Service: Service sales primarily consists of sales from subscriptions of bundled devices, maintenance, and software. During the first quarter of 2022 and the first quarter of 2023, we have taken pricing actions by increasing the price of the device while lowering the price of the monthly subscription.
Service: Service sales primarily consist of sales service and support including annual maintenance and cloud hosting. During each of the first quarters of 2023 and 2022, we have taken pricing actions by increasing the price of the device while lowering the price of the annual service and support charges.
Cost of sales Year Ended December 31, Change 2022 2021 Amount % Device $ 4,231 $ 2,058 $ 2,173 105.6 % Service 1,676 605 1,071 177.0 % Total cost of sales $ 5,907 $ 2,663 $ 3,244 121.8 % 76 Cost of device sales increased by $2.2 million, or 105.6%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cost of sales Year Ended December 31, Change 2023 2022 Amount % Device $ 4,463 $ 4,231 $ 232 5.5 % Service 1,812 1,676 136 8.1 % Total cost of sales $ 6,275 $ 5,907 $ 368 6.2 % Percentage of revenue 56.9 % 86.7 % 75 Cost of device sales increased by $0.2 million, or 5.5%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Interest income Year Ended December 31, Change 2022 2021 Amount % Interest income $ 761 $ 18 $ 743 4,128 % 77 Interest income increased by $0.7 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Interest income Year Ended December 31, Change 2023 2022 Amount % Interest income $ 3,842 $ 761 $ 3,081 404.9 % Interest income increased by $3.1 million, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Comparison of the Years Ended December 31, 2022 and 2021 ($ Amounts in thousands) Year Ended December 31, Change ($ Amounts in thousands) 2022 2021 % Sales Device $ 5,246 $ 715 633.7 % Service 1,568 781 100.8 % Total sales $ 6,814 $ 1,496 355.5 % Cost of Sales Device $ 4,231 $ 2,058 105.6 % Service 1,676 605 177.0 % Total cost of sales $ 5,907 $ 2,663 121.8 % Gross margin 907 (1,167 ) (178 )% Operating expenses: Research and development $ 28,156 $ 25,842 9.0 % General and administrative 32,406 27,497 17.9 % Sales and marketing 14,219 10,362 37.2 % Total operating expenses 74,781 63,701 17.4 % Loss from operations $ (73,874 ) $ (64,868 ) 13.9 % Interest income $ 761 $ 18 4,127.78 % Other expense, net (51 ) (1 ) 5,000.00 % Loss before provision for income taxes $ (73,164 ) $ (64,851 ) 12.8 % Provision for income taxes — — Net loss and comprehensive loss $ (73,164 ) $ (64,851 ) 12.8 % Sales Year Ended December 31, Change 2022 2021 Amount % Device $ 5,246 $ 715 $ 4,531 633.7 % Service 1,568 781 787 100.8 % Total sales $ 6,814 $ 1,496 $ 5,318 355.5 % Device sales increased by $4.5 million, or 633.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Comparison of the Years Ended December 31, 2023 and 2022 ($ Amounts in thousands) Year Ended December 31, Change ($ Amounts in thousands) 2023 2022 % Sales Device $ 8,746 $ 5,246 66.7 % Service 2,286 1,568 45.8 % Total sales $ 11,032 $ 6,814 61.9 % Cost of Sales Device $ 4,463 $ 4,231 5.5 % Service 1,812 1,676 8.1 % Total cost of sales $ 6,275 $ 5,907 6.2 % Gross margin 4,757 907 424.5 % Operating expenses: Research and development $ 22,493 $ 28,156 (20.1 )% General and administrative 20,276 32,406 (37.4 )% Sales and marketing 10,103 14,219 (28.9 )% Total operating expenses 52,872 74,781 (29.3 )% Loss from operations $ (48,115 ) $ (73,874 ) (34.9 )% Interest income $ 3,842 $ 761 404.9 % Other expense, net 35 (51 ) (168.6 )% Loss before provision for income taxes $ (44,238 ) $ (73,164 ) (39.5 )% Provision for income taxes — — Net loss and comprehensive loss $ (44,238 ) $ (73,164 ) (39.5 )% Sales Year Ended December 31, Change 2023 2022 Amount % Device $ 8,746 $ 5,246 $ 3,500 66.7 % Service 2,286 1,568 718 45.8 % Total sales $ 11,032 $ 6,814 $ 4,218 61.9 % Device sales increased by $3.5 million, or 66.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Other expense, net Year Ended December 31, Change 2022 2021 Amount % Other expense, net $ (51 ) $ (1 ) $ (50 ) 5,000 % Other expense, net had an unfavorable increase in other expense by $50 thousand for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Other income (expense), net Year Ended December 31, Change 2023 2022 Amount % Other income (expense), net $ 35 $ (51 ) $ 86 (168.6 )% 76 Other income (expense), net had a favorable increase in other income of $86 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We had no other significant contractual obligations as of December 31, 2022. For information on contingencies, refer to Note 14 to our combined and consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021 included elsewhere in this Annual Report on Form 10-K.
