Butterfly Network Inc

Previous wording

In 2023 and 2022, we took significant actions to reduce our cost of operations and extend our cash runway. Over the two years, we reduced our annual cash requirements by approximately $170 million, to approximately $60 million assuming no revenue growth or further reductions in expenses. As such, we conservatively expect our cash to last into 2026. As we look forward, we expect to continue to invest our business in order to grow revenue. Before we reach 2026, we expect to raise capital in order to reach profitability. We expect to first seek nondilutive capital in the form of grants or debt and then potentially in the form of equity securities.

Current wording

Since 2022, we have taken significant actions to reduce our cost of operations and extend our cash runway and have reduced our annual cash requirements by approximately $180 million, to less than $50 million annually. As such, we conservatively expect our cash to last into 2027. As we look forward, we expect to continue to invest in our business in order to grow revenue. Before we reach 2027, we expect to raise capital in order to reach profitability. We expect to first seek nondilutive capital in the form of grants or debt and then potentially in the form of equity securities.

Previous wording

Software and other services mix decreased by 6.7 percentage points, to 36.1% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease is due to the recent launch of our new iQ3 probe and an increase in device sales during the current year.

Current wording

Software and other services mix decreased by 1.8 percentage points, to 31.8% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Although our software and other services revenue increased in the

Previous wording

Over time as adoption of our devices increases through further market penetration and as practitioners in the Butterfly network continue to use our devices, we expect our annual revenue mix to shift more toward software and other services. The quarterly revenue mix may be impacted by the timing of device sales. In 2024, due to the launch of our next generation device iQ3, we are expecting our software as a percentage of total revenue to remain flat or decrease.

Current wording

Over time, as adoption of our devices increases through further market penetration and as practitioners in the Butterfly network continue to use our devices, we expect our annual revenue mix to shift more toward software and other services. The quarterly revenue mix may be impacted by the timing of device sales. In 2024, due to the launch of our next generation iQ3 device, we are expecting our software and other services as a percentage of total revenue to remain flat or decrease.

Previous wording

General and administrative expenses primarily consist of personnel costs and benefits, insurance, patent fees, software costs, facilities costs, and outside services. Outside services consist of professional services, legal fees, and other professional fees.

Current wording

General and administrative expenses primarily consist of personnel costs and benefits, insurance, patent fees, software costs, facilities-related expenses, and outside services. Outside services consist of professional services, legal fees, and other professional fees.

Previous wording

Product revenue increased by $2.4 million, or 27.6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was primarily driven by higher device sales across nearly all of our sales channels, including the launch of our next-generation iQ3 probe and its higher selling price.

Current wording

Product revenue increased by $2.4 million, or 19.4%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily driven by higher product revenue across all sales channels, including the impact of our recently launched next-generation iQ3 probe’s higher selling price as well as an increase in

Previous wording

Cost of product revenue increased by $0.7 million, or 17.2%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was primarily driven by higher device sales in the current year. Cost of software and other services revenue was higher for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 largely due to increased software amortization of $0.2 million.

Current wording

Cost of product revenue increased by $1.1 million, or 19.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily driven by higher devices sales in the current year and a higher warranty accrual with the launch of our iQ3 probe. Cost of software and other services revenue increased by $0.2 million, or 11.7%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was largely due to increased software amortization of $0.2 million.

Previous wording

Research and development expenses decreased by $5.9 million, or 35.6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was primarily driven by reductions of $4.4 million in personnel costs resulting from our reduction in force in July 2023, $0.8 million in engineering and software costs, and $0.3 million in consulting fees resulting from continued execution of our plan announced to better align our commercial objectives and prioritization with our existing strengths and offerings.

Current wording

Research and development expenses decreased by $12.1 million, or 37.6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily driven by reductions of $9.2 million in personnel costs resulting from our reduction in force in July 2023; $2.4 million in engineering, facilities, and software costs related to reduced headcount; and $0.4 million in consulting fees resulting from continued execution of our plan announced to better align our commercial objectives and prioritization with our existing strengths and offerings.

Previous wording

Sales and marketing expenses increased by $0.3 million, or 3.4%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was primarily driven by a $0.3 million increase in marketing expenses related to the launch of our new iQ3 probe in February 2024.

Current wording

Sales and marketing expenses increased by $0.3 million, or 1.7%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was primarily driven by a $0.6 million increase in marketing expenses related to the recent launches of our iQ3 probe in February 2024 and iQ+ Bladder probe in May 2024. This was partially offset by a $0.2 million reduction in software expenses.

Previous wording

Other decreased by $5.1 million, or 78.9%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was primarily driven by the nonrecurrence of $3.7 million of employee severance and benefits costs related to our January 2023 reduction in force that were incurred in the prior year and a reduction of $1.4 million in legal costs due to litigation and other legal matters. These costs are not representative of our ongoing operations.

Current wording

Other decreased by $6.6 million, or 77.2%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily driven by the nonrecurrence of $3.9 million of employee severance and benefits costs related to our January 2023 reduction in force that were incurred in the prior year and a reduction of $2.7 million in legal costs due to litigation and other legal matters. These costs are not representative of our ongoing operations.

