0001410578-22-000544.txt : 20220328 0001410578-22-000544.hdr.sgml : 20220328 20220328061200 ACCESSION NUMBER: 0001410578-22-000544 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20220328 DATE AS OF CHANGE: 20220328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Butterfly Network, Inc. CENTRAL INDEX KEY: 0001804176 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-39292 FILM NUMBER: 22773100 BUSINESS ADDRESS: STREET 1: 530 OLD WHITFIELD STREET CITY: GUILFORD STATE: CT ZIP: 06437 BUSINESS PHONE: 203-689-5650 MAIL ADDRESS: STREET 1: 530 OLD WHITFIELD STREET CITY: GUILFORD STATE: CT ZIP: 06437 FORMER COMPANY: FORMER CONFORMED NAME: Longview Acquisition Corp. DATE OF NAME CHANGE: 20200220 10-Q/A 1 tmb-20210930x10qa.htm 10-Q/A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(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, 2021

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, $0.0001 Par Value 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 November 1, 2021, the registrant had 170,830,161 shares of Class A common stock outstanding and 26,426,937 shares of Class B common stock outstanding.

EXPLANATORY NOTE

Butterfly Network, Inc. (the “Company”) has determined that an administrative error occurred in connection with the filing of its Quarterly Report on Form 10-Q for the three months ended September 30, 2021 that was filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2021 (the “Original Report”). While the Original Report was reviewed and approved by the appropriate officers of the Company prior to its filing with the SEC, the Company did not obtain manual or electronic signatures from the Company’s officers whose conformed signatures were set forth in the Original Report, as required by Rule 12b-11 and Rule 302(b) of Regulation S-T under the Securities Exchange Act of 1934, as amended (the “Signature Authorization Rules”). This Amendment No. 1 on Form 10-Q/A (the “Amendment No. 1”) to the Original Report is being filed in order to reflect that the Company has obtained the required signatures to this Amendment No. 1 from its officers, as required by the Signature Authorization Rules.

Except as described above, this Amendment No. 1 does not modify or update disclosure in, or exhibits to, the Original Report. Furthermore, this Amendment No. 1 does not change any previously reported financial results, nor does it reflect events occurring after the date of the Original Report. Information not affected by this Amendment No. 1 remains unchanged and reflects the disclosures made at the time the Original Report was made.

i

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 as of September 30, 2021 and December 31, 2020 (Unaudited)

4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

5

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

40

Item 4.

Controls and Procedures

40

Part II

Other Information

40

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults Upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

42

Signatures

45

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.”

ii

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 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; or
the potential impacts of the COVID-19 pandemic on our business operations or financial condition.

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, among other things, to:

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;
the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably and retain our key employees;
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;
our ability to remediate the material weakness in our internal controls over financial reporting;
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.

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, 2020, 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.

3

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, 

    

2021

    

2020

    

Assets

  

  

Current assets:

  

  

Cash and cash equivalents

$

153,326

$

60,206

Marketable securities

315,099

Accounts receivable, net

 

9,538

 

5,752

Inventories

 

23,820

 

25,805

Current portion of vendor advances

24,975

2,571

Prepaid expenses and other current assets

 

16,753

 

2,998

Total current assets

$

543,511

$

97,332

Property and equipment, net

9,368

6,870

Non-current portion of vendor advances

 

20,601

 

37,390

Other non-current assets

 

6,838

 

5,599

Total assets

$

580,318

$

147,191

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

Current liabilities:

 

  

 

  

Accounts payable

$

5,017

$

16,400

Deferred revenue, current

 

12,015

 

8,443

Accrued purchase commitments, current

 

5,329

 

22,890

Accrued expenses and other current liabilities

22,809

21,962

Total current liabilities

$

45,170

$

69,695

Deferred revenue, non-current

4,878

2,790

Convertible debt

49,528

Loan payable

4,366

Warrant liabilities

56,796

Accrued purchase commitments, non-current

14,200

19,660

Other non-current liabilities

8,013

2,146

Total liabilities

$

129,057

$

148,185

Commitments and contingencies (Note 16)