For information on contingencies, refer to Note 13 to our consolidated financial statements and notes thereto for the years ended December 31, 2023 and 2022 included elsewhere in this Annual Report on Form 10-K. Critical Accounting Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Provision for income taxes We utilize the asset and liability method of accounting for income taxes, as set forth in Accounting Standards Codification (“ASC”) 740, Income Taxes.
Interest income Interest income primarily consists of interest earned on our cash equivalents invested in money market securities. Other expense, net Other expense, net primarily relates to foreign exchange gain or loss. Provision for income taxes We utilize the asset and liability method of accounting for income taxes, as set forth in Accounting Standards Codification (“ASC”) 740, Income Taxes.
Both of the grants are designed to support the deployment of a total of 25 Swoop® system devices and other services to investigators, which commenced in the spring of 2021, and is expected to fund the program for approximately two years.
These grants are designed to provide data to validate the use of our Swoop® system in measuring the impact of maternal anemia, malnutrition, infection and birth related injury. All of these grants are designed to support the deployment of a total of 25 Swoop® system devices and other services to investigators, which commenced in the spring of 2021.
Healthcare professionals can use the Swoop® system to make effective clinical diagnoses on a patient in various settings where MRI devices have previously been inaccessible. The easy-to-use interface and portable design of our Swoop® system make it accessible f anywhere in a hospital, clinic, or patient care site.
Healthcare professionals can use the Swoop® system to make effective clinical diagnoses and decisions in various care settings where conventional MRI devices are inaccessible.
As a result, we terminated approximately 13% of our global workforce including, among others, the employees of our subsidiary, Liminal.
Also, in December 2022, we announced an organizational restructuring designed to decrease our operating costs and create a more streamlined organization to support our business. As a result, we terminated approximately 13% of our global workforce including, among others, the employees of our Liminal subsidiary.
Other related costs include additional facilities expenses and general corporate overhead to support the employee base. 74 Sales and marketing Sales and marketing costs primarily consist of personnel costs and benefits including stock-based compensation, advertising, promotional costs, as well as costs for conferences, meetings, and other events.
Sales and marketing Sales and marketing costs primarily consist of personnel costs and benefits including stock-based compensation, advertising and promotional costs, as well as costs for conferences, meetings, and other events. We will seek to control sales and marketing expenses while continuing to promote our brand through marketing and advertising initiatives and expand our market presence and awareness.
Service sales increased by $0.8 million, or 100.8%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This increase was driven by an increase in the volume of devices installed as generally all commercial systems installations generate service revenue.
