Item 7. 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. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

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® SystemTM (“Swoop® system”) produces high-quality images at a lower magnetic field strength than conventional MRI scanners. 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. 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. 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. 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. 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.

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. 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. 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. 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 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. 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. As a result, we terminated approximately 13% of our global workforce including, among others, the employees of our subsidiary, Liminal. 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. 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. 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.

COVID-19

In March 2020, the World Health Organization declared the global outbreak of COVID-19 to be a pandemic. 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. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our operations.

COVID-19 created multiple commercial challenges in 2022 and 2021 and the commercial challenges and restrictions from COVID-19 have been generally reduced in 2023. We experienced restrictions on our salesforce’s ability to visit sites during 2022. During the second half of 2022, hospitals and other healthcare providers started to ease restrictions and our salesforce’s ability to visit sites improved. Commercially, many hospitals and other healthcare providers decreased spending and limited physical access to facilities, slowing our ability to demonstrate our Swoop® system. In addition, many hospitals and other healthcare providers continue to focus their attention on addressing COVID-19, which we believe has resulted in lower sales volume. Trade shows and conferences moved to a virtual platform creating difficulty in demonstrating our device to key stakeholders. It was not uncommon to host virtual product demonstrations with 6-10 physicians, something that would ordinarily not happen or would take many weeks of planning to produce. While physician society conferences are beginning to ramp, attendance has remained below pre-pandemic levels. As such we continue to supplement the conferences with “Demo at Your Door” — demonstrations providing target customers hands-on device experience at a place of their choosing. Virtual demonstrations, even though they generated a lot of interest in our product, often did not result in sales, and all sales required an in-person product demonstration. As more conferences begin to be held in-person, we expect to improve our ability to provide product demonstrations to potential customers. It is unclear whether or not conferences will have the same in-person attendance as they would have had in the past.

Because the manufacturing of our Swoop® system was developed, and our commercial launch of our Swoop® system occurred, during the COVID-19 pandemic market and manufacturing conditions, we did not have to materially adjust our existing resource allocation or our factors of production because of the COVID-19 pandemic. However, if there are further waves of the COVID-19 pandemic, we may experience a greater negative impact in our supply chain than we have previously.

During the COVID-19 pandemic and the variants that followed, our suppliers agreed to shift new work to domestic suppliers to help reduce the risk of manufacturing delays. Our supplier and sub tier suppliers have been adversely affected by COVID-19. Although we work closely with our suppliers to attempt to ensure continuity of supply, the supply of certain components and raw materials used in our product has been and may continue to be slowed as a direct result of COVID-19 and its variants. We have also experienced increases in product costs as raw materials have been constrained. Prices have risen sharply over the past year, and lead times have extended dramatically, particularly on semiconductor products. Over the next 12 months, we expect prices to increase due to the raw material demand surges across numerous industries, along with labor and transportation related constraints. We also expect lead times to reduce as component production levels recover to meet demand. We helped to minimize the impact of the COVID-19 pandemic on the manufacturing of our product and operations by using our manufacturer’s preferred suppliers, increasing communications with suppliers and freight carriers, and providing advanced forecasts and purchase orders for new and existing devices.

In addition, future regulatory authorizations by the FDA or other regulatory authorities may take longer because of COVID-19 pandemic-related delays, though we have not been impacted by such delays to date.

Please refer to the section titled, "Item 1A. Risk Factors” included elsewhere in this Annual Report on Form 10-K for more information. We are unable to predict the full impact that the COVID-19 pandemic will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic and actions that may be taken by government authorities across the United States and elsewhere. We will continue to monitor the performance of our business and reassess the impacts of COVID-19.

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 installations (which make up total revenue), grant fulfillment installations, and research unit installations. The Swoop® system total installed base (or total installed units) is the number of Swoop® systems 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 December 31, 2022, the Company had a total of 107 Swoop® systems installed, including 25 research units which are installed, at no cost to the institutions, to expand clinical use cases.

Presented below is a breakout of total Swoop® systems installed as of December 31, 2022 and 2021:

TOTAL INSTALLED UNITS

Commercial systems installations 62 27

Grant fulfillment installations 20 18

Total Installed Units 107 70

Commercial system installations reflect device sales and subscription services through commercial agreements (commercial sales) or through research transfer agreements ("RTA") sales. Commercial sales are made to hospitals and other healthcare providers as direct sales of devices and software subscription and support services, or through subscriptions for the use of the device and software. RTA sales represent the sale of Swoop® systems or subscriptions for research use purposes. Our revenue for the years ended December 31, 2022 and 2021 is derived from commercial sales and RTA sales.

Grant fulfillment installations consist of shipments of Swoop® systems to hospitals and other clinical facilities designated by the Bill & Melinda Gates Foundation (“BMGF”). The corresponding funding for these installations from 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. The installation of research units is recorded as a fixed asset with the related depreciation recorded as research and development expense over the life of the research unit.

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. In December 2022, we suspended our program to develop a device to non-invasively measure key vital signs in the brain to focus our resources on the continued development and commercialization of the Swoop® system.

Technical innovation

We have developed our device through extensive research and development activities. Our Swoop® system is designed to make the customer experience as easy as possible through our integrated, easy-to-use interface that portrays images on a tablet, smartphone or other WiFi capable device. In addition to this design, our team is focused on customer success programs that help integrate the Swoop® system into any hospital or clinic workflow. We believe that as the Swoop® system becomes integrated into intensive care units (ICUs) and sites across medical practices, we will gain more insights into our product’s usability and potentially develop automated analysis of images that we believe will lead to further efficiencies in patient diagnosis. We plan to continue developing our technology to expand into new imaging applications to enable us to reach the broader care continuum through diagnosis and treatment. In the future, we plan to introduce a further enhanced MRI system designed to conduct neuroimaging and imaging of other extremities for interventional procedures. In addition to our efforts to disrupt the MRI market, we see a significant opportunity to help patients in the neuromonitoring space. Although we expect these activities in technical innovation of the current device and new devices will increase our research and development expenses, we expect them to positively impact our results of operations and profitability in the future.

Expand sales in international markets

Revenue from non-U.S. countries was 37% of total revenue for the year ended December 31, 2022. We intend to continue to increase our sales and distribution capabilities outside of the United States to take advantage of the large international opportunity for our products. The countries in which we have begun commercializing our Swoop® system include the United Kingdom, 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, New Zealand and Pakistan.

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. 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. 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.

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. 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.

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. 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.

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. 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.

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.

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. 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.

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. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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. 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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted which included provisions related to net operating loss (“NOL”) carryovers and carrybacks. The CARES Act amended the NOL carryback rules by allowing NOLs arising in tax years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of the 5 years preceding the year of the loss to generate a refund of previously paid income taxes. In addition, the CARES Act temporarily removed the 80% limitation under which NOLs generated post-2017 could be used to offset no more than 80% of taxable income, and allows for full use of such NOLs for tax years before January 1, 2021. We have evaluated the relevant provisions of the CARES Act and have determined that we do not expect to recognize any benefit related to these provisions due to our net operating losses in the current year and all prior years. 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.

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.

