Filed Pursuant to Rule 424(b)(3)

Registration No. 333-254836

PROSPECTUS SUPPLEMENT NO. 3

To Prospectus dated April 28, 2022

 

BUTTERFLY NETWORK, INC. 

Up to 110,352,371 Shares of Class A Common Stock

Up to 26,426,937 Shares of Class B Common Stock

Up to 6,853,333 Warrants

This prospectus supplement no. 3 supplements the prospectus dated April 28, 2022, as supplemented from time to time (the “Prospectus”), relating to the issuance by us of up to an aggregate of 20,652,790 shares of our Class A common stock, par value $0.0001 per share (“Class A common stock”), which consists of (i) up to 6,853,333 shares of Class A common stock that are issuable upon the exercise of private placement warrants (the “Private Placement Warrants”) originally issued in a private placement in connection with the initial public offering of our predecessor company, Longview Acquisition Corp., a Delaware corporation (“Longview”), at an exercise price of $11.50 per share of Class A common stock, and (ii) up to 13,799,457 shares of Class A common stock that are issuable upon the exercise of 13,799,457 warrants issued in connection with the initial public offering of Longview (the “Public Warrants,” and together with the Private Placement Warrants, the “Warrants”).

The Prospectus and prospectus supplements also relate to the resale from time to time by the Selling Securityholders named in the Prospectus (the “Selling Securityholders”) of up to (i) 6,853,333 Private Placement Warrants, (ii) 6,853,333 shares of Class A common stock that may be issued upon exercise of the Private Placement Warrants, (iii) 89,699,581 shares of Class A common stock held by Longview’s sponsor, Longview Investors LLC (the “Sponsor”) and certain of its transferees (the “Founder Shares”), shares of Class A common stock issued in the PIPE Financing (as defined in the Prospectus), and shares of Class A common stock issued to our directors, officers and affiliates and the directors, officers and affiliates of Legacy Butterfly (as defined in the Prospectus) pursuant to the Business Combination Agreement (as defined in the Prospectus), including shares of Class A common stock that may be issued upon the exercise of stock options (the “Options”) and the vesting of restricted stock units or upon the conversion of Class B common stock, par value $0.0001 per share (“Class B common stock”), and (iv) 26,426,937 shares of Class B common stock issued pursuant to the Business Combination Agreement.

The Prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in the Prospectus.

We will not receive any proceeds from the sale of shares of Class A common stock, shares of Class B common stock or Private Placement Warrants by the Selling Securityholders or of shares of Class A common stock by us pursuant to the Prospectus, except with respect to amounts received by us upon exercise of the Warrants or the Options. However, we will pay the expenses, other than any underwriting discounts and commissions, associated with the sale of securities pursuant to the Prospectus.

We registered the securities for resale pursuant to the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by the Prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer and sell the securities covered by the Prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares or Warrants in the section entitled “Plan of Distribution” in the Prospectus. 

This prospectus supplement incorporates into the Prospectus the information contained in our attached quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission on August 3, 2022.

You should read this prospectus supplement in conjunction with the Prospectus, including any supplements and amendments thereto. This prospectus supplement is qualified by reference to the Prospectus except to the extent that the information in the prospectus supplement supersedes the information contained in the Prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any supplements and amendments thereto.

Our Class A common stock and Public Warrants are listed on the NYSE under the symbols “BFLY” and “BFLY WS,” respectively. On August 2, 2022, the closing price of our Class A common stock was $4.86 and the closing price for our Public Warrants was $0.83.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 12 of the Prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement of the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is August 3, 2022.

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 June 30, 2022

or

☐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.)
530 Old Whitfield Street Guilford, Connecticut	06437
(Address of principal executive offices)	(Zip Code)

(203) 689-5650

(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 July 29, 2022, the registrant had 173,115,829 shares of Class A common stock outstanding and 26,426,937 shares of Class B common stock outstanding.

