Beta Bionics, Inc.

Net Sales

In May 2023, the iLet was cleared by the FDA for the treatment of T1D and we began commercializing the iLet in the United States. We generate product revenue from the sale of the iLet and single-use products that are used together with the iLet, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to a user’s body. We are able to recognize revenue when control of the promised goods and services is passed to the customer, which we have identified as our distributor and pharmacy partners. Revenue is recognized in the amount of the consideration received net of any estimated returns and estimated variable consideration adjustments, including rebates, chargebacks and patient assistance, all of which differ by product and sales mix. Revenue is recognized either over time or at a point in time, depending on when control of the associated performance obligation is transferred to the customer.

Cost of Sales

Cost of sales includes raw materials, labor costs, manufacturing overhead expenses, royalties, freight, import tariffs, scrap and reserves for expected warranty costs and excess and obsolete inventory. Manufacturing overhead expenses include expenses relating to manufacturing engineering, material procurement, inventory and quality control, facilities, depreciation, information technology and operations supervision and management.

Gross Profit and Gross Margin

Gross profit and gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by various factors, including the timing of new patient adoption, iLet and associated single-use products sales, reimbursement, length of product usage, our introduction of new products, including the costs associated with producing and bringing those new products to market, cost reduction and operational efficiency. As a result of the small revenue recognized at or around the date the iLet is sold in the PBP channel, we absorb initial negative gross margin. iLet sales in the PBP channel are generally expected to start generating cumulative positive gross margin for us beyond the third month the user uses the iLet and continues to purchase single-use products. Given the differences in the timing and amount of outlays which correlate directly to revenue between the DME and PBP channels, changes in our future sales mix may also impact our gross profit and gross margin.

Operating Expenses

Our operating expenses consist of (i) research and development expenses (ii) sales and marketing expenses and (iii) general and administrative expenses.

Research and Development

Our research and development expenses include engineering and clinical trial activities for the iLet, regulatory efforts, personnel costs such as salaries, bonuses, stock-based compensation and benefits, payments under third-party license agreements, supplies, development prototypes, design and testing services, depreciation and allocated facilities and information technology expenses, all of which are expensed as incurred. We track research and development expenses by individual product candidate. We expect research and development expenses to increase significantly for the foreseeable future as we advance clinical development, pursue new products and indications including the bihormonal system, patch pump, and potential T2D use, expand technical and operational staffing, make required payments under license arrangements, and establish commercial scale manufacturing capabilities.

Sales and Marketing

We are in the early commercialization stages of the iLet and are focused on driving awareness and adoption among new customers. Sales and marketing expenses primarily include personnel costs for our sales and clinical teams, the development of customer support infrastructure, marketing and branding activities, healthcare conference and market research costs, payer education and market access initiatives, data purchases, website and consulting fees, and facilities, travel, and other related operating expenses. We anticipate a significant increase in sales and marketing expenses for the foreseeable future to support the continued commercialization of the iLet and our future products.

General and Administrative

General and administrative expenses include personnel-related costs, including salaries, bonuses, stock-based compensation expense and benefits for our personnel in executive, legal, finance, accounting, human resources, information technology, quality assurance and other administrative functions, as well as expenses for patent filings, legal services, accounting and tax services, insurance, travel, facilities and depreciation. We expect these expenses to increase significantly as we continue operating as a public company, driven by higher professional services costs, director and officer insurance, investor and public relations activities and compliance with SEC and stock exchange listing requirements. We anticipate a significant increase in general and administrative expenses for the foreseeable future in order to continue to scale the business and support future demand.

Other Income (Expense)

Our other income (expense) consists of (i) interest income, and (ii) other income (expense).

Interest Income

Interest income consists of cash interest earned on our cash, cash equivalents and short-term and long-term investment balances.

Other Income (Expense)

Other income (expense) consists of miscellaneous income unrelated to our core operations.