# Hyperfine, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Hyperfine, Inc.](/companies/hypr.md) (CIK 1833769)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 21:14 ET
- Period: 2023-09-30
- Accession: 0000950170-23-062066
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1833769/000095017023062066/hypr-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1833769/000095017023062066/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $8.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $4.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $1.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $3.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $5.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $16.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$11.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$36.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$10.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$33.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.15 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.15 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 71,464,315 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 71,178,769 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$31.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $546.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $85.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $98.2m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $103.1m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $8.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $9.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $93.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,934 characters.

*The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2022 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2023. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2022, and of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Hyperfine, Inc. and its consolidated subsidiaries. The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023 and 2022, respectively, present the financial position and results of operations of Hyperfine, Inc. and its wholly owned subsidiaries.*

### Overview

We are an innovative health technology business with a mission to revolutionize patient care globally through transformational, accessible, clinically relevant ultra-low-field (“ULF”) magnetic resonance (“MR”) diagnostic brain imaging and data solutions. 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. The Swoop® system is a portable, ULF magnetic resonance imaging 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. Healthcare professionals can use the Swoop® system to make effective clinical diagnoses and decisions in various care settings where MRI devices have previously been inaccessible. The easy-to-use interface and portable design of our Swoop® system make it accessible anywhere in a hospital, clinic, or patient care site and it does not require any special facilities accommodations to operate safely for patients or the clinical team. Unlike X-ray computed tomography (“CT”) or positron emission tomography (“PET”), ULF MR does not expose patients to harmful ionizing radiation.

The demand for MR imaging has been increasing due to the aging population and the rising prevalence of neurological,neurodegenerative, and cardiovascular conditions. Healthcare professionals and insurers recognize imaging as an effective, non-invasive diagnostic tool for evaluation and ongoing monitoring. 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, qualified operators, and capital necessary to acquire and maintain expensive conventional MRI devices. The Swoop® system, the world’s first U.S. Food and Drug Administration (“FDA”)-cleared, portable, ULF, magnetic resonance brain imaging system capable of providing imaging at multiple sites of care, can inform the timely diagnosis and treatment of acute conditions inside and outside the hospital. We designed the Swoop® system to address the limitations of current imaging technologies and make MR imaging accessible nearly anytime and anywhere in a professional healthcare setting. We believe the adoption of the Swoop® system by healthcare professionals has clinical and economic benefits across healthcare communities in both high and low resource settings. Following the COVID-19 pandemic, we have observed an accelerated pace in the migration of care from the traditional hospital setting to less resource-intensive care facilities such as ambulatory surgery centers (“ASC”), community clinics, and other community based locations where technologies like the Swoop® system can offer high clinical and cost-effective value to clinicians, their patients, and payors.

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. As a result, deep learning enhances the image quality and, consequently, the diagnostic value of images generated at ULF. The algorithms are designed to improve the image quality of our scan output, while reducing the impact of scan artifacts. The images created with these algorithms were validated by expert radiologists. As we move forward, we are continuously investing in improving our AI-powered image quality, leveraging each imaging-focused software release to further improve the Swoop® System performance.

Legacy Hyperfine received initial 510(k) clearance for brain imaging from the FDA in 2020 and eight subsequent clearances from FDA after the initial clearance. We have received our most recent clearance from the FDA in October 2023 for the latest update of our Swoop® system software. This updated software expanded the Swoop® system’s AI denoising capabilities by incorporating deep learning denoising in the DWI sequence. The Swoop® system has also received marketing authorization for brain imaging in several countries, including the European Union (CE marking), the United Kingdom (UKCA), Canada, Australia and New Zealand.

In December 2022, we suspended the development of our 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. Also, in December 2022, we announced an organizational restructuring designed to decrease our 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. 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 Metrics

We review the key performance measures discussed below to evaluate the business and measure performance, identify trends, formulate plans and make strategic decisions.

### Installed Base

The Swoop® system total installed base consists of three components, discussed in further detail below: Commercial system units (which make up total revenue), grant fulfillment units, and research units. The Swoop® system total installed base (or total installed units) is the number of Swoop® system devices sold to or deployed to hospitals, other healthcare providers, and research institutions. We view the total installed base as a key metric of the growth of our business and is measured from period over period. As of September 30, 2023, we had a total of 133 Swoop® systems deployed, including 21 research units which are deployed, at no cost to the institutions, to validate and expand clinical use cases.