This increase was driven primarily by an increase in overhead and product costs of $0.1 million due to an increase of units sold, and an increase of $0.1 million in personnel and related costs. Cost of service sales increased by $0.1 million, or 8.2%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In connection with the restructuring, we estimate we will incur up to $1.7 million of costs, of which we have incurred approximately $1.1 million as of December 31, 2022, consisting primarily of cash severance costs, other severance benefits, fixed asset impairment costs and other related restructuring costs. We expect to substantially complete the restructuring in the first quarter of 2023.
In connection with the restructuring, we incurred $1.0 million of costs consisting primarily of cash severance costs, other severance benefits, fixed asset impairment costs and other related restructuring costs. We completed the restructuring as of the first quarter of 2023. Key Performance Measures Management reviews and analyzes several key performance measures including Total revenues, and Total Swoop® system units sold.
Research and development 2022 2021 Amount % Research and development $ 28,156 $ 25,842 $ 2,314 9.0 % Research and development expenses increased by $2.3 million, or 9.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This increase is due to an increased install base. Research and development 2023 2022 Amount % Research and development $ 22,493 $ 28,156 $ (5,663 ) (20.1 )% Research and development expenses decreased by $5.7 million, or 20.1%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
This increase was driven primarily by an increase in personnel related expenses of $3.7 million due to increased headcount, an increase in stock-based compensation expense of $0.3 million due to stock option and restricted stock unit awards granted, and an increase in travel expense of $0.8 million, partially offset by a decrease in marketing expenses of $1.0 million related to trade shows, digital marketing and advertising.
This decrease was driven primarily by a decrease in personnel related costs and stock-based compensation expenses of $2.1 million as a result of decreased headcount, a decrease in digital marketing and marketing events costs of $1.3 million, a decrease in consulting costs of $0.4 million, and a decrease in recruitment costs of $0.3 million.
The Swoop® system has since been authorized for brain imaging in several countries, including the European Union (CE marking), the United Kingdom (UKCA), Canada, Australia, New Zealand and Pakistan.
The Swoop® system has also received marketing authorization for brain imaging in several countries, including the European Union (CE), the United Kingdom (UKCA), Canada, Australia and New Zealand. 72 In December 2022, we suspended our Liminal program to develop a device to non-invasively measure key vital signs in the brain.
This increase was driven primarily by an increase in personnel related costs of $3.8 million as a result of increased headcount, an increase in stock-based compensation expense of $0.8 million due to stock option and restricted stock unit awards granted, an increase related to restructuring and severance cost of $0.4 million, and an increase in consulting and outsource costs of $0.3 million, partially offset by grant fulfilments of which 10 baby cradles were provisioned and delivered to BMGF and the milestones for service deliverables such as installment and training were met and recorded as credits to research and development expenses of $2.6 million and a decrease in fabrication services of $0.4 million.
This decrease was driven primarily by a decrease in personnel related costs and stock-based compensation expenses of $5.3 million as a result of decreased headcount and a decrease in consulting costs of $1.6 million partially offset by $1.3 million of lower grant fulfilments recorded as credits to research and development expenses.
Changes in operating assets and liabilities were driven primarily by an increase in inventory of $2.7 million, partially offset by an increase in accrued expense and other current liabilities of $6.9 million and amounts due to related parties of $1.8 million.
Changes in operating assets and liabilities were driven primarily by an increase in inventory of $2.2 million due to increased inventory units-on-hand, an increase in accounts receivable of $1.1 million due to increased revenue, a decrease in accrued expenses and other liabilities of $0.7 million, an increase in unbilled receivables of $0.5 million, an increase in prepaid inventory of $0.4 million and an increase of other long term assets of $0.2 million, partially offset by a decrease in prepaid expenses and other current assets of $1.5 million mainly due to the timing of directors and officers liability insurance prepayment.
We believe the adoption of the Swoop® system by healthcare professionals has benefits across healthcare communities in both high and low resource settings. Our technology allows us to provide decision support and rapid feedback for diagnostic insight for clinicians of various levels of expertise.