Comparison of the Years Ended December 31, 2022 and 2021 ($ Amounts in thousands)

Year Ended December 31, Change

Sales

Cost of Sales

Operating expenses:

Loss before provision for income taxes $ (73,164 ) $ (64,851 ) 12.8 %

Provision for income taxes — —

Sales

Year Ended December 31, Change

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. This increase was driven by an increase in the volume of device sales. In addition, in the first quarter of 2022, we have taken a pricing action by increasing the price of the device while lowering the price of the annual subscription. This pricing action resulted in higher device revenue per unit and lower service revenue per unit for sales under the subscription plus ownership model. In addition, revenue is typically recognized for sales of hardware devices where control of the product transfers to the customer upon shipment of goods. In the first quarter of 2023, we have taken an additional pricing action by further increasing the price of the device while lowering the price of the annual subscription. We expect this pricing action will result in higher device revenue per unit and lower service revenue per unit.

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. Service sales revenue is generally recognized over time as we are providing the customer with ongoing access to our resources throughout the subscription period. This type of revenue is recurring in nature and we expect will continue to grow as more devices are sold.

Cost of sales

Year Ended December 31, Change

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. This increase was driven primarily by increase in third-party manufacturing costs and higher labor cost as a result of increased volume of products sold and as a result of supply chain challenges. 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. This increase was driven primarily by an increase of $1.1 million in internal overhead and labor costs.

We expect cost of sales to continue to increase as additional products are sold and we continue to experience supply chain challenges.

Research and development

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 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.

General and administrative

Year Ended December 31, Change

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. This 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.

Sales and marketing

Year Ended December 31, Change

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. 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.

Interest income

Year Ended December 31, Change

Interest income increased by $0.7 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021. 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.

Other expense, net

Year Ended December 31, Change

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. 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. 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. In December 2021, we completed the Business Combination with HealthCor, and as a result we received gross proceeds of approximately $162.1 million and net proceeds of approximately $141.5 million. As of December 31, 2022, we had cash and cash equivalents of $117.5 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) 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. 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.

We expect to use our funds 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 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. 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 or cease operations.

Cash

As of December 31, 2022, we had cash and cash equivalents of $117.5 million. Our future capital requirements may vary from those currently planned and will depend on various factors including further development costs, commercialization strategy, regulatory developments, supply constraints, manufacturing costs and international expansion. 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:

Year Ended December 31,

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 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. Non-cash items were primarily stock based compensation expense of $10.7 million, including $0.1 million of stock-based compensation related to severance, and $0.1 million fixed asset impairment costs and other related restructuring costs. Changes in operating assets and liabilities were driven primarily by a decrease in accrued expenses and other current liabilities of $2.2 million, a decrease in due to related parties of $2.0 million, a decrease in deferred grant funding of $1.9 million, an increase in prepaid expenses and other current assets of $1.8 million, a decrease in accounts payable of $1.6 million, an increase in accounts receivables of $1.6 million, an increase in other long term assets of $0.6 million, an increase in unbilled receivables of $0.4 million, an increase in inventory of $0.3 million, and an increase in prepaid inventory of $0.3 million, partially offset by an increase in deferred revenue of $1.7 million.

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. 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.

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 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.

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.

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. During the third quarter of 2021, we were awarded an additional $3.3 million grant, of which we received $2.5 million from the BMGF in September 2021 and the remaining amount of $0.8 million in second quarter of 2022. 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. 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. 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. At December 31, 2022, 20 Swoop® system units and 10 baby cradles were provisioned and delivered to BMGF and a majority of the 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.

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.

Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. 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.

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. We account for those contracts as a lease arrangement under ASC 842 and ASC 840, Leases for the years ended December 31, 2022 and 2021, respectively. We identify certain Device-as-a-Service contracts to be within the scope of ASC 842 and ASC 606. Upon adoption of ASC 842 revenue from contracts with customers, in which we act as a lessor. 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. Accordingly, we account for the monthly payments as lease revenue. For contracts in which the lease component is a sales-type lease, we derecognize the asset (the MRI device) and recognize a lease receivable in an amount that represents the present value of the lease payments.

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”). We routinely evaluate quantities and value of our inventories in light of current market conditions and market trends and record a write-down against the cost of inventories for NRV below cost. NRV is based upon an estimated average selling price reduced by the estimated costs of disposal and transportation. 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.

The valuation of inventory also requires us to estimate excess and obsolete inventory. We periodically review the age, condition and turnover of our inventory to determine whether any inventory has become obsolete or has declined in value and incur a charge to operations for known and anticipated inventory obsolescence. We also consider how quickly customers will transition from older products to newer products, including whether older products can be re-manufactured into new products. The evaluation takes into consideration the effect that new products might have on the sale of existing products, product obsolescence, product merchantability and other factors. Market conditions are subject to change and if actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which would have a negative impact on gross margin.

Stock-based compensation

Our stock-based compensation program includes restricted stock unit and stock option grants to our employees, directors and consultants. Stock options are granted at exercise prices not less than the estimated fair market value of our common stock at the dates of grant. For purposes of restricted stock unit grants, the grant date fair value is calculated as the fair market value of the stock on the date of grant.

The fair values of stock option grants are estimated using a Black-Scholes option-pricing model. Key inputs and assumptions include the expected term of the option, stock price volatility, risk free interest rate, dividend yield, stock price and exercise price. Many of the assumptions require significant judgment and changes in assumptions could have a significant impact in the determination of stock-based compensation expense.

Key assumptions include:

•

Risk free interest rate: The risk free interest rate for the expected term of the awards is based on the U.S. Treasury yield curve in effect at the time of the grant.

•

Expected dividend yield: We have never declared or paid any cash dividends and do not expect to pay any cash dividends in the foreseeable future.

•

Expected term: We calculate expected term using the “simplified” method, which is the simple average of the vesting period and the contractual term. The simplified method is applied as we do not have sufficient historical data to provide a reasonable basis for an estimate of the expected term. 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.

Generally, stock options granted to employees fully vest four years from the grant date and have a contractual term of 10 years and stock options granted to non-employees fully vest one year from the grant date or upon performance of a service and have a contractual term of 10 years.

During the year ended December 31, 2020, Liminal was a wholly owned subsidiary of 4Bionics, and as such, 4Bionics granted equity awards in the form of incentive units to Liminal employees and nonemployees under 4Bionics’ stock-based compensation program. On April 2, 2021, 4Bionics executed a plan of liquidation and dissolution and its ownership in Liminal was distributed to its members and to the holders of incentive units. Immediately subsequent to the dissolution, all outstanding unvested incentive unit awards under 4Bionics’ 2019 Equity Incentive Plan were replaced with preferred stock awards indexed to and settled in the preferred stock of the former 4Bionics subsidiaries Liminal, Detect, Inc. (f/k/a Homodeus Inc.), identifeye HEALTH Inc. (f/k/a Tesseract Health, Inc.) and Protein Evolution, Inc. The preferred stock awards were subject to service vesting conditions only. No incremental value was provided to participants as a result of the modification of the awards as the modification date fair value of the incentive unit awards was equal to the modification date fair value of the stock underlying the restricted stock awards. Moreover, the remaining vesting period before and after the modification was unchanged. No incremental compensation expense was recognized as a result of the modification.

Prior to the dissolution of 4Bionics, a portion of total 4Bionics stock-based compensation expense was allocated to Liminal based on the level of service provided by the relevant employees and nonemployees to Liminal over the term of the award. Subsequent to the dissolution of 4Bionics, we recognize the stock-based compensation expense related to the replacement preferred stock awards and no allocation methodology is required. In connection with the Closing of the Business Combination, all replacement preferred stock awards were accelerated to fully vest.