Previous wording

Since our inception, our primary sources of liquidity are cash flows from operations, proceeds from the Business Combination and issuances of preferred stock and convertible notes. Our primary uses of liquidity are operating expenses, working capital requirements and capital expenditures. The Company has incurred net losses and negative cash flows from operating activities in each year since inception, and we expect to continue to incur losses and negative cash flows for a few years as we continue to commercialize existing and new products and services. We expect that our existing cash and cash flows from operations will be sufficient to meet our liquidity, capital expenditure, and anticipated working capital requirements and fund our operations for at least the next 12 months.

Current wording

Since our inception, our primary sources of liquidity are cash flows from operations, proceeds from the Business Combination, and issuances of preferred stock and convertible notes. Our primary uses of liquidity are operating expenses, working capital requirements, and capital expenditures. The Company has incurred net losses and negative cash flows from operating activities in each year since inception, and we expect to continue to incur losses and negative cash flows for a few years as we continue to commercialize existing and new products and services. We expect that our existing cash

Previous wording

During the three months ended March 31, 2024, the Company utilized $21.8 million of cash and cash equivalents. In the first quarter, we paid $6.3 million of bonuses and $1.4 million of legal payments due to litigation and other legal matters. As of March 31, 2024, our cash and cash equivalents balance was $112.7 million. Our future spending on capital resources may vary from those currently planned and will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives.

Current wording

During the three months ended June 30, 2024, the Company utilized $10.6 million of cash and cash equivalents. In the second quarter, we paid $0.6 million of legal payments due to litigation and other legal matters. As of June 30, 2024, our cash and cash equivalents balance was $102.1 million. Our future spending on capital resources may vary from those currently planned and will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives.

Previous wording

As of March 31, 2024, we have restricted cash of $4.0 million to secure a letter of credit for one of our leases, which is expected to be maintained as a security deposit for the duration of the lease. In addition, we have restricted cash of $0.2 million for an agreement with the Gates Foundation. The restriction is expected to lapse as we fulfill our obligations in the agreement with the Gates Foundation.

Current wording

As of June 30, 2024, we have restricted cash of $4.0 million to secure a letter of credit for one of our leases, which is expected to be maintained as a security deposit for the duration of the lease. In addition, we have restricted cash of $0.1 million for an agreement with the Gates Foundation. The restriction is expected to lapse as we fulfill our obligations in the agreement with the Gates Foundation.

Previous wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and inventory supply agreements. Our fixed office lease payment obligations were $30.7 million as of March 31, 2024, with $3.6 million payable within the next 12 months. Our fixed technology license payment obligations were $15.5 million as of March 31, 2024, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements were $12.5 million as of March 31, 2024, with $9.0 million payable within the next 12 months. We expect to pay for approximately 15% of the amount payable within the next 12 months using vendor advances.

Current wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and inventory supply agreements. Our fixed office lease payment obligations were $29.8 million as of June 30, 2024, with $3.6 million payable within the next 12 months. Our fixed technology license payment obligations were $15.5 million as of June 30, 2024, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements were $10.3 million as of June 30, 2024, with $9.0 million payable within the next 12 months. We expect to pay for approximately 20% of the amount payable within the next 12 months using vendor advances.

Previous wording

The following table summarizes our sources and uses of cash for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities decreased by $22.6 million, or 52.2%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was driven by reductions of $14.8 million in net loss adjusted for certain non-cash items and $7.9 million in net working capital cash usage. The decrease in net loss adjusted for certain non-cash items was primarily driven by a reduction of $11.8 million in net loss and higher adjustments for stock-based compensation expense and other non-cash items. The decrease in net working capital cash usage was primarily driven by reductions of $6.3 million in cash used for changes in our inventory and the related vendor advances and accrued purchase commitments, $2.8 million in cash used for changes in our prepaid expenses and other assets, and $0.7 million in cash used for changes in accounts payable and accrued expenses, partially offset by a $1.8 million increase in cash used for changes in accounts receivable.

Current wording

Net cash used in operating activities decreased by $39.1 million, or 56.0%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was driven by reductions of $24.5 million in net loss adjusted for certain non-cash items and $14.6 million in net working capital cash usage. The decrease in net loss adjusted for certain non-cash items was primarily driven by a reduction of $24.7 million in net loss. The decrease in net working capital cash usage was primarily driven by a reduction of $16.5 million in cash used for changes in our inventory and the related vendor advances and accrued purchase commitments, partially offset by increases of $2.5 million in cash used for changes in accounts payable and accrued expenses and $0.8 million in cash used for changes in our prepaid expenses and other assets.

Previous wording

Net cash provided by investing activities decreased by $76.0 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to the sale of our marketable securities in 2023.

Current wording

Net cash provided by investing activities decreased by $75.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily due to the sale of our marketable securities in 2023.

Previous wording

We did not have any significant financing activities during the three months ended March 31, 2024 and 2023.

Current wording

Net cash provided by financing activities decreased by $0.1 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. We did not have any significant financing activities during the six months ended June 30, 2024.