Presented below is a breakout of the total Swoop® systems installed units as of September 30, 2023 and 2022:

|  | TOTAL INSTALLED UNITS As of September 30, 2023 | As of September 30, 2022 |
| --- | ---: | ---: |
| Commercial system units | 91 | 57 |
| Grant fulfillment units | 21 | 20 |
|  | 112 | 77 |
| Research units | 21 | 23 |
| **Total Installed Units** | 133 | 100 |

*Commercial system units* reflect device sales and subscription sales through commercial agreements (commercial sales) or through research transfer agreements ("RTA") sales. Commercial sales of Swoop® system units are made to hospitals and other healthcare providers for commercial use purposes and RTA sales represent the sale of Swoop® system units for research use purposes. Our device revenue for the three and nine months ended September 30, 2023 and 2022 is derived from commercial sales and RTA sales.

*Grant fulfillment units* consist of shipments of Swoop® system units to hospitals and other clinical facilities designated by the Bill & Melinda Gates Foundation (the “BMGF”). The corresponding funding for these installations from the BMGF is recorded as a reduction in the research and development expenses when realized during the period.

*Research units* represent installed units, at no cost to the institutions, to expand clinical use cases, and throughout the research study we have access to research results and data. The research units are recorded as a fixed asset with the related depreciation recorded as research and development expense over the life of the research unit. During the nine months ended September 30, 2023, four research units were decommissioned and returned to the Company due to the completion of the underlying research.

### 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. Moreover, our team is dedicated to clinical support programs designed to integrate the Swoop® system into an array of diverse healthcare environments and applications. We believe that, from our commercial and clinical experience, we are gaining invaluable insights into the Swoop® system’s utility. We believe these learnings will enable us to further improve our product and develop new services and tools in the future. We are continuously improving our image quality and imaging capabilities. Building upon this foundation and our expertise in ULF brain imaging, we plan to develop new imaging applications, broadening the range of clinical uses for our technology. Additionally, we are leveraging our strengths in AI and cloud technology to explore the Swoop® system’s role as a brain imaging clinical decision support platform. While these technical innovations may increase our research and development expenses, we expect them to have a positive impact on our results of operations and profitability in the future.

### Commercialization efforts of the Swoop® system

While our results have included revenue from outside the United States, our primary commercial focus is on the United States. Legacy Hyperfine received initial 510(k) clearance from the FDA in 2020. We are focused on building relationships and executing contracts with U.S. hospital systems. We are building a direct sales and field support organization in the United States and have recently made changes within our sales and clinical support teams who are working in strong collaboration to increase adoption, support successful implementations and support routine use at customer sites.

### Expand sales in international markets

The countries in which we have begun commercializing our Swoop® system include Canada, Australia, New Zealand and Pakistan. 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 and New Zealand.

While we will maintain our commercial focus in the United States in 2023 and 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. 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. As of September 30, 2023, 21 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. In May 2023, we were awarded an additional grant of $3.4 million grant from the BMGF to continue to develop a scalable approach to measuring neurodevelopment via ULF brain imaging in neonates, infants, and young children in low-to-middle income countries.

### Results of Operations

The following is a discussion of our results of operations for the three and nine months ended September 30, 2023 and 2022. Our accounting policies are described under "*Summary of Significant Accounting Policies"* in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

|  | Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change |
| --- | ---: | ---: | ---: | ---: |
| **($ Amounts in thousands)** | **2023** | **2022%** | **2023** | **2022%** |
| Sales |  |  |  |  |
| Device | $1,728 | $1,945 (11.2)% | $6,670 | $4,305 54.9% |
| Service | 602 | 403 49.4% | 1,676 | 1,085 54.5% |
| Total sales | 2,330 | 2,348 (0.8)% | $8,346 | $5,390 54.8% |
| Cost of Sales |  |  |  |  |
| Device | 835 | 1,215 (31.3)% | $3,321 | $3,511 (5.4)% |
| Service | 371 | 445 (16.6)% | 1,302 | 1,272 2.36% |
| Cost of sales | 1,206 | 1,660 (27.3)% | $4,623 | $4,783 (3.3)% |
| **Gross margin** | **1,124** | **688** 63.37% | **3,723** | **607** 513.34% |
| Operating expenses: |  |  |  |  |
| Research and development | 5,739 | 7,338 (21.8)% | $16,531 | $22,937 (27.9)% |
| General and administrative | 4,615 | 3,198 44.3% | 16,103 | 26,570 (39.4)% |
| Sales and marketing | 2,529 | 3,434 (26.4)% | 7,575 | 11,345 (33.2)% |
| **Total operating expenses** | **12,883** | **13,970** (7.8)% | **40,209** | **60,852** (33.9)% |
| **Loss from operations** | **(11,759)** | **(13,282)** (11.5)% | **$(36,486)** | **$(60,245)** (39.4)% |
| Interest income | 1,021 | 170 500.59% | $2,920 | $203 1,338.42% |
| Other expense, net | (19) | (59) (67.8)% | 12 | (63) (119.0)% |
| **Loss before provision for income taxes** | **(10,757)** | **(13,171)** (18.3)% | **$(33,554)** | **$(60,105)** (44.2)% |
| Provision for income taxes | — | — | — | — |
| **Net loss and comprehensive loss** | **$(10,757)** | **$(13,171)** (18.3)% | **$(33,554)** | **$(60,105)** (44.2)% |

