Butterfly Network, Inc. [BFLY] Filings

10-Q 1 bfly-20230930x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39292

Butterfly Network, Inc.

(Exact name of registrant as specified in its charter)


Delaware		84-4618156
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1600 District Avenue Burlington, Massachusetts		01803
(Address of principal executive offices)		(Zip Code)

(781) 557-4800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	BFLY	The New York Stock Exchange
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share	BFLY WS	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2023, the registrant had 180,696,581 shares of Class A common stock outstanding and 26,426,937 shares of Class B common stock outstanding.

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TABLE OF CONTENTS

		Page

	Cautionary Statement Regarding Forward-Looking Statements	3

Part I	Financial Information	4

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets (Unaudited)	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

Part II	Other Information	28

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 5.	Other Information	29

Item 6.	Exhibits	29

Signatures		32

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company,” and “Butterfly” mean Butterfly Network, Inc. and our subsidiaries.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that relate to future events or our future financial performance regarding, among other things, the plans, strategies, and prospects, both business and financial, of the Company. These statements are based on the beliefs and assumptions of the Company’s management team. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

●

the commercialization of our products and services;

●

the success, cost, and timing of our product development activities;

●

the potential attributes and benefits of our products and services;

●

our ability to obtain and maintain regulatory approval for our products, and any related restrictions and limitations of any authorized product;

●

our ability to identify, in-license, or acquire additional technology;

●

our ability to maintain our existing license, manufacturing, and supply agreements;

●

our ability to compete with other companies currently marketing or engaged in the development of ultrasound imaging devices, many of which have greater financial and marketing resources than us;

●

the size and growth potential of the markets for our products and services, and the ability of each to serve those markets, either alone or in partnership with others;

●

our estimates regarding expenses, revenue, capital requirements, and needs for additional financing;

●

our ability to raise financing in the future; and

●

our financial performance.

These statements may be preceded by, followed by, or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends,” similar expressions or phrases, or the negative of those expressions or phrases. The forward-looking statements are based on projections prepared by, and are the responsibility of, the Company’s management. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions relating to, among other things:

●

our rapid growth may not be sustainable and depends on our ability to attract and retain customers;

●

our business could be harmed if we fail to manage our growth effectively;

●

our projections are subject to risks, assumptions, estimates, and uncertainties;

●

our business is subject to a variety of U.S. and foreign laws, which are subject to change and could adversely affect our business;

●

the pricing of our products and services, and reimbursement for medical procedures conducted using our products and services;

●

changes in applicable laws or regulations;

●

failure to protect or enforce our intellectual property rights could harm our business, results of operations, and financial condition;

●

the ability to maintain the listing of our Class A common stock on the New York Stock Exchange; and

●

economic downturns and political and market conditions beyond our control could adversely affect our business, financial condition, and results of operations.

These and other risks and uncertainties are described in greater detail under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”), in Item 1A of Part II of this Quarterly Report on Form 10-Q, and in other filings that we make with the Securities and Exchange Commission (“SEC”). The risks described under the caption “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	150,006	$	162,561
Marketable securities		—		75,250
Accounts receivable, net		13,646		14,685
Inventories		94,016		59,970
Current portion of vendor advances		2,728		35,182
Prepaid expenses and other current assets		8,189		9,489
Total current assets		268,585		357,137
Property and equipment, net		26,362		31,331
Non-current portion of vendor advances		16,808		—
Operating lease assets		16,016		21,567
Other non-current assets		6,451		7,535
Total assets	$	334,222	$	417,570
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	8,097	$	7,211
Deferred revenue, current		15,117		15,856
Accrued purchase commitments, current		212		2,146
Accrued expenses and other current liabilities		21,933		26,116
Total current liabilities		45,359		51,329
Deferred revenue, non-current		5,273		4,957
Warrant liabilities		1,446		5,370
Operating lease liabilities		23,409		29,966
Other non-current liabilities		1,316		588
Total liabilities		76,803		92,210
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A common stock $.0001 par value; 600,000,000 shares authorized at September 30, 2023 and December 31, 2022; 180,633,155 and 174,459,956 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		18		17
Class B common stock $.0001 par value; 27,000,000 shares authorized at September 30, 2023 and December 31, 2022; 26,426,937 shares issued and outstanding at September 30, 2023 and December 31, 2022		3		3
Additional paid-in capital		942,915		921,278
Accumulated deficit		(685,517)		(595,938)
Total stockholders’ equity		257,419		325,360
Total liabilities and stockholders’ equity	$	334,222	$	417,570