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.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 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. 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 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. 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. With respect to our sales outside the U.S., the majority of our transactions are executed in U.S. dollars and, to a lesser extent, in foreign currency. 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.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See financial statements included in Item 15 "Exhibits and Financial Statement Schedules" of this Annual Report on Form 10-K.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A. CONTROLS AND PROCEDURES

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 December 31, 2022. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2022, solely due to the material weaknesses in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective at the 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 and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 and, in making this assessment, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Because of the material weaknesses described below, our management believes that, as of December 31, 2022, our internal control over financial reporting was not effective based on those criteria.

Material Weakness in Internal Control Over Financial Reporting

We have identified two material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

As previously disclosed, prior to the Closing of the Business Combination in December 2021, Legacy Hyperfine and Liminal were private companies and had limited accounting and financial reporting personnel and other resources with which to address its internal controls and procedures. We outsourced our accounting and financial reporting to 4Catalyzer Corporation (“4Catalyzer”) and did not have our own finance function to appropriately perform the supervision and review of the information received from 4Catalyzer and assess its reasonableness and accuracy. As a result, in connection with the combined financial statement close process of Legacy Hyperfine and Liminal for the years ended December 31, 2020 and 2019, we identified a material weakness in our internal control over financial reporting.

In addition, as previously disclosed, HealthCor previously recorded a portion of its Class A ordinary shares subject to possible redemption in permanent equity. 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 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. Although we did not specify a maximum redemption threshold in HealthCor’s Amended and Restated Memorandum and Articles of Association (the “HealthCor Articles”), the HealthCor Articles provided that we could not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001. In light of the SEC Staff communications with certain independent auditors, our management re-evaluated the effectiveness of our disclosure controls and procedures, and based upon that evaluation, we concluded that the misclassification of the Class A ordinary shares was quantitatively material to individual line items within the balance sheet. 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. We concluded that the foregoing represents a material weakness in our internal controls over financial reporting.

Notwithstanding these material weaknesses, management has concluded that our audited combined and consolidated financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented therein.

Plan for Remediation of the Material Weaknesses in Internal Control Over Financial Reporting

In response to these material weaknesses, our management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of material weaknesses in internal control over financial reporting. Our management developed and continues to execute a remediation plan, which included the hiring of accounting and finance resources including the Chief Financial Officer and Vice President, Controller with technical public company accounting and financial reporting experience, as well as other team members. We also have access to accounting training, literature, research materials and increased communication among our personnel and outsourced third-party professionals with whom we may consult regarding the application of complex accounting transactions. Our remediation plan can only be accomplished over time and will be continually reviewed to determine that we are achieving our objectives. We believe these actions will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting; however, there is no assurance that these initiatives will ultimately have the intended effects. The material weaknesses will not be considered remediated until our management has designed and implemented effective controls that operate for a sufficient period of time and our management has concluded through testing that these controls are effective. We plan to continue to devote significant time and attention to continue to remediate the above material weaknesses as soon as reasonably practicable.

Changes in Internal Controls

Other than the changes made to remediate the material weaknesses described above, 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 fourth quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

The information in the section entitled, “Exclusive License Agreements with The General Hospital Corporation (d/b/a Massachusetts General Hospital)” in Item 1. Business of this report is incorporated herein by reference.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The response to this item is incorporated by reference from the discussion responsive thereto under the headings “Management and Corporate Governance,” “Delinquent Section 16(a) Reports” and “Code of Conduct and Ethics” in our proxy statement for the 2023 annual meeting of stockholders (the “2023 Proxy Statement”).

Item 11. EXECUTIVE COMPENSATION

The response to this item is incorporated by reference from the discussion responsive thereto under the heading “Executive Compensation” in our 2023 Proxy Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The response to this item is incorporated by reference from the discussion responsive thereto under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our 2023 Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The response to this item is incorporated by reference from the discussion responsive thereto under the headings “Certain Relationships and Related Person Transactions” and “Management and Corporate Governance” in our 2023 Proxy Statement.

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The response to this item is incorporated by reference from the discussion responsive thereto under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in our 2023 Proxy Statement.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Page Number

Combined and Consolidated Balance Sheets as of December 31, 2022 and 2021 F-2

Notes to Combined and Consolidated Financial Statements F-6

Item 15(a)(3) Exhibits

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

4.2 Description of Securities X

23.1 Consent of Deloitte & Touche LLP X

31.1 Certification of the Chief Executive Officer X

31.2 Certification of the Chief Financial Officer X

32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X

101.INS Inline XBRL Instance Document X

101.SCH Inline XBRL Taxonomy Extension Schema Document X

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X

† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

+ Management contract or compensatory plan or arrangement.

@ Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) is the type of information that the Company treats as private or confidential.

* The certification attached as Exhibit 32 that accompanies this Annual Report on Form 10-K is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

Item 16. FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HYPERFINE, INC.

Date: March 22, 2023 By: /s/ Maria Sainz

Maria Sainz

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures Title Date

By: /s/ John Dahldorf John Dahldorf Director March 22, 2023

By: /s/ Ruth Fattori Ruth Fattori Director March 22, 2023

By: /s/ Daniel J. Wolterman Daniel J. Wolterman Director March 22, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Hyperfine, Inc.

Opinion on the Financial Statements

We have audited the accompanying combined and consolidated balance sheets of Hyperfine, Inc. and subsidiaries, (the "Company") as of December 31, 2022 and 2021, the related combined and consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

New York City, New York

March 22, 2023

We have served as the Company's auditor since 2021.

F-1

HYPERFINE, INC. AND SUBSIDIARIES

COMBINED AND CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2022 AND 2021

(in thousands, except share and per share amounts)

December 31,

ASSETS

CURRENT ASSETS:

Unbilled receivables 454 91

Prepaid expenses and other current assets 3,194 1,357

Due from related parties 48 14

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Due to related parties — 1,981

Accrued expenses and other current liabilities 5,976 8,115

Long term deferred revenue 1,526 510

COMMITMENTS AND CONTINGENCIES (NOTE 14)

STOCKHOLDERS' EQUITY:

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 134,051 $ 202,473

The accompanying notes are an integral part of these combined and consolidated financial statements.

F-2

HYPERFINE, INC. AND SUBSIDIARIES

COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands, except share and per share amounts)

Year ended December 31,

Sales

Cost of sales

Operating Expenses:

Interest income $ 761 $ 18

Other expense, net (51 ) (1 )

Loss before provision for income taxes $ (73,164 ) $ (64,851 )

Provision for income taxes — —

Net loss and comprehensive loss $ (73,164 ) $ (64,851 )

The accompanying notes are an integral part of these combined and consolidated financial statements.

F-3

HYPERFINE, INC. AND SUBSIDIARIES

COMBINED AND CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands, except share amounts)

Investment from 4Bionics, LLC — — — — — — — — 3,516 — 3,516

Stock-based compensation expense — — — — — — — — 6,901 — 6,901

Issuance of restricted stock — — — — 319,557 — — — — — —

Exercise of stock options — — — — 25,870 — — — 7 — 7

Stock-based compensation expense — — — — — — — — 10,652 — 10,652

The accompanying notes are an integral part of these combined and consolidated financial statements.