Convertible preferred stock:

Convertible preferred stock (Series A, B, C and D) $.0001 par value with an aggregate liquidation preference of $0 and $383,829 at September 30, 2021 and December 31, 2020, respectively; 0 and 107,197,118 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively

360,937

Stockholders’ equity (deficit):

Class A common stock $.0001 par value; 600,000,000 and 116,289,600 shares authorized at September 30, 2021 and December 31, 2020, respectively; 170,573,310 and 6,593,291 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

17

1

Class B common stock $.0001 par value; 27,000,000 and 26,946,089 shares authorized at September 30, 2021 and December 31, 2020, respectively; 26,426,937 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

3

Additional paid-in capital

863,240

32,874

Accumulated deficit

(411,999)

(394,806)

Total stockholders’ equity (deficit)

$

451,261

$

(361,931)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

$

580,318

$

147,191

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

4

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, 

    

2021

    

2020

    

2021

    

2020

Revenue:

  

  

  

  

Product

$

10,848

$

8,621

$

33,455

$

25,820

Subscription

 

3,773

 

1,514

 

10,123

 

4,777

Total revenue

$

14,621

$

10,135

$

43,578

$

30,597

Cost of revenue:

 

  

 

  

 

  

 

  

Loss on product purchase commitments

11,623

63,993

11,623

63,993

Product

7,584

14,619

21,090

35,266

Subscription

 

536

 

774

 

1,351

 

1,260

Total cost of revenue

$

19,743

$

79,386

$

34,064

$

100,519

Gross profit

$

(5,122)

$

(69,251)

$

9,514

$

(69,922)

Operating expenses:

Research and development

$

21,654

$

11,971

54,459

36,427

Sales and marketing

 

14,203

 

5,538

 

34,550

 

17,408

General and administrative

 

16,008

 

5,068

 

67,928

 

15,651

Total operating expenses

 

51,865

 

22,577

 

156,937

 

69,486

Loss from operations

$

(56,987)

$

(91,828)

$

(147,423)

$

(139,408)

Interest income

$

893

$

16

1,739

238

Interest expense

 

 

(300)

 

(645)

 

(418)

Change in fair value of warrant liabilities

42,958

130,528

Other income (expense), net

 

(428)

 

(84)

 

(1,320)

 

(183)

Loss before provision for income taxes

$

(13,564)

$

(92,196)

$

(17,121)

$

(139,771)

Provision for income taxes

 

(3)

 

12

 

72

 

32

Net loss and comprehensive loss

$

(13,561)

$

(92,208)

$

(17,193)

$

(139,803)

Net loss per common share attributable to Class A and B common stockholders, basic and diluted

$

(0.07)

$

(15.20)

$

(0.10)

$

(23.20)

Weighted-average shares used to compute net loss per share attributable to Class A and B common stockholders, basic and diluted

196,095,192

6,066,117

165,656,408

6,026,658

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

5

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 September 30, 2020

  

  

  

 

 

  

  

  

  

  

  

  

  

  

  

  

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)

June 30, 2020

107,197,118

$

360,937

6,045,858

$

1

$

$

25,393

$

(279,656)

$

(254,262)

Net loss

(92,208)

(92,208)

Common stock issued upon exercise of stock options

44,602

167

167

Stock-based compensation expense

2,409

2,409

September 30, 2020

107,197,118

$

360,937

6,090,460

$

1

$

$

27,969

$

(371,864)

$

(343,894)

Nine months ended September 30, 2020

  

  

  

 

 

  

  

  

  

  

  

  

  

  

  

  

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, 2019

107,197,118

$

360,937

5,939,950

$

1

$

$

19,782

$

(232,061)

$

(212,278)

Net loss

(139,803)

(139,803)

Common stock issued upon exercise of stock options

150,510

391

391

Stock-based compensation expense

7,796

7,796

September 30, 2020

107,197,118

$

360,937

6,090,460

$

1

$

$

27,969

$

(371,864)

