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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended 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 001-39587

23ANDME HOLDING CO.

(Exact name of registrant as specified in its charter)

 

Delaware

87-1240344

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

349 Oyster Point Boulevard

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

 

(650) 938-6300

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

ME

The Nasdaq Global Select Market

 

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, there were 259,768,376 shares of Class A common stock, $0.0001 par value per share, and 191,756,521 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.

 


 

23ANDME HOLDING CO.

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

4

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to the Condensed Consolidated Financial Statements

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

41

Item 4. Controls and Procedures

42

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

43

Item 1A. Risk Factors

43

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

43

Item 3. Defaults Upon Senior Securities

43

Item 4. Mine Safety Disclosures

43

Item 5. Other Information

43

Item 6. Exhibits

44

Signature

45

 

 


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, statements under the headings “Management's Discussion and Analysis of Financial Condition and Results of Operations,” 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”). Generally, statements that are not historical facts, including statements concerning 23andMe Holding Co.’s (the “Company,” “we,” “us,” or “our”) possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these forward-looking statements can be identified by the use of forward-looking terminology, including, without limitation, words like “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations.

The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs, which we believe to be reasonable, concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, without limitation, those factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on May 27, 2022, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on August 9, 2022 (the “Fiscal 2022 Form 10-K”) and our subsequent reports filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results or operations, financial condition, and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

3


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

June 30,

 

 

March 31,

 

 

 

2022

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

479,398

 

 

$

553,182

 

Restricted cash

 

 

1,599

 

 

 

1,599

 

Accounts receivable, net (related party amounts of $19 and nil as of June 30, 2022 and March 31, 2022, respectively)

 

 

2,920

 

 

 

3,380

 

Inventories

 

 

11,461

 

 

 

10,789

 

Deferred cost of revenue

 

 

6,546

 

 

 

7,700

 

Prepaid expenses and other current assets

 

 

17,883

 

 

 

25,139

 

Total current assets

 

 

519,807

 

 

 

601,789

 

Property and equipment, net

 

 

46,914

 

 

 

49,851

 

Operating lease right-of-use assets

 

 

53,745

 

 

 

55,577

 

Restricted cash, noncurrent

 

 

6,974

 

 

 

6,974

 

Internal-use software, net

 

 

10,294

 

 

 

9,635

 

Intangible assets, net

 

 

69,393

 

 

 

73,905

 

Goodwill

 

 

351,744

 

 

 

351,744

 

Other assets

 

 

3,356

 

 

 

2,593

 

Total assets

 

$

1,062,227

 

 

$

1,152,068

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable (related party amounts of nil and $12,567 as of June 30, 2022 and March 31, 2022, respectively)

 

$

18,054

 

 

$

37,930

 

Accrued expenses and other current liabilities (related party amounts of $9,082 and $5,772 as of June 30, 2022 and March 31, 2022, respectively)

 

 

52,041

 

 

 

44,588

 

Deferred revenue (related party amounts of $935 and $9,181 as of June 30, 2022 and March 31, 2022, respectively)

 

 

49,823

 

 

 

62,939

 

Operating lease liabilities

 

 

7,893

 

 

 

7,784

 

Total current liabilities

 

 

127,811

 

 

 

153,241

 

Operating lease liabilities, noncurrent

 

 

76,236

 

 

 

78,524

 

Other liabilities

 

 

3,984

 

 

 

4,647

 

Total liabilities

 

$

208,031

 

 

$

236,412

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common Stock - Class A shares, par value $0.0001, 1,140,000,000 shares authorized as of June 30, 2022 and March 31, 2022, 258,952,446 and 228,174,718 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively; Class B shares, par value $0.0001, 350,000,000 shares authorized as of June 30, 2022 and March 31, 2022, 192,373,071 and 220,637,603 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively

 

 

45

 

 

 

45

 

Additional paid-in capital

 

 

2,137,608

 

 

 

2,110,160

 

Accumulated other comprehensive income

 

 

803

 

 

 

179

 

Accumulated deficit

 

 