F-4

HYPERFINE, INC. AND SUBSIDIARIES

COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands)

Year ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Write-off of other assets - related party — 984

Changes in assets and liabilities

Unbilled receivables (363 ) (91 )

Prepaid expenses and other current assets (1,837 ) (666 )

Due from related parties (34 ) 1,451

Other assets - related party — 260

Prepaid inventory (281 ) —

Other long term assets (632 ) (1,201 )

Accrued expenses and other current liabilities (2,146 ) 6,851

Net cash used in operating activities $ (72,339 ) $ (47,182 )

Cash flows from investing activities:

Purchases of property and equipment (585 ) (2,711 )

Net cash used in investing activities $ (585 ) $ (2,711 )

Cash flows from financing activities:

Proceeds from exercise of stock options 7 1,497

Proceeds from issuance of Series D convertible preferred stock — 30,468

Stock issuance costs related to Series D convertible preferred stock — (7 )

Repayment of notes payable — (178 )

Investment from 4Bionics, LLC — 3,516

Net proceeds from equity infusion from the Business Combination — 141,471

Net cash provided by financing activities $ 7 $ 176,767

Cash, cash equivalents and restricted cash, beginning of year 191,160 64,286

Cash, cash equivalents and restricted cash, end of year $ 118,243 $ 191,160

Total cash, cash equivalents and restricted cash $ 118,243 $ 191,160

Supplemental disclosure of cash flow information:

Cash received from exchange of research and development tax credits $ 131 $ 374

Supplemental disclosure of noncash information:

Write-off of notes receivable $ 90

The accompanying notes are an integral part of these combined and consolidated financial statements.

F-5

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Hyperfine, Inc. (together with its subsidiaries, as applicable, “Hyperfine” and the “Company”), formerly known as HealthCor Catalio Acquisition Corp. (“HealthCor”), was incorporated as a Cayman Islands exempted company on November 18, 2020. The Company’s legal name became Hyperfine, Inc. in connection with the closing of the Business Combination (the “Closing”) on December 22, 2021 (the “Closing Date”), as defined and described in Note 3. Business Combination. In connection with the Closing, Hyperfine, Inc., a Delaware corporation (“Legacy Hyperfine”), and Liminal Sciences, Inc., a Delaware corporation (“Liminal”), merged with and into separate wholly owned subsidiaries of HealthCor and became wholly-owned subsidiaries of the Company, and changed their names to Hyperfine Operations, Inc. and Liminal Operations, Inc., respectively. Liminal subsequently changed its name to Liminal Sciences, Inc. The prior period financial information represents the combined financial results of Legacy Hyperfine and Liminal.

The Company is 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. The Company’s Swoop® Portable Magnetic Resonance (“MR”) Imaging® System (“Swoop® system”) produces high quality images at a lower magnetic field strength than conventional MRI scanners. Healthcare professionals can use the Swoop® system to make effective clinical diagnoses on a patient in various of settings where MRI devices have previously been inaccessible. The Company received 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2020. The Swoop® system has since been authorized for brain imaging in several countries, including the European Union (CE marking), the United Kingdom (UK Conformity Assessment (“UKCA”)), Canada, Australia, New Zealand and Pakistan. All of the Company’s revenue to date has been generated from sales of this machine and related services. In December 2022, the Company has suspended its program to develop a device to non-invasively measure key vital signs in the brain. In addition to Legacy Hyperfine and Liminal, the Company has an indirect wholly-owned subsidiary in the United Kingdom that did not have any significant operations during 2022.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying combined and consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated.

COVID-19 Outbreak

In March 2020, the World Health Organization declared the global outbreak of COVID-19 to be a pandemic. The Company continues 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. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our operations. For example, we have experienced restrictions on our salesforce’s ability to visit sites. Many hospitals and other healthcare providers decreased spending and limited physical access to facilities, slowing the Company’s ability to demonstrate its Swoop® system. Many hospitals and other healthcare providers have continued to focus their attention on addressing COVID-19, which the Company believes has resulted in lower sales volume. Trade shows and conferences moved to a virtual platform creating difficulty in demonstrating our device to key stakeholders. In addition, the Company’s supplier and sub tier suppliers have been adversely affected by COVID-19 and the Company has also experienced increases in product costs as raw materials have been constrained.

In adjusting to the COVID-19 market and manufacturing conditions, the Company did not have to materially adjust its existing resource allocation or its factors of production. The Company has not incurred any significant impairment losses in the carrying values of its assets as a result of the COVID-19 pandemic and is not aware of any specific related event or circumstance that would require the Company to revise its estimates reflected in its combined and consolidated financial statements.

F-6

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

COVID-19 created multiple commercial challenges in 2022 and 2021 and the commercial challenges and restrictions from COVID-19 have been generally reduced in 2023, however, the Company is unable to predict the full impact that the COVID-19 pandemic will have on its future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, and the actions that may be taken by government authorities across the United States and elsewhere, it is not expected to result in any significant changes in costs going forward.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents. At December 31, 2022 and 2021, substantially all the Company’s cash and cash equivalents were invested at three and two financial institutions, respectively. The Company also maintains balances in various operating accounts above federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

For the years ended December 31, 2022 and 2021 there was one customer that represented 10% or more of total net revenue. We had two customers as of December 31, 2022 and three customers as of December 31, 2021, respectively, that each accounted for more than 10% of our total accounts receivable, net and unbilled receivables.

The Company utilizes a single exclusive manufacturer for its Swoop® system. Additionally, the Company purchases raw materials from this manufacturer.

Segment Information

The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer (“CEO”). Legacy Hyperfine and Liminal represent two operating segments. Given the similar qualitative and economic characteristics of the two operating segments, such that both are focused upon the development and commercialization of existing and new products and services, Legacy Hyperfine and Liminal are aggregated into one reporting unit. All of the Company’s long-lived assets are located in the United States. Other than $2,538 and $78 of revenue recognized in non-U.S. countries for the years ended December 31, 2022 and 2021, respectively, all of the revenues during these periods were earned in the United States. Since the Company is aggregated into a single reportable unit, all required financial segment information is provided in the combined and consolidated financial statements.

Use of Estimates

The preparation of the combined and consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in its combined and consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with certainty. On an ongoing basis, management evaluates these estimates and assumptions. Significant estimates and assumptions included:

•

Revenue recognition, 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;

•

Allowance for doubtful accounts;

•

Net realizable value (the selling price as well as estimated costs of disposal and transportation) of inventory, and demand and future use of inventory;

•

Valuation allowances with respect to deferred tax assets; and

•

Assumptions underlying the fair value used in calculation of the stock-based compensation expense.

F-7

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s combined and consolidated financial statements.

Cash and Cash Equivalents

All highly liquid investments purchased with a maturity of three months or less are cash equivalents. As of December 31, 2022 and 2021, cash and cash equivalents consist principally of cash and money market accounts. The Company funded its operations primarily with proceeds from the issuance of common and preferred stock. The Company incurred significant cash burn and recurring net losses, which includes a net loss of $73,164 for the year ended December 31, 2022, and an accumulated deficit of $209,484 as of December 31, 2022. As of December 31, 2022, the Company had cash and cash equivalents of $117,472.

Restricted Cash

Restricted cash balance represents funds received as part of grant funding and restricted in use to the purpose of the funding. For details, see the Note 2. Summary of Significant Accounting Policies - Grant Funding and Note 14. Commitments and Contingencies.

Accounts Receivable

Accounts receivable are stated as the amount the Company expects to collect. The Company maintains allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. As of December 31, 2022 and 2021, the allowance for doubtful accounts was $180 and $32, respectively.