We designed the Swoop® system to address the limitations of conventional imaging technologies and make MR brain imaging accessible nearly anytime and anywhere across professional healthcare settings. We believe the adoption of the Swoop® system by healthcare professionals has clinical and economic benefits throughout healthcare communities in both high and low resource settings.
The increase is comprised of a $0.7 million increase in product hardware costs and a $1.4 million increase in labor cost as a result of the increase in the volume of products sold and manufacturing cost increases. Cost of service sales increased by $1.1 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The increase in device revenue is mainly due to an increase in unit average selling price as well as an increase in units sold. Service sales increased by $0.7 million, or 45.8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase is mainly due to the increased unit install-base.
Factors Affecting Results of Operations The following factors have been important to our business and we expect them to impact our results of operations and financial condition in future periods: Development and commercialization efforts on the Swoop® system In addition to our efforts to develop and commercialize the Swoop® system, we were previously working to develop a non-invasive brain sensing technology that is more affordable, accessible, and safer, to enable healthcare professionals to more easily monitor key brain vital signs such as cerebral blood flow and intracranial pressure throughout patient care.
Factors Affecting Results of Operations The following factors have been important to our business and we expect them to impact our results of operations and financial condition in future periods: Technical innovation We have developed our Swoop® system through extensive research and development activities.
For the year ended December 31, 2021, net cash provided by financing activities of $176.8 million was primarily due to proceeds from issuance of Series D convertible preferred stock of $30.5 million, and net proceed from equity infusion from the Business Combination of $141.5 million. 79 Contractual obligations In April 2020, we received a $1.6 million grant from the BMGF for the provision and equipping of 20 sites with our portable point-of-care MRI system to enable the performance of a multi-site study focused on optimizing diagnostic image quality.
We did not make any matching contributions to the 401(k) plan for the years ended December 31, 2023 and 2022. 78 During 2020 and 2021 we received multiple grants totaling $4.9 million from the BMGF for the provision and equipping of sites with our portable MR brain imaging system to enable the performance of a multi-site study focused on optimizing diagnostic image quality.
Unlike X-ray computed tomography (“CT”) or positron emission tomography (“PET”), MRI does not expose patients to harmful ionizing radiation. We believe MRI offers unrivaled clarity in assessing brain disorders and injuries. Despite its advantages, many healthcare institutions worldwide lack the facilities, qualified operators, and capital necessary to acquire and maintain expensive MRI devices.
ULF MR does not expose patients to harmful ionizing radiation and compares favorably in this regard to X-ray computed tomography (“CT”) or positron emission tomography (“PET”).
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We are working to realize our vision of providing affordable and accessible imaging of health conditions worldwide. MRI is a medical imaging technique used in radiology to image the human body’s anatomy and physiological processes. MRI is typically used in various clinical settings for medical diagnosis, the staging of disease, and follow-up treatment.
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Our Swoop® system is designed to transform brain MR for the patient, the clinician and the provider, and to provide a highly differentiated experience for patients, timely imaging to clinicians, and favorable economics for hospital administrators.
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The Swoop® system is intended for use at the patient’s bedside in any professional healthcare facility, such as a physician’s office or a critical care facility. The demand for MRI has been augmented by the aging population and the rising prevalence of cancer and cardiovascular, neurological, and orthopedic conditions.
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The easy-to-use interface and portable design of our Swoop® system make it easily and readily accessible anywhere in a hospital, clinic, or patient care site and it does not require any special facilities accommodations nor specialized personnel to operate safely.
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Healthcare professionals and insurers recognize imaging as a cost-effective and non-invasive diagnostic tool for evaluation and ongoing monitoring. The Swoop® system is the next generation MRI device designed to drive costs down and expand the current $28 billion imaging market.
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The demand for MR imaging has been increasing due to the aging population and the rising prevalence of neurological, neurodegenerative, and cardiovascular conditions, as well as the trends towards decentralized healthcare in mature as well as low- and middle-income countries. Healthcare professionals and insurers recognize imaging as an effective, non-invasive diagnostic tool for evaluation and ongoing monitoring.