### Comparison of the Three and Nine Months Ended September 30, 2023 and 2022 ($ Amounts shown in tables in thousands)

### Sales

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Device | $1,728 | $1,945 | $(217) | (11.2)% | $6,670 | $4,305 | $2,365 | 54.9% |
| Service | 602 | 403 | 199 | 49.4% | 1,676 | 1,085 | 591 | 54.5% |
| Total sales | $2,330 | $2,348 | $(18) | (0.8)% | $8,346 | $5,390 | $2,956 | 54.8% |

Device sales decreased by $0.2 million, or 11.2%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This decrease was driven primarily by a decrease in the volume of device sales, partially offset by an increase in the sales price of the device.

Service sales increased by $0.2 million, or 49.4%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was driven by an increase in the volume of commercial system units installed as generally all commercial systems installations generate recurring service revenue. Service sales revenue is generally recognized over time as we are providing the customer with ongoing access to our resources and software upgrades throughout the subscription period. This type of revenue is recurring in nature and we expect will continue to grow as more devices are sold.

Device sales increased by $2.4 million, or 54.9%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was driven by an increase in the sales price of the device.

Service sales increased by $0.6 million, or 54.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was driven by an increase in commercial system units installed.

### Cost of sales

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Device | $835 | $1,215 | $(380) | (31.3)% | $3,321 | $3,511 | $(190) | (5.4)% |
| Service | 371 | 445 | (74) | (16.6)% | 1,302 | 1,272 | 30 | 2.4% |
| Total cost of sales | $1,206 | $1,660 | $(454) | (27.3)% | $4,623 | $4,783 | $(160) | (3.3)% |

Cost of device sales decreased by $0.4 million, or 31.3%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This decrease was driven by a decrease in volume of products sold.

Cost of service sales decreased by $0.1 million, or 16.6%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel and related costs.

Cost of device sales decreased by $0.2 million, or 5.4%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel and related costs.

Cost of service sales slightly increased by $30.0 thousand, or 2.4%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase is related to increase in personnel and related costs.

### Research and development

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $5,739 | $7,338 | $(1,599) | (21.8)% | $16,531 | $22,937 | $(6,406) | (27.9)% |

Research and development expenses decreased by $1.6 million, or 21.8%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel related costs of $1.2 million as a result of decreased headcount and a decrease in consulting costs of $0.4 million.

Research and development expenses decreased by $6.4 million, or 27.9%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel related costs of $5.9 million as a result of decreased headcount and a decrease in consulting costs of $1.6 million partially offset by $1.2 million of lower grant fulfilments recorded as credits to research and development expenses.

### General and administrative

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative | $4,615 | $3,198 | $1,417 | 44.3% | $16,103 | $26,570 | $(10,467) | (39.4)% |

25

General and administrative expenses increased by $1.4 million, or 44.3%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was driven primarily by an increase in stock-based compensation expenses of $3.6 million due to stock-based compensation expenses of $0.8 million in the three months ended September 30, 2023 as compared to a net credit of $2.8 million in the three months ended September 30, 2022 as a result of a credit to stock-based compensation expense for the previously recognized expense of $4.5 million related to forfeited awards of our former Chief Executive Officer (“CEO”), partially offset by a decrease in accounting, auditing and SEC expenses of $0.8 million, a decrease in personnel related costs of $0.4 million, a decrease in insurance expenses of $0.3 million, a decrease in legal expenses of $0.3 million, and a decrease in recruitment expenses of $0.3 million.

General and administrative expenses decreased by $10.5 million, or 39.4%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel related costs of $5.9 million of which $4.2 million pertains to stock-based compensation costs, a decrease in accounting, auditing and SEC expenses of $1.6 million, a decrease in insurance expenses of $1.0 million, a decrease in legal expenses and patent fees of $0.8 million, a decrease in software costs of $0.5 million, a decrease in recruitment expenses of $0.3 million, a decrease in consulting cost of $0.2 million, and a decrease in allowance for credit losses of $0.2 million.