Inventories

Inventories primarily consist of finished goods which are produced by the Company’s third-party contract manufacturers as well as raw materials ordered in advance by the third-party contract manufacturer due to long delivery-lead time and which were billed to the Company. Inventories are stated at the lower of actual cost, determined using the average cost method, or net realizable value. Cost includes an allocation of wages, taxes and benefits for employees involved in warehousing, logistics coordination, material sourcing, and production planning activities. Net realizable value is based upon an estimated average selling price reduced by the estimated costs of disposal and transportation.

The valuation of inventory also requires the Company to estimate excess and obsolete inventory. The Company considers sales forecasts and historical experience to identify excess, close out, or slow-moving items as well as new product development schedules, product obsolescence and product merchantability, including whether older products can be remanufactured into new products, among other factors. The Company reduces the value of inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the net realizable value.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include amounts paid in advance for operating expenses as well as monies to be received from the State of Connecticut for research and development tax credits. These research and development tax credits are exchanged for a cash refund and are typically collected within one year from the date the tax return is filed with the state. The credits are recognized as an offset to research and development expenses in the combined and consolidated statements of operations and comprehensive loss in the annual period in which the corresponding expenses were incurred.

F-8

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is computed using the straight-line method over the estimated useful lives of the related assets. MRI devices purchased from a third-party manufacturer that were intended for use as research units, for customer demonstration purposes to support sales efforts and training and as leased units are classified as Property and Equipment.

Useful lives of property and equipment are as follows:

Property and equipment Estimated useful life

Laboratory equipment 5

Research devices 5

Sales and marketing devices 5

Computer equipment 5

Tooling 3

Trade show assets 3

Leased devices 5

Other property and equipment include furniture and fixtures, software, vehicles, and machinery and equipment.

Expenditures for major renewals and improvements are capitalized. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation is eliminated from the balance sheet, and any resulting gains or losses are included in the combined and consolidated statements of operations and comprehensive loss in the period of disposal.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment at least annually or when the Company determines a triggering event has occurred. When a triggering event has occurred, each impairment test is based on a comparison of the future expected undiscounted cash flow to the recorded value of the asset. If the recorded value of the asset is less than the undiscounted cash flow, the asset is written down to its estimated fair value. Impairments were recorded for the years ended December 31, 2022 of $80 and no impairment recorded for the year ended December 31, 2021 (see Note 15. Restructuring).

Capitalized Software Development Costs

For the costs incurred in developing the firmware embedded in the hardware devices that the Company sells and leases to its customers, the Company applies the principles of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The Company has adopted the “tested working model” approach to establishing technological feasibility for its software products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected. The Company’s hardware device, with the embedded firmware, was released for sale during the fourth quarter of the year ended December 31, 2020, when the Company had completed all of the research and development activity to establish the technological feasibility of the product. As of December 31, 2022 and 2021, the Company had not incurred significant costs between the establishment of technological feasibility and the release of a product for sale; thus, the Company had expensed all software development costs as incurred.

F-9

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

For software developed or acquired for internal use, including software used in the provision of subscription services to the Company’s customers, the Company applies the principles of ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Costs incurred during the preliminary project and post-implementation stages, including training and maintenance, are expensed as incurred. Capitalized costs are amortized on a project-by-project basis using the straight-line method over the estimated economic life of the application, which is three years, beginning when the asset is substantially ready for use. As of December 31, 2022 and 2021, the Company did not have any amount of capitalized internal-use software development costs.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers.”

Revenue is recognized when or as a customer obtains control of the promised goods and services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. To achieve this core principle, the Company applies the following 5 steps:

• Step 1: Identify Contracts with Customers: The Company executes signed contracts with its customers for the sale of hardware devices and subscription services.

• Step 2: Identify Performance Obligations: The Company’s contracts with customers primarily include two performance obligations, namely the hardware device and subscription services, which include access to the Company’s hosted cloud-based software applications and hardware maintenance and support on an ongoing basis throughout the subscription period.

• Step 3: Determine Transaction Price: The Company’s contracts with customers include variable consideration in the form of discounts and price concessions. The Company estimates variable consideration using the expected value method based on the data available as of the end of each reporting period.

• Step 4: Allocate Transaction Price to Performance Obligations: The Company allocates transaction price to the performance obligations in a contract with a customer, based on the relative standalone selling prices of the goods and services. The standalone selling prices of the hardware devices and subscription services are determined based on the observable standalone selling prices for which the Company sells the respective goods and services on a standalone basis, including renewals of subscription services.

• Step 5: Recognize Revenue as Performance Obligations are Satisfied: Each unit of hardware devices is a performance obligation satisfied at a point in time, when control of the good transfers from the Company to the customer, which is typically upon shipment of the good to the customer. For sales of hardware where control of the product transfers to the customer upon shipment, the Company has made an accounting policy election to account for shipping and handling as fulfillment activities rather than a performance obligation. The subscription services are stand-ready obligations that are satisfied over time by providing the customer with ongoing access to the Company’s resources throughout the subscription period. The Company uses the time elapsed (straight-line) measure of progress to recognize revenue as these performance obligations are satisfied evenly over the respective service period.

The Company offers alternative payment structures and “as-a-service” offerings that are assessed to determine whether an embedded lease arrangement exists. The Company accounts for those contracts as a lease arrangement under ASC 842 and ASC 840, Leases for the years ended December 31, 2022 and 2021, respectively. The Company identify certain Device-as-a-Service contracts to be within the scope of ASC 842 and ASC 606. Revenue from contracts with customers upon adoption of ASC 842, in which the Company acts as a lessor. For contracts that are in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, the Company has applied the practical expedient in ASC 842 to combine the lease component (the device itself in device as a service,

F-10

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

("DaaS") contracts) and non-lease (maintenance and SaaS) components, and to account for the combined components as a single lease component. Accordingly, the Company accounts for the monthly payments as lease revenue. For contracts in which the lease component is a sales-type lease, the Company derecognizes the asset (the MRI device) and recognizes a lease receivable in an amount that represents the present value of the lease payments. At times, the Company may enter into arrangements with payment terms which exceed one year from the transfer of control of the product or service. In such cases, the Company assesses whether the arrangement contains a significant component. If a significant financing component exists, the transaction price is adjusted for the financing portion of the arrangement, which is recorded as interest income over the payment term using the effective interest method. The Company does not assess whether a significant component exists when, at contract inception, the period between the transfer of control to a customer and final payment is one year or less.

Deferred Revenue

Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services described above and is reduced as the revenue recognition criteria are met. Deferred revenue is classified as current based on expected revenue recognition timing. Specifically, deferred revenue that will be recognized as revenue within the succeeding 12 month period is recorded as deferred revenue as part of current liabilities and the remaining portion is recorded as long term deferred revenue in the Company’s combined and consolidated balance sheets.

Warranties

The Company offers a device warranty to customers for the longer of (a) 12 months from delivery of the device for devices obtained through a capital purchase, or (b) the term of the subscription agreement for devices obtained on a subscription basis (subject to continued payment of fees for the subscription service). The Company’s subscription services include hardware maintenance and support. As noted in the accounting policy for revenue recognition, the Company recognizes revenue for subscription service over time using the time elapsed measure of progress. The costs of hardware maintenance are recognized in costs of revenue as they are incurred.