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

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BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Revenue:
Product	$	8,753	$	13,164	$	29,874	$	37,607
Software and other services		6,668		6,454		19,510		16,800
Total revenue		15,421		19,618		49,384		54,407
Cost of revenue:
Product		3,929		6,534		13,765		19,481
Software and other services		2,110		2,095		6,226		5,022
Total cost of revenue		6,039		8,629		19,991		24,503
Gross profit		9,382		10,989		29,393		29,904
Operating expenses:
Research and development		12,130		22,040		44,409		68,883
Sales and marketing		9,012		15,481		28,776		47,121
General and administrative		11,560		16,603		37,239		54,080
Other		9,243		2,897		17,848		3,838
Total operating expenses		41,945		57,021		128,272		173,922
Loss from operations		(32,563)		(46,032)		(98,879)		(144,018)
Interest income		1,903		1,304		5,714		1,574
Interest expense		—		(2)		—		(2)
Change in fair value of warrant liabilities		3,511		(9,087)		3,924		8,881
Other income (expense), net		(217)		(898)		(256)		(1,387)
Loss before provision for income taxes		(27,366)		(54,715)		(89,497)		(134,952)
Provision for income taxes		2		27		82		68
Net loss and comprehensive loss	$	(27,368)	$	(54,742)	$	(89,579)	$	(135,020)
Net loss per common share attributable to Class A and B common stockholders, basic and diluted	$	(0.13)	$	(0.27)	$	(0.44)	$	(0.68)
Weighted-average shares used to compute net loss per share attributable to Class A and B common stockholders, basic and diluted		206,740,234		200,172,683		204,749,108		199,528,394

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

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BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


Three months ended September 30, 2023

	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity
June 30, 2023	179,720,918	$	18	26,426,937	$	3	$	935,833	$	(658,149)	$	277,705
Net loss	—		—	—		—		—		(27,368)		(27,368)
Common stock issued upon exercise of stock options	55,807		—	—		—		92		—		92
Common stock issued upon vesting of restricted stock units	856,430		—	—		—		—		—		—
Stock-based compensation expense	—		—	—		—		6,990		—		6,990
September 30, 2023	180,633,155	$	18	26,426,937	$	3	$	942,915	$	(685,517)	$	257,419


Three months ended September 30, 2022

	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity
June 30, 2022	172,816,532	$	17	26,426,937	$	3	$	894,162	$	(507,493)	$	386,689
Net loss	—		—	—		—		—		(54,742)		(54,742)
Common stock issued upon exercise of stock options and warrants	691,907		—	—		—		2,034		—		2,034
Common stock issued upon vesting of restricted stock units, net	566,163		—	—		—		—		—		—
Stock-based compensation expense	—		—	—		—		9,656		—		9,656
September 30, 2022	174,074,602	$	17	26,426,937	$	3	$	905,852	$	(562,235)	$	343,637


Nine months ended September 30, 2023

	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity (Deficit)
December 31, 2022	174,459,956	$	17	26,426,937	$	3	$	921,278	$	(595,938)	$	325,360
Net loss	—		—	—		—		—		(89,579)		(89,579)
Common stock issued upon exercise of stock options	180,467		—	—		—		228		—		228
Common stock issued upon vesting of restricted stock units	5,992,732		1	—		—		—		—		1
Stock-based compensation expense	—		—	—		—		21,409		—		21,409
September 30, 2023	180,633,155	$	18	26,426,937	$	3	$	942,915	$	(685,517)	$	257,419


Nine months ended September 30, 2022

	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity
December 31, 2021	171,613,049	$	17	26,426,937	$	3	$	874,886	$	(427,215)	$	447,691
Net loss	—		—	—		—		—		(135,020)		(135,020)
Common stock issued upon exercise of stock options and warrants	1,035,574		—	—		—		2,844		—		2,844
Common stock issued upon vesting of restricted stock units, net	1,425,979		—	—		—		(106)		—		(106)
Stock-based compensation expense	—		—	—		—		28,228		—		28,228
September 30, 2022	174,074,602	$	17	26,426,937	$	3	$	905,852	$	(562,235)	$	343,637