TABLE OF CONTENTS

		Page
	Cautionary Statement Regarding Forward-Looking Statements	2
Part I	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	4
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)	5
	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	29
Item 4.	Controls and Procedures	29
Part II	Other Information	29
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		34

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “Butterfly” mean Butterfly Network, Inc. (formerly Longview Acquisition Corp.) and our subsidiaries. On February 12, 2021 (the “Closing Date”), Longview Acquisition Corp., a Delaware corporation (“Longview” and after the Business Combination described herein, the “Company”), consummated a business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of November 19, 2020 (the “Business Combination Agreement”), by and among Longview, Clay Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Butterfly Network, Inc., a Delaware corporation (“Legacy Butterfly”). Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”, and such completion, the “Closing”), Merger Sub merged with and into Legacy Butterfly, with Legacy Butterfly surviving the Business Combination as a wholly-owned subsidiary of Longview (the “Merger”). In connection with the Transactions, Longview changed its name to “Butterfly Network, Inc.” and Legacy Butterfly changed its name to “BFLY Operations, Inc.”

i

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;

● our financial performance; and

● the potential impacts of the COVID-19 pandemic on our business, financial condition and results of operations.

These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or 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;

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

● the impact of the COVID-19 pandemic on 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 fiscal year ended December 31, 2021, as amended, in Item 1A of Part II of this quarterly report, and in other filings that we make with the Securities and Exchange Commission, or SEC. The risks described under the heading “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.

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	310,802	$	422,841
Accounts receivable, net		12,691		11,936
Inventories		65,587		36,243
Current portion of vendor advances		16,784		27,500
Prepaid expenses and other current assets		19,647		13,384
Total current assets	$	425,511	$	511,904
Property and equipment, net		28,577		14,703
Non-current portion of vendor advances		12,168		12,782
Operating lease assets		22,981		24,083
Other non-current assets		7,400		8,493
Total assets	$	496,637	$	571,965
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,518	$	5,798
Deferred revenue, current		15,572		13,071
Accrued purchase commitments, current		18,119		5,329
Accrued expenses and other current liabilities		24,998		25,631
Total current liabilities	$	62,207	$	49,829
Deferred revenue, non-current		6,954		5,476
Warrant liabilities		8,261		26,229
Accrued purchase commitments, non-current		1,410		14,200
Operating lease liabilities		30,422		27,690
Other non-current liabilities		694		850
Total liabilities	$	109,948	$	124,274
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock $.0001 par value; 600,000,000 shares authorized at June 30, 2022 and December 31, 2021; 172,816,532 and 171,613,049 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		17		17
Class B common stock $.0001 par value; 27,000,000 shares authorized at June 30, 2022 and December 31, 2021; 26,426,937 shares issued and outstanding at June 30, 2022 and December 31, 2021		3		3
Additional paid-in capital		894,162		874,886
Accumulated deficit		(507,493)		(427,215)
Total stockholders’ equity	$	386,689	$	447,691
Total liabilities and stockholders’ equity	$	496,637	$	571,965

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

3

BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Revenue:
Product	$	13,429	$	13,012	$	24,443	$	22,608
Subscription		5,786		3,501		10,346		6,350
Total revenue	$	19,215	$	16,513	$	34,789	$	28,958
Cost of revenue:
Product		6,799		7,858		12,947		13,506
Subscription		1,844		435		2,927		814
Total cost of revenue	$	8,643	$	8,293	$	15,874	$	14,320
Gross profit	$	10,572	$	8,220	$	18,915	$	14,638
Operating expenses:
Research and development	$	23,220	$	17,088		46,843		32,804
Sales and marketing		16,438		10,540		31,640		20,347
General and administrative		19,369		17,279		38,419		51,920
Total operating expenses		59,027		44,907		116,902		105,071
Loss from operations	$	(48,455)	$	(36,687)	$	(97,987)	$	(90,433)
Interest income	$	260	$	607		270		846
Interest expense		—		(7)		—		(645)
Change in fair value of warrant liabilities		12,805		33,458		17,968		87,570
Other income (expense), net		(388)		(262)		(488)		(895)
Loss before provision for income taxes	$	(35,778)	$	(2,891)	$	(80,237)	$	(3,557)
Provision for income taxes		23		51		41		75
Net loss and comprehensive loss	$	(35,801)	$	(2,942)	$	(80,278)	$	(3,632)
Net loss per common share attributable to Class A and B common stockholders, basic and diluted	$	(0.18)	$	(0.02)	$	(0.40)	$	(0.02)
Weighted-average shares used to compute net loss per share attributable to Class A and B common stockholders, basic and diluted		199,399,356		192,180,141		199,200,909		149,286,700