Research and Development

Research and development costs consists of production costs for prototype, test and pre-production units, lab supplies, consulting and personnel costs, including salaries, stock-based compensation, bonuses, benefit costs and depreciation. Certain research and development grant funding is recognized as a reduction to research and development costs (see Note 2. Summary of Significant Accounting Policies - Grant Funding). The Company recognizes these costs as they are incurred.

Grant Funding

The Company received certain research and development funding through a grant issued by the Bill & Melinda Gates Foundation (“BMGF”). Funding is recorded on the combined and consolidated balance sheet as restricted cash upon receipt. The funding is recognized in the combined and consolidated statements of operations and comprehensive loss as a reduction to research and development expense in the period when milestone deliverables are fulfilled and met. Grant funding payments received in advance of research and development expenses incurred are recorded as deferred grant funding as a current liability in the Company’s combined and consolidated balance sheets.

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 expenses, inventory excess and obsolescence expenses.

F-11

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

Patent Costs

Patent costs have been charged to operations as incurred, as their realization is uncertain. These costs are included in general and administrative expenses in the combined and consolidated statements of operations and comprehensive loss.

General and Administrative

General and administrative expenses primarily consist of personnel costs and benefits including stock-based compensation, patent and filing fees, office expenses and outside services. Outside services consist of professional services, legal and other professional fees.

Sales and Marketing

Sales and marketing costs primarily consist of personnel costs and benefits including stock-based compensation, advertising, promotional, as well as conferences, meetings, and other events. Advertising costs are expensed as incurred. For the years ended December 31, 2022 and 2021, advertising expenses were $1,338 and $2,459, respectively.

Net Loss per Common Share

Basic net loss per common share is calculated by dividing the net loss attributed to common stockholders by the weighted average number of common shares outstanding during the period, without consideration of potentially dilutive securities.

Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares plus the common equivalent shares of the period, including any dilutive effect from such shares. The Company’s diluted net loss per common share is the same as basic net loss per common share for all periods presented since the effect of potentially dilutive securities is anti-dilutive.

Convertible Preferred Stock

The Company has applied the guidance in ASC Topic 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, and has therefore classified the Series A, Series B, Series C and Series D Convertible Preferred Stock (“Convertible Preferred Stock”) (see Note 10. Convertible Preferred Stock) as mezzanine equity. The Convertible Preferred Stock was recorded outside of stockholders’ equity (deficit) because the Convertible Preferred Stock included a redemption provision upon a change of control, which is deemed a liquidation event that is considered outside the Company’s control. The Convertible Preferred Stock has been recorded at its original issue price, net of issuance costs. The Company did not adjust the carrying value of the Convertible Preferred Stock to the liquidation price associated with a change of control at December 31, 2020 because a change of control of the Company was not considered probable at the reporting date (see Note 10. Convertible Preferred Stock). Subsequent adjustments to increase or decrease the carrying values to their respective liquidation prices were made only when it became probable that such a change of control would occur.

Stock-Based Compensation

The measurement of stock-based compensation expense for all stock-based payment awards, including stock options granted to employees, directors, and consultants, is based on the estimated fair value of the awards on the date of grant.

The Company recognizes stock-based compensation expense for stock option grants and incentive unit grants with only service conditions on a straight-line basis over the requisite service period of the individual grants, which is generally the vesting period, based on the estimated grant date fair values. Generally, stock option grants and incentive unit grants fully vest four years after the grant date, and stock option grants generally have a term of 10 years.

F-12

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

The Company recognizes the effect of forfeiture in compensation costs based on actual forfeitures when they occur.

The Company's stock-based compensation program includes stock option grants to its employees, directors, and consultants. Stock options are granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant.

The fair values of stock option grants are estimated using a Black-Scholes option-pricing model. Key inputs and assumptions include the expected term of the option, stock price volatility, risk free interest rate, dividend yield, stock price and exercise price. Many of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based compensation expense.

On April 2, 2021, 4Bionics executed a plan of liquidation and dissolution and its ownership in Liminal was distributed to its members and to the holders of incentive units. Immediately subsequent to the dissolution, all outstanding unvested incentive unit awards under 4Bionic’s 2019 Equity Incentive Plan were replaced with preferred stock awards indexed to and settled in the preferred stock of the former 4Bionics subsidiaries Liminal, Detect, Inc. (f/k/a Homodeus Inc.), identifeye HEALTH Inc. (f/k/a Tesseract Health, Inc.) and Protein Evolution, Inc. The preferred stock awards were subject to service vesting conditions only. No incremental value was provided to participants as a result of the modification of the awards as the modification date fair value of the incentive unit awards was equal to the modification date fair value of the stock underlying the restricted stock awards. Moreover, the remaining vesting period before and after modification was unchanged.

Earn-Out Shares

Earn-Out Shares, as defined in Note 3. Business Combination, to which the Companies’ pre-closing equity holders are entitled, fall within the scope of ASC 815, Derivatives and Hedging (“ASC 815”) pursuant to which such Earn-Out Shares are equity classified and are to be recognized upon achievement of the market price milestone.

Earn-Out Shares to which certain employees are entitled to fall within the scope of ASC 718, Compensation – Stock Compensation (“ASC 718”), pursuant to which such Earn-Out Shares are equity classified and their grant date fair value will be recognized as compensation expense over the vesting period.

Research and Development Tax Credits

The Company recognizes research and development tax credits as a reduction of research and development expense as earned. For State of Connecticut research and development tax credits, which are exchanged for a cash refund from the State of Connecticut, such exchanged credits are recognized as earned as a reduction of research and development expense in the combined and consolidated statements of operations and comprehensive loss.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes, as set forth in ASC Topic 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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. The Company has recorded a full valuation allowance as of December 31, 2022 and 2021. Based on the available evidence, the Company believes that it is more likely than not that it will be unable to utilize all of its deferred tax assets in the future.

F-13

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

In accordance with the provisions of ASC Topic 740, the Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes. An uncertain tax position will not be recognized if it has a less than 50% likelihood of being sustained. The Company’s policy is to recognize any interest and penalties related to income taxes in income tax expense in the combined and consolidated statements of operations and comprehensive loss. The Company’s open tax years subject to examination by the relevant taxing authorities are 2017 through 2019. As of December 31, 2022 and 2021, the Company had no uncertain tax positions.

Recent Accounting Pronouncements

Accounting pronouncements adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize almost all of their leases on the balance sheet by recording a lease liability and corresponding right-of-use assets. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. As per the latest ASU 2020-05 issued by the FASB, entities that have not yet issued or made available for issuance the financial statements as of June 3, 2020 can defer the new guidance for one year. For public entities, this guidance is effective for annual reporting periods beginning January 1, 2020, including interim periods within that annual reporting period. For the Company, this guidance is effective for annual reporting periods beginning January 1, 2022, and interim reporting periods within annual reporting periods beginning January 1, 2023. The Company adopted this guidance including the election of the effective date modified retrospective transition approach, the package of practical expedients applied in the transition on January 1, 2022 and there was no material effect of adoption on the combined and consolidated financial statements.

As part of the adoption of Topic 842, the Company made the following practical expedient elections:

•

We elected the package of practical expedients available for transition which allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

•

We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.

•

For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases.

•

For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

The Company identified certain Device-as-a-Service contracts to be within the scope of ASC 842 and ASC 606, Revenue from Contracts with Customers upon adoption of ASC 842, in which the Company acts as a lessor. For contracts that are in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, the Company has applied 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. Accordingly, the Company accounts for the monthly payments as lease revenue. For contracts in which the lease component is a sales-type lease, the Company derecognizes the asset (the MRI device) and recognizes a lease receivable in an amount that represents the present value of the lease payments.