$

(343,894)

Three months ended September 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)

June 30, 2021

$

167,477,126

$

17

26,426,937

$

3

$

844,770

$

(398,438)

$

446,352

Net loss

(13,561)

(13,561)

Common stock issued upon exercise of stock options and warrants

2,966,397

7,634

7,634

Common stock issued upon vesting of restricted stock units

129,787

Stock-based compensation expense

10,836

10,836

September 30, 2021

$

170,573,310

$

17

26,426,937

$

3

$

863,240

$

(411,999)

$

451,261

Nine months ended September 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

(17,193)

(17,193)

Common stock issued upon exercise of stock options and warrants

8,268,869

1

19,322

19,323

Common stock issued upon vesting of restricted stock units

597,021

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

38,921

38,921

September 30, 2021

$

170,573,310

$

17

26,426,937

$

3

$

863,240

$

(411,999)

$

451,261

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)

Nine months ended September 30, 

2021

2020

Cash flows from operating activities:

Net loss

    

$

(17,193)

    

$

(139,803)

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

 

 

Depreciation and amortization

 

1,420

 

904

Non-cash interest expense on convertible debt

389

418

Write-down of inventories

582

6,923

Stock-based compensation expense

38,769

7,727

Change in fair value of warrant liabilities

(130,528)

Other

665

731

Changes in operating assets and liabilities:

 

Accounts receivable

(3,674)

(1,475)

Inventories

 

1,432

 

(12,426)

Prepaid expenses and other assets

(8,896)

(340)

Vendor advances

(5,615)

5,003

Accounts payable

(11,276)

3,236

Deferred revenue

5,660

2,662

Accrued purchase commitments

(23,021)

63,376

Accrued expenses and other liabilities

4,876

1,987

Net cash used in operating activities

$

(146,410)

$

(61,077)

Cash flows from investing activities:

 

  

 

  

Purchases of marketable securities

(1,018,095)

Sales of marketable securities

702,152

Purchases of property and equipment

 

(3,826)

 

(2,597)

Net cash used in investing activities

$

(319,769)

$

(2,597)

 

 

Cash flows from financing activities:

 

 

Proceeds from exercise of stock options and warrants

 

19,314

 

391

Net proceeds from equity infusion from the Business Combination

548,403

Proceeds from loan payable

 

4,317

Proceeds from issuance of convertible debt

 

20,650

Payment of loan payable

(4,366)

Payments of debt issuance costs

(52)

Net cash provided by financing activities

$

563,299

$

25,358

Net (decrease) increase in cash, cash equivalents and restricted cash

$

97,120

$

(38,316)

Cash, cash equivalents and restricted cash, beginning of period

60,206

90,002

Cash, cash equivalents and restricted cash, end of period

$

157,326

$

51,686

Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets

Cash and cash equivalents

$

153,326

$

51,686

Restricted cash

4,000

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

$

157,326

$

51,686

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.

The Company is an innovative digital health business whose mission is to democratize healthcare by making medical imaging accessible to everyone around the world. Butterfly’s solution uses a unique combination of software and hardware technology to enable medical imaging to drive more clinical insight at patient point-of-care. The hardware platform works alongside cloud-based software that is intended to make the product easy to use, integrate with the clinical workflow and be accessible on a user’s smartphone, tablet and/or healthcare enterprise systems.

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

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, 2020 and 2019. All intercompany balances and transactions are eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2020, 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. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company reclassified the loss on product purchase commitments that was recorded within cost of product revenue on the condensed consolidated statement of operations and comprehensive loss to be presented separately.

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 nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2021, or any other period.

Except as described elsewhere in this Note 2, including under the heading “Recent Accounting Pronouncements Adopted”, and Note 3 “Business Combination”, 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, 2020 and 2019.

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

8

future developments that are highly uncertain, including those that result from new information that may emerge concerning COVID-19, the actions taken to contain or treat COVID-19 and the economic impacts of COVID-19.