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

4

BUTTERFLY NETWORK, INC.

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

(In thousands, except share amounts)

(Unaudited)

Three months ended June 30, 2021
	Convertible			Class A			Class B
	Preferred			Common			Common			Additional				Total
	Stock			Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity (Deficit)
March 31, 2021	—	$	—	164,862,470	$	16	26,426,937	$	3	$	831,640	$	(395,496)	$	436,163
Net loss	—		—	—		—	—		—		—		(2,942)		(2,942)
Common stock issued upon exercise of stock options and warrants	—		—	2,147,422		1	—		—		5,375		—		5,376
Common stock issued upon vesting of restricted stock units	—		—	467,234		—	—		—		—		—		—
Stock-based compensation expense	—		—	—		—	—		—		7,755		—		7,755
June 30, 2021	—	$	—	167,477,126	$	17	26,426,937	$	3	$	844,770	$	(398,438)	$	446,352
Six months ended June 30, 2021
	Convertible			Class A			Class B
	Preferred			Common			Common			Additional				Total
	Stock			Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity (Deficit)
December 31, 2020	107,197,118	$	360,937	6,593,291	$	1	—	$	—	$	32,874	$	(394,806)	$	(361,931)
Net loss	—		—	—		—	—		—		—		(3,632)		(3,632)
Common stock issued upon exercise of stock options and warrants	—		—	5,302,472		1	—		—		11,688		—		11,689
Common stock issued upon vesting of restricted stock units	—		—	467,234		—	—		—		—		—		—
Conversion of convertible preferred stock	(107,197,118)		(360,937)	80,770,178		8	26,426,937		3		360,926		—		360,937
Conversion of convertible debt	—		—	5,115,140		1	—		—		49,916		—		49,917
Net equity infusion from the Business Combination	—		—	69,228,811		6	—		—		361,281		—		361,287
Stock-based compensation expense	—		—	—		—	—		—		28,085		—		28,085
June 30, 2021	—	$	—	167,477,126	$	17	26,426,937	$	3	$	844,770	$	(398,438)	$	446,352

Three months ended June 30, 2022
	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity
March 31, 2022	172,523,557	$	17	26,426,937	$	3	$	884,336	$	(471,692)	$	412,664
Net loss	—		—	—		—		—		(35,801)		(35,801)
Common stock issued upon exercise of stock options and warrants	79,651		—	—		—		159		—		159
Common stock issued upon vesting of restricted stock units, net	213,324		—	—		—		—		—		—
Stock-based compensation expense	—		—	—		—		9,667		—		9,667
June 30, 2022	172,816,532	$	17	26,426,937	$	3	$	894,162	$	(507,493)	$	386,689

5

Six months ended June 30, 2022
	Class A			Class B
	Common			Common			Additional				Total
	Stock			Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Equity (Deficit)
December 31, 2021	171,613,049	$	17	26,426,937	$	3	$	874,886	$	(427,215)	$	447,691
Net loss	—		—	—		—		—		(80,278)		(80,278)
Common stock issued upon exercise of stock options and warrants	343,667		—	—		—		810		—		810
Common stock issued upon vesting of restricted stock units, net	859,816		—	—		—		(106)		—		(106)
Stock-based compensation expense	—		—	—		—		18,572		—		18,572
June 30, 2022	172,816,532	$	17	26,426,937	$	3	$	894,162	$	(507,493)	$	386,689