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

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BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine months ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(89,579)	$	(135,020)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization, and impairments		8,332		4,066
Stock-based compensation expense		20,924		27,428
Change in fair value of warrant liabilities		(3,924)		(8,881)
Gain on lease termination		(214)		—
Other		(478)		750
Changes in operating assets and liabilities:
Accounts receivable		711		(39)
Inventories		(34,046)		(21,421)
Prepaid expenses and other assets		2,354		(498)
Vendor advances		15,646		9,555
Accounts payable		1,092		(3,121)
Deferred revenue		(423)		971
Accrued purchase commitments		(1,934)		(15,578)
Change in operating lease assets and liabilities		(671)		1,772
Accrued expenses and other liabilities		(3,509)		(240)
Net cash used in operating activities		(85,719)		(140,256)

Cash flows from investing activities:
Purchases of marketable securities		(297)		(75,118)
Sales of marketable securities		76,484		—
Purchases of property and equipment, including capitalized software		(3,271)		(16,180)
Sales of property and equipment		10		—
Net cash provided by (used in) investing activities		72,926		(91,298)

Cash flows from financing activities:
Proceeds from exercise of stock options and warrants		228		2,844
Other financing activities		—		(100)
Net cash provided by financing activities		228		2,744
Net decrease in cash, cash equivalents, and restricted cash		(12,565)		(228,810)
Cash, cash equivalents, and restricted cash, beginning of period		166,828		426,841
Cash, cash equivalents, and restricted cash, end of period	$	154,263	$	198,031

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

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BUTTERFLY NETWORK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Description of Business

The Company is an innovative digital health business transforming care with handheld, whole-body ultrasound. Powered by its proprietary Ultrasound-on-Chip™ technology, the solution enables the acquisition of imaging information from an affordable, powerful device that fits in a healthcare professional’s pocket with a combination of cloud-connected software and hardware technology.

The Company was incorporated in Delaware on February 4, 2020 as Longview Acquisition Corp. (“Longview”). Following a business combination between the Company and BFLY Operations, Inc. (formerly Butterfly Network, Inc.) on February 12, 2021 (the “Business Combination”), the Company’s legal name became Butterfly Network, Inc.

The Company operates wholly-owned subsidiaries in Australia, Germany, the Netherlands, Taiwan, and the United Kingdom.

Although the Company has incurred recurring losses in each year since inception, the Company expects its cash and cash equivalents will be sufficient to fund operations for at least the next twelve months.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the accounting disclosure rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the 2022 Annual Report on Form 10-K. All intercompany balances and transactions are eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited consolidated financial statements as of that date but does not include all disclosures, including certain notes, required by U.S. GAAP for annual reporting.

Certain prior period amounts presented on the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 have been reclassified to conform to the current period presentation. See the Operating Expenses – Other section of this note for additional information regarding these reclassifications.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2023, or any other period.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. As of September 30, 2023, substantially all of the Company’s cash and cash equivalents were invested in money market accounts with one financial institution. The Company also maintains balances in various operating accounts above federally insured limits. The Company has not experienced any significant losses on such accounts and does not believe it is exposed to any significant credit risk of its cash and cash equivalents.

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As of September 30, 2023 and December 31, 2022, no customer accounted for more than 10% of the Company’s accounts receivable. No customer accounted for more than 10% of the Company’s total revenue for the three and nine months ended September 30, 2023. One customer accounted for more than 10% of the Company’s total revenue for the three months ended September 30, 2022, and no customer accounted for more than 10% of the Company’s total revenue for the nine months ended September 30, 2022.

Segment Reporting

The Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and evaluating its financial performance. Accordingly, the Company has determined that it operates as a single reportable segment. Substantially all of the Company’s long-lived assets are located in the United States. Since the Company operates as a single reporting segment, all required segment reporting disclosures can be found in the condensed consolidated financial statements.

Use of Estimates

The Company makes estimates and assumptions about future events that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with certainty. On an ongoing basis, management evaluates these estimates, judgments, and assumptions.

The Company bases its 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 condensed consolidated financial statements. There have been no material changes to the Company’s use of estimates as described in the consolidated financial statements for the year ended December 31, 2022.