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Through our collaborations with the healthcare community, we have begun to optimize Hyperfine’s software ecosystem to harness artificial intelligence (“AI”) and cloud technology to transform the system into a bedside clinical decision support platform. These efforts seek to improve image quality, help users analyze images, and reduce the time to diagnosis.
Added
The Swoop® system is the next generation brain imaging device designed to increase access to MRI in a cost-effective manner and expand the current $35 billion imaging market. Despite its advantages, many healthcare institutions worldwide lack the facilities, specialized operators, and capital necessary to acquire and maintain expensive conventional MRI devices. The Swoop® system is the first U.S.
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In December 2022, we suspended the development of our brain sensing platform, which was in the early stages of development to non-invasively measure key vital signs in the brain. Legacy Hyperfine received initial 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2020.
Added
Food and Drug Administration (“FDA”)-cleared, portable, ULF, MR brain imaging system and is capable of providing imaging at multiple sites of care, such as intensive care units, clinics, emergency departments or physicians’ offices, and can inform the timely detection, diagnosis, monitoring, and treatment of acute and chronic conditions inside and outside the hospital.
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We are building our direct commercial infrastructure in the United States and plan to sell our products in other countries through direct sales or distributors . In December 2022, we committed to an organizational restructuring designed to decrease our costs and create a more streamlined organization to support our business.
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The Swoop® system is AI-powered and integrates deep learning, a form of AI, for the reconstruction and denoising of T1, T2, and fluid-attenuated inversion recovery (“FLAIR”) sequences. The Swoop® system also incorporates deep learning denoising in the diffusion-weighted imaging (“DWI”) sequences for image post-processing. The integration of deep learning does not require any additional steps from the user.
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The estimates of costs and expenses that we expect to incur in connection with the restructuring are subject to a number of assumptions and actual results may differ materially.
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As a result, deep learning can enhance the image quality and, consequently, the diagnostic value of images generated at ULF. The algorithms are designed to improve ULF image quality, while reducing the impact of scan artifacts. The images created with these algorithms were validated by expert radiologists.
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We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring. 71 COVID-19 In March 2020, the World Health Organization declared the global outbreak of COVID-19 to be a pandemic.
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Furthermore, the Swoop® system is used clinically every day as the first mover in the field of portable ULF MRI, and with an install base that continues to expand.
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We continue to closely monitor the recent COVID-19 developments, including the lifting of COVID-19 safety measures, the drop in COVID-19 vaccination rates, the implementation of, and reaction to, vaccine mandates, the spread of new strains or variants of the coronavirus, and supply chain and labor shortages.
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The learnings from this field experience has served to improve our software, AI, and denoising algorithms resulting in the image quality and performance boosts of our product over the eight software releases since our initial clearance.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on our balance sheet position at December 31, 2022, the annualized effect of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by $0.3 million. Inflation Risk Inflation has continued to increase during 2022 and is expected to continue to increase for the near future.
Biggest changeBased on our balance sheet position at December 31, 2023, the annualized effect of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by $0.4 million.
We have not utilized hedging strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our combined and consolidated financial statements. 82
We have not utilized hedging strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our consolidated financial statements.
Interest rate risk Our cash equivalents as of December 31, 2022 consisted of $63.4 million in money market funds. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
Interest rate risk Our cash, cash equivalents and restricted cash as of December 31, 2023 consisted of $75.7 million in money market funds, demand deposit and savings accounts. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
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We rely on a single contract manufacturer; inflation generally affects us by increasing our cost of manufacturing and a higher cost of certain key components. To the extent our costs are impacted by general inflationary pressures, we may not be able to fully offset such higher costs through price increases or manufacturing efficiencies.
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Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition, or results of operations, other than its impact on the general economy. Nonetheless, if our costs were to become subject to inflationary pressures, we might not be able to fully offset such higher costs through price increases.

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