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

6

BUTTERFLY NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six months ended June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(80,278)	$	(3,632)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,190		915
Non-cash interest expense on convertible debt		—		389
Stock-based compensation expense		18,015		28,035
Change in fair value of warrant liabilities		(17,968)		(87,570)
Other		137		498
Changes in operating assets and liabilities:
Accounts receivable		(909)		(1,979)
Inventories		(29,344)		(21,113)
Prepaid expenses and other assets		(3,493)		(6,352)
Vendor advances		11,330		(3,519)
Accounts payable		(2,437)		(11,088)
Deferred revenue		3,979		4,501
Change in operating lease assets and liabilities		1,118		(722)
Accrued expenses and other liabilities		(569)		1,708
Net cash used in operating activities	$	(98,229)	$	(99,929)
Cash flows from investing activities:
Purchases of marketable securities		—		(692,514)
Sales of marketable securities		—		202,000
Purchases of property and equipment, including capitalized software		(11,578)		(1,829)
Net cash used in investing activities	$	(11,578)	$	(492,343)
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants		810		11,686
Net proceeds from equity infusion from the Business Combination		—		548,403
Payment of loan payable		—		(4,366)
Other financing activities		(101)		(52)
Net cash provided by financing activities	$	709	$	555,671
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(109,098)	$	(36,601)
Cash, cash equivalents and restricted cash, beginning of period		426,841		60,206
Cash, cash equivalents and restricted cash, end of period	$	317,743	$	23,605

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

7

BUTTERFLY NETWORK, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Description of Business

Butterfly Network, Inc., formerly known as Longview Acquisition Corp. (the “Company” or “Butterfly”), was incorporated in Delaware on February 4, 2020. The Company’s legal name became Butterfly Network, Inc. following the closing of the business combination discussed in Note 3 “Business Combination”. The prior period financial information represents the financial results and condition of BFLY Operations, Inc. (formerly Butterfly Network, Inc.).

The Company is an innovative digital health business transforming care with hand-held, 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 operates wholly-owned subsidiaries in Australia, Germany, Netherlands, the United Kingdom and Taiwan.

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 Butterfly Network, Inc. and its wholly-owned subsidiaries 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”) regarding interim financial reporting. Certain information and note disclosures normally included in the 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 Company’s audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020. All intercompany balances and transactions are eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2021, 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, required on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal 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 six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2022, or any other period.

Except as described elsewhere in the notes, there have been no material changes to the Company’s significant accounting policies as described in the audited consolidated financial statements as of December 31, 2021 and 2020.

COVID-19 Outbreak

The COVID-19 pandemic that began in 2020 has created significant global economic uncertainty and has impacted the Company’s operating results, financial condition and cash flows. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain, including those that result from new information that may emerge concerning COVID-19, the economic impacts of the COVID-19 pandemic and the actions taken to contain the COVID-19 pandemic or address its impacts.

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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 the estimates reflected in its financial statements.

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. At June 30, 2022, substantially all of the Company’s cash and cash equivalents were invested in money market accounts at 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 on cash and cash equivalents.

One customer accounted for 14% and 15% of the Company’s accounts receivable as of June 30, 2022 and December 31, 2021, respectively. For the three and six months ended June 30, 2022 and 2021, no customer accounts for more than 10% of the total revenues.

Segment Information

The Company’s Chief Operating Decision Maker, its Chief Executive Officer (“CEO”), reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating its financial performance. Accordingly, the Company has determined that it operates in a single reportable segment. Substantially all of the Company’s long-lived assets are located in the United States. Since the Company operates in one operating segment, all required financial segment information 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 audited consolidated financial statements as of December 31, 2021.