### Sales and marketing

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales and marketing | $2,529 | $3,434 | $(905) | (26.4)% | $7,575 | $11,345 | $(3,770) | (33.2)% |

Sales and marketing expenses decreased by $0.9 million, or 26.4%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel related costs of $0.4 million as a result of decreased headcount and a decrease in stock-based compensation costs, a decrease in consulting costs of $0.3 million, and a decrease in marketing expense of $0.2 million.

Sales and marketing expenses decreased by $3.8 million, or 33.2%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This decrease was driven primarily by a decrease in personnel related costs of $2.2 million as a result of decreased headcount, a decrease in digital marketing and marketing events costs of $0.8 million, a decrease in consulting costs of $0.6 million, and a decrease in recruitment costs of $0.2 million.

### Interest income

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income | $1,021 | $170 | $851 | 500.6% | $2,920 | $203 | $2,717 | 1,338.4% |

Interest income increased by $0.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase was driven primarily by a higher interest rates and higher cash balances in money market funds and demand deposit accounts during the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Interest income increased by $2.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was driven primarily by a higher interest rates and higher cash balances in money market funds and demand deposit accounts during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

### Other income (expense), net

|  | Three Months Ended September 30, 2023 | 2022 | Change Amount% |  | Nine Months Ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Other income (expense), net | $(19) | $(59) | $40 | (67.8)% | $12 | $(63) | $75 | (119.0)% |

Other income (expense), net had a favorable increase in other income of $40 thousand for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This favorable increase in other income was driven primarily by an increase in interest income from customer financing of approximately $11 thousand and a net realized gain on foreign currencies of approximately $29 thousand.

Other income (expense), net had a favorable increase in other income of $75 thousand for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This favorable increase in other income was driven primarily by an increase in interest income from customer financing of approximately $31 thousand and a net realized gain on foreign currencies of approximately $44 thousand.

### Liquidity and Capital Resources

We have funded our operations primarily with proceeds from the issuance of common and preferred stock. We have incurred significant cash burn and recurring net losses, which includes a net loss of $33.6 million for the nine months ended September 30, 2023, and an accumulated deficit of $243.0 million as of September 30, 2023. As of September 30, 2023, we had cash and cash equivalents of $85.4 million. As we continue to invest in research and development of our products and sales and marketing, we expect to continue to incur a significant cash burn and recurring net losses for the foreseeable future until such time that our product and services sales generate enough gross profit to cover our operating expenses. However, we can provide no assurance that our product and service sales will generate a net profit in the future or that our cash resources will be sufficient to continue our commercialization and development activities.

Our ability to access capital when needed is not assured and, if capital is not available when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs, commercialization of our products, and other operations which could materially harm our operations, financial condition and operating results. We expect that our existing cash and cash equivalents, together with proceeds from the sales of our products and services, will enable us to conduct our planned operations for at least the next 12 months. 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. As part of the prioritization of our projects and expenditures, in December 2022, we suspended 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.

We expect to use our cash to further invest in the development of our products and services, commercial expansion, and for working capital and general corporate purposes.

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. We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. 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 and services or cease operations.

### Cash

As of September 30, 2023, we had cash and cash equivalents of $85.4 million. Our future capital requirements may vary from those currently planned and will depend on various factors including further development costs, commercialization strategy, international expansion, and regulatory costs. If we need additional funds and are unable to obtain funding on a timely basis, we may need to curtail significantly our product development and commercialization efforts to provide sufficient funds to continue our operations, which could adversely affect our business prospects.

### Cash flows

The following table summarizes our cash flows for the periods indicated:

*(In thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(31,871) | $(56,994) |
| Net cash used in investing activities | (546) | (427) |
| Net cash provided by financing activities | 146 | 2 |
| **Net decrease in cash, cash equivalents, and restricted cash** | **$(32,271)** | **$(57,419)** |

#### Net cash used in operating activities

For the nine months ended September 30, 2023, net cash used in operating activities of $31.9 million was due primarily to a net loss of $33.6 million and changes in operating assets and liabilities of $2.6 million, partially offset by non-cash items of $4.4 million. Non-cash items were primarily stock-based compensation expense of $3.5 million and depreciation expense of $0.8 million. Changes in operating assets and liabilities were driven primarily by an increase in inventory of $2.5 million, a decrease in accrued expenses and other liabilities of $0.8 million, a decrease in deferred revenue of $0.4 million, an increase in accounts receivable of $0.3 million, and an increase in unbilled receivables of $0.2 million, partially offset by a decrease in prepaid expenses and other current assets of $1.0 million, a decrease in prepaid inventory of $0.3 million, and an increase in accounts payable of $0.2 million.