F-14

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

Accounting pronouncements issued but not yet adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments — Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. As per the latest ASU 2020-02, the FASB deferred the timelines for certain small public and private entities, thus the new guidance will be adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is in the process of evaluating the impact that the adoption of this pronouncement will have on the Company’s combined and consolidated financial statements and disclosures.

3. BUSINESS COMBINATION

At the Closing, Legacy Hyperfine and Liminal merged with and into separate wholly owned subsidiaries of HealthCor and each became a wholly-owned subsidiary of the Company. The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP primarily due to the fact that Legacy Hyperfine and Liminal stockholders continued to control the Company following the closing of the Business Combination. Under this method of accounting, HealthCor is treated as the “acquired” company for accounting purposes and the Business Combination is treated as the equivalent of Legacy Hyperfine and Liminal issuing stock for the net assets of HealthCor, accompanied by a recapitalization. The net assets of HealthCor are stated at historical cost, with no goodwill or other intangible assets recorded. Reported shares and loss per share available to holders of the Company’s capital stock and equity awards prior to the Business Combination have been retroactively restated reflecting the exchange ratios established pursuant to the Business Combination Agreement dated as of July 7, 2021 (the “Business Combination Agreement”).

Pursuant to the Business Combination Agreement, at the effective time of the Business Combination (the “Effective Time”):

• each share of Legacy Hyperfine capital stock (other than shares of Legacy Hyperfine Series A preferred stock) that was issued and outstanding as of immediately prior to the Effective Time was automatically cancelled and extinguished and converted into the right to receive a number of shares of the Company’s Class A common stock equal to 0.3275 (the “Hyperfine Exchange Ratio”), rounded down to the nearest whole number of shares;

• each share of Legacy Hyperfine Series A preferred stock that was issued and outstanding as of immediately prior to the Effective Time was automatically cancelled and extinguished and converted into the right to receive a number of shares of the Company’s Class B common stock equal to the Hyperfine Exchange Ratio, rounded down to the nearest whole number of shares;

• each share of Liminal capital stock (other than shares of Liminal Series A-1 preferred stock) that was issued and outstanding as of immediately prior to the Effective Time was automatically cancelled and extinguished and converted into the right to receive a number of shares of the Company’s Class A common stock equal to 0.1796 (the “Liminal Exchange Ratio”), rounded down to the nearest whole number of shares;

• each share of Liminal Series A-1 preferred stock that was issued and outstanding as of immediately prior to the Effective Time was automatically cancelled and extinguished and converted into the right to receive a number of shares of the Company’s Class B common stock equal to the Liminal Exchange Ratio, rounded down to the nearest whole number of shares;

F-15

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

• each option to purchase shares of Legacy Hyperfine common stock and each option to purchase shares of Liminal common stock, whether vested or unvested, that was outstanding and unexercised as of immediately prior to the Effective Time was assumed by the Company and became an option (vested or unvested, as applicable) to purchase a number of shares of the Company’s Class A common stock equal to the number of shares of Legacy Hyperfine common stock or Liminal common stock subject to such option immediately prior to the Effective Time multiplied by the Hyperfine Exchange Ratio or the Liminal Exchange Ratio, as applicable, rounded down to the nearest whole number of shares, at an exercise price per share equal to the exercise price per share of such option immediately prior to the Effective Time divided by the Hyperfine Exchange Ratio or the Liminal Exchange Ratio, as applicable, rounded up to the nearest whole cent; and

• each Legacy Hyperfine restricted stock unit and each Liminal restricted stock unit outstanding immediately prior to the Effective Time was assumed by the Company and became a restricted stock unit with respect to a number of shares of the Company’s Class A common stock equal to the number of shares of Legacy Hyperfine common stock or Liminal common stock subject to such Legacy Hyperfine restricted stock unit or Liminal restricted stock unit immediately prior to the Effective Time multiplied by the Hyperfine Exchange Ratio or the Liminal Exchange Ratio, as applicable, rounded down to the nearest whole share.

Pursuant to the Business Combination Agreement, the Company will issue to holders of Legacy Hyperfine and Liminal securities as of immediately prior to the Effective Time, in accordance with their pro rata share, up to 10,000,000 shares of Class A common stock as earn-out consideration (the “Earn-Out Shares”), if at any time during the period between the Closing Date and the third anniversary of the Closing Date (the “Earn-Out Period”), (i) the last share price of the Class A common stock is greater than or equal to $15.00 for any 20 trading days within any 30 consecutive trading day period, or (ii) there is a transaction that will result in shares of Class A common stock being converted or exchanged into the right to receive cash or other consideration having a value greater than or equal to $15.00. During the Earn-Out Period, if there is a transaction (other than for stock splits, stock dividends, special cash dividends, reorganizations, recapitalizations or similar transactions affecting the Class A common stock) that will result in the shares of Class A common stock being converted or exchanged into the right to receive cash or other consideration having a value less than $15.00, then the right to receive Earn-Out Shares will terminate.

On December 21, 2021, HealthCor filed the Certificate of Incorporation (the “Certificate”) with the Secretary of State of the State of Delaware, which became effective after the Domestication. As a consequence of filing the Certificate, the Company adopted a dual class structure, comprised of the Company’s Class A common stock, which is entitled to one vote per share, and the Company’s Class B common stock, which is entitled to 20 votes per share. The Company’s Class B common stock has the same economic terms as the Company’s Class A common stock, but is subject to a “sunset” provision if Jonathan M. Rothberg, Ph.D., the founder of Legacy Hyperfine and Liminal, and a Director of the Company (“Dr. Rothberg”), and other permitted holders of the Company’s Class B common stock collectively cease to beneficially own at least twenty percent (20%) of the number of shares of the Company’s Class B common stock (as such number of shares is equitably adjusted in respect of any reclassification, stock dividend, subdivision, combination or recapitalization of the Company’s Class B common stock) collectively held by Dr. Rothberg and permitted transferees of the Company’s Class B common stock as of the Effective Time. At the Effective Time, the Company amended the Certificate to change the name of the Company from HealthCor Catalio Acquisition Corp. to “Hyperfine, Inc.” (the Certificate, as amended, the “Amended Certificate”).

Concurrently with the execution of the Business Combination Agreement, HealthCor entered into subscription agreements (the “Subscription Agreements”) with certain institutional investors and accredited investors (the “PIPE Investors”), pursuant to which the PIPE Investors purchased, immediately prior to the Closing, an aggregate of 12,610,000 shares of HealthCor Class A common stock at a purchase price of $10.00 per share (the “PIPE Investment”).

Additionally, on December 22, 2021, HealthCor, HC Sponsor LLC (the “Sponsor”), Legacy Hyperfine and Liminal entered into a Forfeiture Agreement (the “Forfeiture Agreement”), pursuant to which, immediately prior to the Closing, 150,000 shares of HealthCor’s Class B common stock held by the Sponsor were irrevocably forfeited and automatically cancelled (the “Forfeiture”).