Note 3. Business Combination

On February 12, 2021 (the “Closing” or the “Closing Date”), the Company consummated the business combination (the “Business Combination”) with Butterfly Network, Inc. (“Legacy Butterfly”). In connection with the Business Combination and the transactions related to the Business Combination (the “Transactions”), Legacy Butterfly merged with and into a wholly owned subsidiary of the Company, with Legacy Butterfly surviving the Business Combination as a wholly owned subsidiary of the Company (the “Merger”). The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP primarily due to the fact that Legacy Butterfly stockholders continue to control the Company following the Closing of the Business Combination.

The most significant change in the post-combination Company’s reported financial position and results was an increase in cash of $589.5 million. The Company as the accounting acquirer incurred $11.4 million in transaction costs relating to the Business Combination, which has been offset against the gross proceeds recorded in additional paid-in capital in the condensed consolidated statements of changes in convertible preferred stock and stockholders’ equity (deficit). The Company on the date of Closing used proceeds of the Transactions to pay off $30.9 million, representing all significant liabilities of the acquiree excluding the warrant liability.  As of the date of the Closing, the Company recorded net liabilities of $186.5 million with a corresponding offset to additional paid-in capital. The net liabilities included warrant liabilities of $187.3 million and other insignificant assets and liabilities.

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Note 4. 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 their revenue streams. The following table summarizes the Company’s disaggregated revenues (in thousands) for the three and six months ended June 30, 2022 and 2021:

	Pattern of	Three months ended June 30,				Six months ended June 30,
	Recognition	2022		2021		2022		2021
By Product Type:
Devices and accessories	Point-in-time	$	13,429	$	13,012	$	24,443	$	22,608
Subscription services and other services	Over time		5,786		3,501		10,346		6,350
Total revenue		$	19,215	$	16,513	$	34,789	$	28,958
By Geographical Market:
United States		$	12,995	$	11,146	$	24,299	$	20,042
International			6,220		5,367		10,490		8,916
Total revenue		$	19,215	$	16,513	$	34,789	$	28,958

Contract Balances

Contract balances represent amounts presented in the condensed 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 cash consideration received from customers 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 Company recognizes a receivable when it has an unconditional right to payment, and payment terms are typically 30 days for all product and service sales. The allowance for doubtful accounts was $0.4 million as of June 30, 2022 and December 31, 2021.

The amount of revenue recognized during the three months ended June 30, 2022 and 2021 that was included in the deferred revenue balance at the beginning of the period was $5.3 million and $3.6 million, respectively. The amount of revenue recognized during the six months ended June 30, 2022 and 2021 that was included in the deferred revenue balance at the beginning of the period was $8.4 million and $5.6 million, respectively.

The Company incurs incremental costs of obtaining contracts and costs of fulfilling contracts with customers. The amount of costs capitalized for the periods presented herein was not significant.

Transaction Price Allocated to Remaining Performance Obligations

On June 30, 2022, the Company had $26.2 million of remaining performance obligations. The Company expects to recognize 68% of its remaining performance obligations as revenue in the next twelve months, and an additional 32% thereafter.

Note 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.

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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.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued 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 periods ended June 30, 2022 and December 31, 2021.

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 on May 26, 2020 and warrants sold in a private placement to Longview’s sponsor (the “Private Warrants”). As of June 30, 2022, there were an aggregate of 13,799,404 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 statement of operations and comprehensive loss. During the three and six months ended June 30, 2022 and 2021, 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 determined the fair value of its Public Warrants as Level 1 financial instruments, as they are traded in active markets. 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 Private Warrants are classified as Level 2 financial instruments.