Operating Expenses – Other

The Company classifies certain operating expenses that are not representative of the Company’s ongoing operations as other on the condensed consolidated statements of operations and comprehensive loss. These include costs related to the Company’s reductions in force, litigation, and legal settlements. To conform to current period presentation of the condensed consolidated statements of operations and comprehensive loss, the Company reclassified certain expenses presented as research and development, sales and marketing, and general and administrative in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 as other in this Quarterly Report on Form 10-Q. The following table summarizes the Company’s operating expenses reclassified as other from research and development, sales and marketing, and general and administrative (in thousands):


	Three months ended		Nine months ended
	September 30, 2022		September 30, 2022
Reclassified from:
Research and development	$	1,114	$	1,114
Sales and marketing		330		330
General and administrative		1,453		2,394
Total reclassified as other	$	2,897	$	3,838

The following table summarizes the types of expenses classified as other in the Company’s condensed consolidated statements of operations and comprehensive loss (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Employment-related expenses	$	4,755	$	1,860	$	8,634	$	1,860
Legal-related expenses		4,488		1,037		9,214		1,978
Total other	$	9,243	$	2,897	$	17,848	$	3,838

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See Note 12 “Reductions in Force” for additional information regarding the employment-related expenses classified as other in the condensed consolidated statements of operations and comprehensive loss.

Note 3. Revenue Recognition

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers by product type and by geographical market. 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 revenue (in thousands):


	Pattern of	Three months ended September 30,				Nine months ended September 30,
	Recognition	2023		2022		2023		2022
By product type:
Devices and accessories	Point-in-time	$	8,753	$	13,164	$	29,874	$	37,607
Software and other services	Over time		6,668		6,454		19,510		16,800
Total revenue		$	15,421	$	19,618	$	49,384	$	54,407

By geographical market:
United States		$	12,230	$	13,582	$	39,726	$	37,881
International			3,191		6,036		9,658		16,526
Total revenue		$	15,421	$	19,618	$	49,384	$	54,407

Contract Balances

Contract balances represent amounts presented in the condensed consolidated balance sheets when the Company has either transferred goods or services to the customer or the customer has paid consideration to the Company under the contract. These contract balances include accounts receivable and deferred revenue. The Company recognizes a receivable when it has an unconditional right to payment, and payment terms are typically 60 days for sales on credit of product, software, and other services. The allowance for doubtful accounts was $0.7 million and $0.5 million as of September 30, 2023 and December 31, 2022, respectively. For the three months ended September 30, 2023 and 2022, the Company recognized $6.7 million and $5.1 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of the period. For the nine months ended September 30, 2023 and 2022, the Company recognized $15.2 million and $11.2 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of the period.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2023 and December 31, 2022, the Company had $32.0 million and $23.9 million, respectively, of remaining performance obligations. As of September 30, 2023, the Company expects to recognize 55% of its remaining performance obligations as revenue in the next twelve months and an additional 45% thereafter.

Note 4. 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.

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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.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate 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 periods ended September 30, 2023 and December 31, 2022.

The Company’s outstanding warrants include publicly traded warrants (the “Public Warrants”) which were issued as one-third of a warrant per unit during Longview’s initial public offering and warrants sold in a private placement to Longview’s sponsor (the “Private Warrants”). As of September 30, 2023, there were an aggregate of 13,799,357 and 6,853,333 outstanding Public Warrants and Private Warrants, respectively. Each whole warrant entitles the registered holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment per the warrant agreements. The warrants will expire on February 12, 2026 or earlier upon redemption or liquidation. The Company recognizes the change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2023 and 2022, the number of exercises and the amount reclassified into equity upon the exercise of the Public Warrants and Private Warrants were not significant.

The Company’s investments in marketable securities were ownership interests in mutual funds. The Company measured the equity securities using Level 1 fair value inputs based on the quoted prices in active markets for identical securities. As the securities had readily determinable fair value, unrealized gains and losses were reported as other income (expense), net on the consolidated statements of operations and comprehensive loss. Subsequent gains or losses realized upon redemption or sale of these securities were also recorded as other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. The Company considered all of its investments in marketable securities as available for use in current operations and therefore classified these securities within current assets on the condensed consolidated balance sheets. The Company did not hold any equity securities as of September 30, 2023. For the three and nine months ended September 30, 2022, the Company recognized $0.6 million of unrealized losses related to equity securities still held as of September 30, 2022.