(1,284,260

)

 

 

(1,194,728

)

Total stockholders’ equity

 

 

854,196

 

 

 

915,656

 

Total liabilities and stockholders’ equity

 

$

1,062,227

 

 

$

1,152,068

 

 

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

4


Table of Contents

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Revenue (related party amounts of $8,265 and $11,209 for the three months ended June 30, 2022 and 2021, respectively)

 

$

64,513

 

 

$

59,239

 

Cost of revenue (related party amounts of $(239) and $448 for the three months ended June 30, 2022 and 2021, respectively)

 

 

39,023

 

 

 

28,542

 

Gross profit

 

 

25,490

 

 

 

30,697

 

Operating expenses:

 

 

 

 

 

 

Research and development (related party amounts of $3,549 and $6,022 for the three months ended June 30, 2022 and 2021, respectively)

 

 

52,009

 

 

 

44,232

 

Sales and marketing

 

 

33,434

 

 

 

15,419

 

General and administrative

 

 

29,643

 

 

 

12,596

 

Total operating expenses

 

 

115,086

 

 

 

72,247

 

Loss from operations

 

 

(89,596

)

 

 

(41,550

)

Other income (expense):

 

 

 

 

 

 

Interest income, net

 

 

245

 

 

 

44

 

Change in fair value of warrant liabilities

 

 

 

 

 

(534

)

Other income (expense), net

 

 

(435

)

 

 

14

 

Loss before income taxes

 

 

(89,786

)

 

 

(42,026

)

Benefit from income taxes

 

 

254

 

 

 

 

Net loss

 

$

(89,532

)

 

$

(42,026

)

Other comprehensive income

 

 

624

 

 

 

 

Total comprehensive loss

 

$

(88,908

)

 

$

(42,026

)

Net loss per share of Class A and Class B common stock attributable to common stockholders:

 

 

 

 

 

 

Basic and diluted

 

$

(0.20

)

 

$

(0.25

)

Weighted-average shares used to compute net loss per share:

 

 

 

 

 

 

Basic and diluted

 

 

446,505,329

 

 

 

168,191,762

 

 

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

5


Table of Contents

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

(Unaudited)

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income Loss

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2022

 

 

 

 

$

 

 

 

448,812,321

 

 

$

45

 

 

$

2,110,160

 

 

$

179

 

 

$

(1,194,728

)

 

$

915,656

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

1,065,784

 

 

 

 

 

 

1,533

 

 

 

 

 

 

 

 

 

1,533

 

Issuance of common stock upon release of RSUs

 

 

 

 

 

 

 

 

1,461,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net share settlements for stock-based minimum tax withholdings

 

 

 

 

 

 

 

 

(14,036

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,915

 

 

 

 

 

 

 

 

 

25,915

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

624

 

 

 

 

 

 

624

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(89,532

)

 

 

(89,532

)

Balance as of June 30, 2022

 

 

 

 

$

 

 

 

451,325,517

 

 

$

45

 

 

$

2,137,608

 

 

$

803

 

 

$

(1,284,260

)

 

$

854,196

 

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’
Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income Loss

 

 

Deficit

 

 

(Deficit)

 

Balance as of March 31, 2021

 

 

209,181,855

 

 

$

837,351

 

 

 

124,529,784

 

 

$

12

 

 

$

381,607

 

 

$

 

 

$

(977,238

)

 

$

(595,619

)

Preferred stock conversion

 

 

(209,181,855

)

 

 

(837,351

)

 

 

209,181,855

 

 

 

21

 

 

 

837,330

 

 

 

 

 

 

 

 

 

837,351

 

Issuance of common stock upon Merger (net of transaction costs of $29,071)

 

 

 

 

 

 

 

 

46,901,747

 

 

 

5

 

 

 

200,574

 

 

 

 

 

 

 

 

 

200,579

 

Issuance of Private Investment in Public Equity (“PIPE”) shares (related party amount of $25,000)

 

 

 

 

 

 

 

 

25,000,000

 

 

 

3

 

 

 

249,997

 

 

 