F-16

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

The total number of shares of the Company’s Class A common stock outstanding immediately following the Closing was 54,977,061 comprising:

• 29,711,224 shares of Class A common stock issued to Hyperfine stockholders (other than certain holders of Hyperfine Series A preferred stock);

• 3,459,081 shares of Class A common stock issued to Liminal stockholders (other than certain holders of Liminal Series A-1 preferred stock);

• 12,610,000 shares of Class A common stock issued in connection with the Closing to the PIPE Investors pursuant to the PIPE Investment;

• 5,025,000 shares of Class A common stock issued immediately prior to the Effective Time to the initial shareholders upon conversion of the 5,025,000 shares of Class B common stock outstanding immediately prior to the Effective Time (following the issuance of the 5,175,000 shares of Class B common stock upon the Conversion of the 5,175,000 Class B ordinary shares held by the initial shareholders and after reflecting the irrevocable forfeiture by the Sponsor to HealthCor of 150,000 shares of Class B common stock for no consideration and automatic cancellation as of immediately prior to the Closing);

• 614,000 shares of Class A common stock issued to the Sponsor; and

• 3,557,756 shares of Class A common stock issued to the Company’s public stockholders holding 3,557,756 Class A ordinary shares outstanding at the Effective Time, after reflecting redemptions of 17,142,244 shares of HealthCor Class A common stock.

The total number of shares of the Company’s Class B common stock outstanding immediately following the Closing was 15,055,288 shares. Immediately following the Closing, Dr. Rothberg held approximately 84.8% of the combined voting power of the Company. Accordingly, Dr. Rothberg and his permitted transferees control the Company, and the Company is a controlled company within the meaning of the Nasdaq listing rules.

Net equity infusion from the Business Combination was $141,471, which consists of $207,448 proceeds from HealthCor, $126,100 proceeds from the PIPE Investors, net of payments to redeeming HealthCor shareholders of $171,437 and payment of transaction costs of $20,640. Additionally, 300,000 shares of Class A Common Stock were issued in connection with the Business Combination to a service provider in exchange for the services provided in connection with HealthCor’s initial public offering.

In December 2021, in connection with the closing of the Business Combination, the Company prepaid directors and officers insurance policy in the amount of $1,244 and repaid the Liminal Paycheck Protection Program ("PPP") loan in full in the amount of $113.

4. REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers by product type. The Company believes that these categories aggregate the payor types by nature, amount, timing and uncertainty of its revenue streams. The following table summarizes the Company’s disaggregated revenues:

F-17

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

Contract Balances

Contract balances represent amounts presented in the combined and consolidated balance sheets when either the Company has transferred goods or services to the customer, or the customer has paid consideration to the Company under the contract. These contract balances include trade accounts receivable and deferred revenue. Deferred revenue represents consideration received from customers at the beginning of the subscription period for services that are transferred to the customer over the respective subscription period. The accounts receivable balances represent amounts billed to customers for goods and services where the Company has an unconditional right to payment of the amount billed.

The following table provides information about receivables and deferred revenue from contracts with customers:

Unbilled receivables - current 454 91

Unbilled receivables - non-current (1) 744 —

Long term deferred revenue 1,526 510

_________________________

(1) Recorded in other long term assets in the Company’s combined and consolidated balance sheets.

The Company recognizes a receivable when it has an unconditional right to payment, and payment terms range from 30 days to less than one year based on the terms agreed upon with the respective customer.

Accounts Receivable, Unbilled Services, and Deferred Revenue

Accounts receivable are recorded at net realizable value. Unbilled receivable arise when performance obligations are satisfied for which revenue has been recognized but the customers have not been billed. Contractual provisions and payment schedules may or may not correspond to the timing of the performance of services under the contract.

Deferred revenue is a contact liability that consists of customer payments received in advance of performance and billings in excess of revenue recognized, net of revenue recognized from the balance at the beginning of the period.

The amount of revenue recognized during the years ended December 31, 2022 and 2021 that was included in the deferred revenue balance at the beginning of the period was $593 and $158, respectively.

Timing of Billing and Performance

Difference in the timing of revenue recognition and associated billings and cash collections result in recording of billed accounts receivable, unbilled accounts receivable (including contract assets), and deferred revenue on the combined consolidated balance sheet. Amounts are billed in accordance with the agreed-upon contractual terms, resulting in recording unbilled accounts receivable in instances where the right to bill is contingent solely on the passage of time, and contract assets in instances where the right to consideration is conditional on something other than the passage of time.

Revenue from Leasing Arrangements

Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers and remains separately accounted for under ASC 842 and ASC 840, Leases for the years ended December 31, 2022 and 2021. The Company records operating lease rental revenue as service revenue on a straight-line basis over the lease term. The Company records revenue from the sale of hardware devices under sales-type leases as device revenue in an amount equal to the present value of minimum lease payments at the inception of the lease. Sales-type leases also produce financing income, which is included in device revenue in the combined and consolidated statements of operations and comprehensive loss and is recognized at effective rates of return over the lease term.

F-18

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

Costs of Obtaining or Fulfilling Contracts

The Company incurs incremental costs of obtaining contracts with customers. Incremental costs of obtaining contracts, which include commissions paid as a result of obtaining contracts with customers, are capitalized to the extent that the Company expects to recover such costs. Capitalized costs are amortized in a pattern that is consistent with the Company’s transfer to the customer of the related goods and services. Such costs are recorded in Other long term assets and were $247 and $158 as of December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021 the Company recognized $331 and $29, respectively, in expense related to the amortization of the capitalized contract costs.

Transaction price allocated to remaining performance obligations

As of December 31, 2022 and 2021, the Company had remaining performance obligations amounting to $8,663 and $2,800, respectively. The Company expects to recognize approximately 62% of its remaining performance obligations as revenue in fiscal year 2023, and an additional 38% in fiscal year 2024 and thereafter.

Significant Judgements

The Company makes significant judgments applying the guidance related to the determination of the timing and pattern of satisfaction of performance obligations, determination of the standalone selling price of performance obligations and estimation of variable consideration if any.

Practical Expedients and Accounting Policy Elections

As a practical expedient, the Company does not adjust transaction price for the effects of a significant financing component in contracts in which the period between when the Company transfers the promised good or service to the customer and when the customer pays for that good or service is one year or less.

The Company has made an accounting policy election to exclude all sales taxes from the transaction price of its contracts with customers. Accordingly, sales taxes collected from customers and remitted to government authorities is not included in revenue and is accounted for as a liability until it has been remitted to the respective government authority.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2 — Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets or liabilities valued with Level 3 inputs.

F-19

HYPERFINE, INC. AND SUBSIDIARIES

NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(all amounts are in thousands, except share and per share data)

The carrying value of cash and cash equivalents, accounts payable and accrued expenses and other current liabilities approximates their fair values due to the short-term or on demand nature of these instruments.

There were no transfers between fair value measurement levels during the years ended December 31, 2022 and 2021.

The Company had $93,502 and $48,625 of money market funds and demand deposit accounts included in cash and cash equivalents and restricted cash as of December 31, 2022 and 2021, respectively. These assets were valued using quoted prices in active markets and accordingly were classified as Level 1.

6. INVENTORIES

A summary of inventories are as follows at December 31:

HYPR US Equity

HYPR · 10-K · period ended 2022-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HYPERFINE

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9A. CONTROLS AND PROCEDURES

Item 9B. OTHER INFORMATION

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11. EXECUTIVE COMPENSATION

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

HYPR US Equity☆

HYPR · 10-K · period ended 2022-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HYPERFINE

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9A. CONTROLS AND PROCEDURES

Item 9B. OTHER INFORMATION

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11. EXECUTIVE COMPENSATION

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

HYPR US Equity