The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19, the actions to contain it or address its impact and the economic impact on local, regional, national and international markets. 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 condensed consolidated financial statements.

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

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, marketable securities and accounts receivable. At September 30, 2021, substantially all of the Company’s marketable securities were invested in mutual funds with one financial institution. At September 30, 2021 and December 31, 2020, 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 significant losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents and marketable securities.

As of September 30, 2021 and December 31, 2020, no customer accounts for more than 10% of the Company’s accounts receivable. For the three and nine months ended September 30, 2021 and 2020, 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. Except with respect to estimates related to the warrant liabilities, 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, 2020.

Investments in Marketable Securities

The Company’s investments in marketable securities are ownership interests in fixed income mutual funds. The equity securities are stated at fair value, as determined by quoted market prices. As the securities have readily determinable fair value, unrealized gains and losses are reported as other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. Subsequent gains or losses realized upon redemption or sale of these securities are also recorded as other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. The Company considers all of its investments in marketable securities as available for use in current operations and therefore classifies these securities within current assets on the condensed consolidated balance sheets.  For the three and

9

nine months ended September 30, 2021, the Company recognized $0.2 million and $0.2 million, respectively, of unrealized losses that relate to equity securities still held as of September 30, 2021.

Restricted Cash

Restricted cash includes deposits in financial institutions used to secure a lease agreement. The Company classified the amounts within other non-current assets as the deposits are used to secure a long-term lease. The amount shown as restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the condensed consolidated statement of cash flows.

Warrant Liability

The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were issued as one-third of a warrant per unit during the Company’s initial public offering on May 26, 2020 (the “IPO”) and warrants sold in a private placement to Longview’s sponsor (the “Private Warrants”). The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since the Public Warrants and Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as long-term liabilities on the balance sheet at fair value upon the Closing of the Business Combination, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive loss at each reporting date.

Recent Accounting Pronouncements Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract (Topic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As a result, eligible implementation costs incurred in a cloud computing arrangement that is a service contract are capitalized as prepaid expenses and other current assets on the balance sheet, recognized on a straight-line basis over its life in the statement of operations and comprehensive loss in the same line item as the fees for the associated arrangement, and the related activity is generally classified as an operating activity in the statement of cash flows. The Company prospectively adopted such guidance on January 1, 2021 and there was no material effect of adoption on the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021.

Recent Accounting Pronouncements Issued but Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which outlines a comprehensive lease accounting model and supersedes the prior 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 their financial statements as of June 3, 2020 can defer the new guidance for one year. For public entities, this guidance was effective for annual reporting periods beginning January 1, 2019, including interim periods within that annual reporting period. For other entities, this guidance is effective for the annual reporting period beginning January 1, 2022, and interim reporting periods within annual reporting periods beginning January 1, 2023. This will require application of the new accounting guidance at the beginning of the earliest comparative period presented in the year of adoption. The impact of the Company's adoption of Topic 842 to the condensed consolidated financial statements will be to recognize the operating lease commitments as operating lease liabilities and right-of-use assets upon adoption, which will result in an increase in the assets and liabilities recorded on the balance sheet. The Company is continuing its assessment, which may identify additional impacts Topic 842 will have on the condensed consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that,

10

when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. For public entities, this guidance was effective for annual reporting periods beginning January 1, 2020, including interim periods within that annual reporting period. For other entities, this guidance is effective 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 the adoption of this pronouncement will have on the Company’s condensed consolidated financial statements and disclosures.

Note 3. Business Combination

On February 12, 2021 (the “Closing Date”), the Company consummated the previously announced 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 incorporated on November 12, 2020 (“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.”

The Merger is 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. Under this method of accounting, Longview is treated as the “acquired” company for accounting purposes and the Business Combination is treated as the equivalent of Legacy Butterfly issuing stock for the net assets of Longview, accompanied by a recapitalization. The net assets of Longview will be stated at historical cost, with no goodwill or other intangible assets recorded. Reported shares and earnings 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 ratio established pursuant to the Business Combination Agreement (1:1.0383).