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
June 30, 2022:
Warrants:
Public Warrants	$	5,520	$	5,520	$	—	$	—
Private Warrants		2,741		—		2,741		—
Total liabilities at fair value on a recurring basis	$	8,261	$	5,520	$	2,741	$	—
December 31, 2021:
Warrants:
Public Warrants	$	17,525	$	17,525	$	—	$	—
Private Warrants		8,704		—		8,704		—
Total liabilities at fair value on a recurring basis	$	26,229	$	17,525	$	8,704	$	—

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Note 6. Inventories

A summary of inventories is as follows at June 30, 2022 and December 31, 2021 (in thousands):

	June 30,		December 31,
	2022		2021
Raw materials	$	48,636		19,853
Work-in-progress		2,851		1,122
Finished goods		14,100		15,268
Total inventories	$	65,587	$	36,243

Work-in-progress represents inventory items in intermediate stages of production by third-party manufacturers. For the three and six months ended June 30, 2022 and 2021, net realizable value inventory adjustments and excess and obsolete inventory charges were not significant and were recognized in product cost of revenues.

Note 7. Property and Equipment, Net

The Company’s property and equipment, net consists of the following at June 30, 2022 and December 31, 2021 (in thousands):

	June 30,		December 31,
	2022		2021
Property and equipment, gross	$	36,091	$	20,079
Less: accumulated depreciation and amortization		(7,514)		(5,376)
Property and equipment, net	$	28,577	$	14,703

The Company excluded $1.0 million of accrued property and equipment as of June 30, 2022 from the cash used in investing activities on the condensed consolidated statements of cash flows. The amount excluded as of June 30, 2021 was not significant.

Note 8. Restricted Cash

A reconciliation of cash, cash equivalents and restricted cash as of June 30, 2022 and 2021, from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows is as follows:

	June 30,
	2022		2021
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	310,802	$	19,605
Restricted cash included within prepaid expenses and other current assets		2,941		—
Restricted cash included within other non-current assets		4,000		4,000
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	317,743	$	23,605

In the second quarter of 2021, the Company delivered a $4.0 million letter of credit for the Company’s Burlington, MA lease, secured by a deposit of the same amount with a financial institution that issued the letter of credit. The deposit is classified as restricted cash and included in other non-current assets on the condensed consolidated balance sheets.

In the first quarter of 2022, the Company received $4.8 million from the Bill & Melinda Gates Foundation (“BMGF”). Due to a legal restriction in the agreement with the BMGF, these funds are classified as restricted cash and included in prepaid expenses and other current assets on the condensed consolidated balance sheets. As of June 30, 2022, the Company has released $1.8 million of the BMGF funds from restricted cash as the Company partially fulfilled its obligations under the agreement.

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Note 9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at June 30, 2022 and December 31, 2021 (in thousands):

	June 30,		December 31,
	2022		2021
Employee compensation	$	8,884	$	12,746
Customer deposits		1,375		1,850
Accrued warranty liability		283		266
Non-income tax		1,551		2,477
Professional fees		5,393		2,797
Current portion of operating lease liabilities		1,745		1,391
Other		5,767		4,104
Total accrued expenses and other current liabilities	$	24,998	$	25,631

Warranty expense activity for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Balance, beginning of period	$	1,094	$	1,186	$	1,116	$	1,826
Warranty provision charged to operations		5		167		165		(225)
Warranty claims		(124)		(192)		(306)		(440)
Balance, end of period	$	975	$	1,161	$	975	$	1,161

The Company classifies its accrued warranty liability based on the timing of expected warranty activity. The future costs of expected activity greater than one year is recorded within other non-current liabilities on the condensed consolidated balance sheet.

Note 10. Equity Incentive Plans

During the three and six months ended June 30, 2022, there were no significant changes to the Company’s 2012 Employee, Director and Consultant Equity Incentive Plan, as amended, (the “2012 Plan”) and the Company’s Amended and Restated 2020 Equity Incentive Plan (the “2020 Plan”). In the fiscal year 2022, pursuant to the terms of the 2020 Plan, the number of shares that may be issued was increased automatically by 4% of the number of outstanding shares of common stock on January 1, 2022.