For the nine months ended September 30, 2022, net cash used in operating activities of $57.0 million was due primarily to a net loss of $60.1 million and changes in operating assets and liabilities of $6.5 million, partially offset by non-cash items of $9.6 million. Non-cash items were primarily stock-based compensation expense of $8.9 million, including $2.5 million related to costs associated with 0.6 million RSU awards granted to our former CEO, and depreciation expense of $0.8 million. Changes in operating assets and liabilities were driven primarily by an increase in accounts receivable of $2.1 million, a decrease in due to related party of $1.9 million, a decrease in accounts payable of $1.5 million, a decrease in deferred grant funding of $1.4 million, an increase in unbilled receivables of $1.4 million, and an increase in prepaid expenses and other current assets of $0.4 million, partially offset by an increase in deferred revenue of $1.1 million, an increase in accrued expenses and other liabilities of $0.8 million, a decrease in inventory of $0.3 million, and a decrease in other long term assets of $0.1 million.

#### Net cash used in investing activities

For the nine months ended September 30, 2023, net cash used in investing activities of $0.5 million was from fixed assets purchased.

For the nine months ended September 30, 2022, net cash used in investing activities of $0.4 million was from fixed assets purchased.

#### Net cash provided by financing activities

For the nine months ended September 30, 2023, net cash provided by financing activities of $0.1 million was proceeds from option exercises.

For the nine months ended September 30, 2022, net cash provided by financing activities of $2.0 thousand was proceeds from option exercises.

### Contractual obligations

We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. We did not make any matching contributions to the 401(k) plan for the three and nine months ended September 30, 2023 and 2022.

In April 2020, we received a $1.6 million grant from the BMGF for the provision and equipping of 20 sites with our portable MR brain imaging system to enable the performance of a multi-site study focused on optimizing diagnostic image quality through February 2023. During the third quarter of 2021, we were awarded an additional $3.3 million grant, of which $2.5 million was received from the BMGF in September 2021. During the second quarter of 2022, we received the remaining amount of $0.8 million. On March 29, 2023, the term of the BMGF grant agreement was extended to February 28, 2024. On May 16, 2023, we were awarded an additional $3.4 million grant from the BMGF to continue to develop a scalable approach to measuring neurodevelopment via low-field magnetic resonance imaging (MRI) in neonates, infants, and young children in low-to-middle income countries through February 2026, of which $0.5 million was received by September 30, 2023. Refer to Note 12 in the notes to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 included elsewhere in this Quarterly Report on Form 10-Q for a discussion of the BMGF grant. 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. 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. As of September 30, 2023, 21 Swoop® system units were provisioned and delivered to the BMGF and certain milestones for service deliverables were also met. 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.

Our purchase commitments and obligations include all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services. A majority of these purchase obligations are due within a year. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

We had no other significant contractual obligations as of September 30, 2023.

For information on contingencies, refer to Note 12 in the notes to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 included elsewhere in this Quarterly Report on Form 10-Q.

### Critical Accounting Policies and Significant Judgments and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Except as described in Note 2 “Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements”, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 22, 2023.

### 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 unaudited condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2023 and 2022 included elsewhere in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 2,161 characters.

We are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our results of operations or financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates, inflation risk, and foreign exchange risk. We do not hold, issue or enter into any financial instruments for speculative or trading purposes. We do not have significant exposure to foreign currencies.

### Interest Rate Risk

Our cash, cash equivalents and restricted cash as of September 30, 2023 consisted of $86.0 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. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash equivalents. Based on our balance sheet position at September 30, 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.

### Inflation Risk

Inflation has increased in recent periods and may increase in the future. 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. Our inability or failure to do so could harm our business, financial condition, and results of operations.

### Foreign Exchange Risk

We operate our business primarily within the United States and currently execute the majority of our transactions in U.S. dollars. 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 condensed consolidated financial statements.

## Controls and procedures

As filed, 1,528 characters.

### Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2023. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2023, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### PART II — OTHER INFORMATION

### Item1. Legal Proceedings

We are not currently a party to any material legal proceedings.

## Risk factors

As filed, 407 characters.

Our business, results of operations and financial condition are subject to various risks and uncertainties including the risk factors described under the caption “Risk Factors” in our most recent Annual Report on Form 10-K, filed with the SEC on March 22, 2023 (the “2022 Annual Report on Form 10-K”). There have been no material changes to the risk factors described in the 2022 Annual Report on Form 10-K.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-062066. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.