Pursuant to the Merger, at the Effective Time of the Merger (the “Effective Time”):

each share of Legacy Butterfly capital stock (other than the Legacy Butterfly Series A preferred stock) that was issued and outstanding immediately prior to the Effective Time was automatically canceled and converted into the right to receive 1.0383 shares of the Company’s Class A common stock, rounded down to the nearest whole number of shares;
each share of Legacy Butterfly Series A preferred stock that was issued and outstanding immediately prior to the Effective Time was automatically canceled and converted into the right to receive 1.0383 shares of the Company’s Class B common stock, rounded down to the nearest whole number of shares;
each option to purchase shares of Legacy Butterfly 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 Butterfly common stock subject to such option immediately prior to the Effective Time multiplied by 1.0383, 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 1.0383 and rounded up to the nearest whole cent;
each Legacy Butterfly 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, rounded to the nearest whole share, equal to the number of shares of Legacy Butterfly common

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stock subject to such Legacy Butterfly restricted stock unit immediately prior to the Effective Time multiplied by 1.0383; and
the principal amount plus accrued but unpaid interest, if any, on the Legacy Butterfly convertible notes outstanding as of immediately prior to the Effective Time was automatically canceled and converted into the right to receive shares of the Company’s Class A common stock, with such shares of the Company’s Class A common stock calculated by dividing the outstanding principal plus accrued interest, if any, of each Legacy Butterfly convertible note by $10.00, rounded down to the nearest whole number of shares.

In addition, on February 12, 2021, Longview filed the Second Amended and Restated Certificate of Incorporation (the “Restated Certificate”) with the Secretary of State of the State of Delaware, which became effective simultaneously with the Effective Time. As a consequence of filing the Restated 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 is subject to a “sunset” provision if Jonathan M. Rothberg, Ph.D., the founder of Legacy Butterfly and Chairman 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.

In addition, concurrently with the execution of the Business Combination Agreement, on November 19, 2020, Longview entered into subscription agreements (the “Subscription Agreements”) with certain institutional investors (the “PIPE Investors”), pursuant to which the PIPE Investors purchased, immediately prior to the Closing, an aggregate of 17,500,000 shares of Longview Class A common stock at a purchase price of $10.00 per share (the “PIPE Financing”).

The total number of shares of the Company’s Class A common stock outstanding immediately following the Closing was approximately 164,862,470, comprising:

95,633,659 shares of the Company’s Class A common stock issued to Legacy Butterfly stockholders (other than certain holders of Legacy Butterfly Series A preferred stock) and holders of Legacy Butterfly convertible notes in the Merger;
17,500,000 shares of the Company’s Class A common stock issued in connection with the Closing to the PIPE Investors pursuant to the PIPE Financing;
10,350,000 shares of the Company’s Class A common stock issued to holders of shares of Longview Class B common stock outstanding at the Effective Time; and
41,378,811 shares of the Company’s Class A common stock held by holders of Longview Class A common stock outstanding at the Effective Time.

The total number of shares of the Company’s Class B common stock issued at the Closing was approximately 26,426,937. Immediately following the Closing, Dr. Rothberg held approximately 76.2% 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 corporate governance standards of the New York Stock Exchange (the “NYSE”).

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 include warrant

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liabilities of $187.3 million and other insignificant assets and liabilities. The Company received proceeds of $0.6 million related to other transactions that occurred at the same time as the Business Combination.

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 nine months ended September 30, 2021 and 2020:

Pattern of

Three months ended September 30, 

Nine months ended September 30, 

Recognition

2021

2020

2021

2020

By Product Type:

   

   

  

   

  

   

  

   

  

   

Devices and accessories

Point-in-time

$

10,848

$

8,621

$

33,455

$

25,820

Subscription services and other services

Over time

3,773

1,514

10,123

4,777

Total revenue

$

14,621

$

10,135

$

43,578

$

30,597

By Geographical Market:

United States

$

10,220

$

7,453

$