 

 

 

 

 

 

250,000

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

818,479

 

 

 

 

 

 

2,553

 

 

 

 

 

 

 

 

 

2,553

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,704

 

 

 

 

 

 

 

 

 

9,704

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,026

)

 

 

(42,026

)

Balance as of June 30, 2021

 

 

 

 

$

 

 

 

406,431,865

 

 

$

41

 

 

$

1,681,765

 

 

$

 

 

$

(1,019,264

)

 

$

662,542

 

 

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

6


Table of Contents

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

 

 

2022

 

 

2021

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(89,532

)

 

$

(42,026

)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,360

 

 

 

4,093

 

 

Amortization and impairment of internal-use software

 

 

1,052

 

 

 

545

 

 

Stock-based compensation expense

 

 

30,462

 

 

 

9,637

 

 

Changes in fair value of warrant liabilities

 

 

 

 

 

534

 

 

Gain on sale of fixed assets

 

 

9

 

 

 

 

 

Gain on lease termination

 

 

 

 

 

(15

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

460

 

 

 

(6,923

)

 

Inventories

 

 

(673

)

 

 

(9,033

)

 

Deferred cost of revenue

 

 

1,154

 

 

 

(638

)

 

Prepaid expenses and other current assets

 

 

7,259

 

 

 

(1,057

)

 

Operating lease right-of-use assets

 

 

1,833

 

 

 

1,812

 

 

Other assets

 

 

(765

)

 

 

101

 

 

Accounts payable (related party amounts of $(12,567) and $2,182 for the three months ended June 30, 2022 and 2021, respectively)

 

 

(19,154

)

 

 

5,721

 

 

Accrued expenses and other current liabilities (related party amounts of $3,310 and $(134) for the three months ended June 30, 2022 and 2021, respectively)

 

 

2,454

 

 

 

(286

)

 

Deferred revenue (related party amounts of $(8,246) and $(11,209) for the three months ended June 30, 2022 and 2021, respectively)

 

 

(13,116

)

 

 

(5,152

)

 

Operating lease liabilities

 

 

(2,179

)

 

 

(1,868

)

 

Other liabilities

 

 

(664

)

 

 

22

 

 

Net cash used in operating activities

 

 

(73,040

)

 

 

(44,533

)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,614

)

 

 

(666

)

 

Capitalized internal-use software costs

 

 

(1,286

)

 

 

(721

)

 

Net cash used in investing activities

 

 

(2,900

)

 

 

(1,387

)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

1,533

 

 

 

2,720

 

 

Payments of deferred offering costs

 

 

 

 

 

(29,071

)

 

Proceeds from issuance of common stock upon Merger

 

 

 

 

 

309,720

 

 

Proceeds from PIPE (related party amounts of nil and $25,000 for the three months ended June 30, 2022 and 2021, respectively)

 

 

 

 

 

250,000

 

 

Net cash provided by financing activities

 

 

1,533

 

 

 

533,369

 

 

Effect of exchange rates on cash

 

 

623

 

 

 

 

 

Net increase (decrease) in cash and restricted cash

 

 

(73,784

)

 

 

487,449

 

 

Cash and restricted cash—beginning of period

 

 

561,755

 

 

 

290,862

 

 

Cash and restricted cash—end of period

 

 

487,971

 

 

 

778,311

 

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and accrued expenses

 

 

28

 

 

 

777

 

 

Stock-based compensation capitalized for internal-use software costs

 

 

573

 

 

 

168

 

 

Reclassification of deferred offering costs

 

 

 

 

 

3,971

 

 

Assumption of merger warrants liability

 

 

 

 

 

75,415

 

 

Deferred offering costs during the period included in accounts payable and accrued expenses

 

 

 

 

1,571

 

 

Conversion of redeemable convertible preferred stock to common stock

 

 

 

 

 

837,351

 

 

Reconciliation of cash and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:

 

 

 

 

 

 

 

Cash

 

 

479,398

 

 

 

769,938

 

 

Restricted cash, current

 

 

1,599

 

 

 

1,399