Stock option activity

The following table summarizes the changes in the Company’s outstanding stock options for the six months ended June 30, 2022:

	Number of
	Options
Outstanding at December 31, 2021	16,243,532
Granted	869,778
Exercised	(343,567)
Forfeited	(1,224,937)
Outstanding at June 30, 2022	15,544,806

Each award will vest based on continued service per the award agreement. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The grant date fair value was determined using similar methods and assumptions as those previously disclosed by the Company.

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Restricted stock unit (“RSU”) activity

The following table summarizes the changes in the Company’s outstanding restricted stock units for the six months ended June 30, 2022:

	Number of
	RSUs
Outstanding at December 31, 2021	3,958,825
Granted	10,663,776
Vested	(879,515)
Forfeited	(967,855)
Outstanding at June 30, 2022	12,775,231

Generally, each award will vest based on continued service per the award agreement. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of restricted stock units was estimated on the date of grant based on the fair value of the Company’s Class A common stock.

The Company’s total stock-based compensation expense for all equity awards for the periods presented is as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Cost of revenue – subscription	$	33	$	1	$	42	$	3
Research and development		3,595		1,562		6,374		2,953
Sales and marketing		2,128		2,085		3,899		3,758
General and administrative		3,529		4,090		7,700		21,321
Total stock-based compensation expense	$	9,285	$	7,738	$	18,015	$	28,035

Note 11. Net Loss Per Share

We compute net loss per share of Class A and Class B common stock using the two-class method. Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of each class of the Company’s common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of the Company’s common stock, including those presented in the table below, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of the Company’s common stock outstanding would have been anti-dilutive.

As the Company uses the two-class method required for companies with multiple classes of common stock, the following table presents the calculation of basic and diluted net loss per share for each class of the Company’s common stock outstanding (in thousands, except share and per share amounts):

Three months ended June 30, 2022
					Total
	Class A		Class B		Common Stock
Numerator:
Allocation of undistributed earnings	$	(31,056)	$	(4,745)	$	(35,801)
Numerator for basic and diluted net loss per share – loss available to common stockholders	$	(31,056)	$	(4,745)	$	(35,801)
Denominator:
Weighted-average common shares outstanding		172,972,419		26,426,937		199,399,356
Denominator for basic and diluted net loss per share – weighted-average common stock		172,972,419		26,426,937		199,399,356
Basic and diluted net loss per share	$	(0.18)	$	(0.18)	$	(0.18)

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Three months ended June 30, 2021
					Total
	Class A		Class B		Common Stock
Numerator:
Allocation of undistributed earnings	$	(2,537)	$	(405)	$	(2,942)
Numerator for basic and diluted net loss per share – loss available to common stockholders	$	(2,537)	$	(405)	$	(2,942)
Denominator:
Weighted-average common shares outstanding		165,753,204		26,426,937		192,180,141
Denominator for basic and diluted net loss per share – weighted-average common stock		165,753,204		26,426,937		192,180,141
Basic and diluted net loss per share	$	(0.02)	$	(0.02)	$	(0.02)

Six months ended June 30, 2022
					Total
	Class A		Class B		Common Stock
Numerator:
Allocation of undistributed earnings	$	(69,628)	$	(10,650)	$	(80,278)
Numerator for basic and diluted net loss per share – loss available to common stockholders	$	(69,628)	$	(10,650)	$	(80,278)
Denominator:
Weighted-average common shares outstanding		172,773,972		26,426,937		199,200,909
Denominator for basic and diluted net loss per share – weighted-average common stock		172,773,972		26,426,937		199,200,909
Basic and diluted net loss per share	$	(0.40)	$	(0.40)	$	(0.40)

Six months ended June 30, 2021
					Total
	Class A		Class B		Common Stock
Numerator:
Allocation of undistributed earnings	$	(3,138)	$	(494)	$	(3,632)
Numerator for basic and diluted net loss per share – loss available to common stockholders	$	(3,138)	$	(494)	$	(3,632)
Denominator:
Weighted-average common shares outstanding		128,991,979		20,294,721		149,286,700
Denominator for basic and diluted net loss per share – weighted-average common stock		128,991,979		20,294,721