The Company measures its Public Warrants using Level 1 fair value inputs based on quoted prices in active markets for the Public Warrants. Because any transfer of Private Warrants from the initial holder of the Private Warrants would result in the Private Warrants having substantially the same terms as the Public Warrants, management determined that the fair value of each Private Warrant is the same as that of a Public Warrant. Accordingly, the Company measures its Private Warrants using Level 2 fair value inputs based on quoted prices in active markets for the Public Warrants.

Table of Contents

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy (in thousands):


			Fair Value Measurement Level
	Total		Level 1		Level 2		Level 3
September 30, 2023:
Warrants:
Public Warrants	$	966	$	966	$	—	$	—
Private Warrants		480		—		480		—
Total liabilities at fair value on a recurring basis	$	1,446	$	966	$	480	$	—

December 31, 2022:
Marketable securities:
Mutual funds	$	75,250	$	75,250	$	—	$	—
Total assets at fair value on a recurring basis	$	75,250	$	75,250	$	—	$	—

Warrants:
Public Warrants	$	3,588	$	3,588	$	—	$	—
Private Warrants		1,782		—		1,782		—
Total liabilities at fair value on a recurring basis	$	5,370	$	3,588	$	1,782	$	—

Note 5. Inventories

The following table summarizes the Company’s inventories (in thousands):


	September 30,		December 31,
	2023		2022
Raw materials	$	72,256		41,265
Work-in-progress		905		1,962
Finished goods		20,855		16,743
Total inventories	$	94,016	$	59,970

Work-in-progress represents inventory items in intermediate stages of production by third-party manufacturers. For the three and nine months ended September 30, 2023, net realizable value inventory adjustments and excess and obsolete inventory charges were not significant and were recognized in product cost of revenue. See Note 13 “Commitments and Contingencies” for additional information regarding the Company’s inventory supply arrangements.

Note 6. Property and Equipment, Net

The following table summarizes the Company’s property and equipment, net (in thousands):


	September 30,		December 31,
	2023		2022
Property and equipment, gross	$	42,947	$	42,385
Less: accumulated depreciation and amortization		(16,585)		(11,054)
Property and equipment, net	$	26,362	$	31,331

As of September 30, 2023 and 2022, the Company excluded $0.2 million and $0.8 million, respectively, of accrued property and equipment from the cash used in investing activities on the condensed consolidated statements of cash flows.

The Company fully impaired its leasehold improvements related to a lease that was terminated during the third quarter of 2023. The Company recognized an impairment loss of $1.8 million for the three and nine months ended September 30, 2023 in operating expenses on the condensed consolidated statements of operations and comprehensive loss. See Note 13, “Commitments and Contingencies” for further discussion of the terminated lease.

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Note 7. Restricted Cash

The following table reconciles cash, cash equivalents, and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows (in thousands):


	September 30,
	2023		2022
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	150,006	$	193,313
Restricted cash included within prepaid expenses and other current assets		243		704
Restricted cash included within other non-current assets		4,014		4,014
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	154,263	$	198,031

Restricted cash included within prepaid expenses and other current assets is restricted by an agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”). The restriction on these funds lapses as the Company fulfills its obligations in the agreement. Restricted cash included within other non-current assets is held as collateral to secure a letter of credit for one of our office leases and is expected to be maintained as a security deposit throughout the duration of the lease.

Note 8. Accrued Expenses and Other Current Liabilities

The following table summarizes the Company’s accrued expenses and other current liabilities (in thousands):

Butterfly Network, Inc. [BFLY] Filings
Butterfly Network, Inc. [BFLY-WT] Filings
10-Q	[2023-11-06]
10-Q	[2023-08-04]
10-Q	[2023-05-11]
10-K	[2023-03-23]
10-Q	[2022-11-03]
10-Q	[2022-08-03]
10-Q	[2022-05-06]
10-K	[2022-02-28]
10-Q	[2021-11-15]
10-Q	[2021-08-09]
10-Q	[2021-05-17]
S-1	[2021-03-29]
10-K	[2021-03-29]
10-Q	[2020-11-16]
10-Q	[2020-08-14]
S-1	[2020-05-01]

Butterfly Network, Inc. [BFLY] Filings

Butterfly Network, Inc. [BFLY-WT] Filings