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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 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 001-39587

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.)

 

 

223 N. Mathilda Avenue

Sunnyvale, California

94086

(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

Redeemable warrants, each whole warrant exercisable for one share of Class A common stock

MEUSW

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 October 31, 2021, there were 93,677,322 shares of Class A common stock, $0.0001 par value per share, and 313,759,355 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

 

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

(Deficit)

6

Condensed Consolidated Statements of Cash Flows

8

Notes to the Condensed Consolidated Financial Statements

9

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

46

Item 4. Controls and Procedures

47

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

48

Item 1A. Risk Factors

48

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

79

Item 3. Defaults Upon Senior Securities

79

Item 4. Mine Safety Disclosures

79

Item 5. Other Information

79

Item 6. Exhibits

80

Signature

81

 

 


 

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. 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 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 under Part II, Item 1A: "Risk Factors." 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. These risks and others described under Part II, Item 1A: "Risk Factors" may not be exhaustive.

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


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

September 30,

 

 

March 31,

 

 

 

 

2021

 

 

2021

 

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

701,050

 

 

$

282,489

 

 

Restricted cash

 

 

1,399

 

 

 

1,399

 

 

Accounts receivable, net (related party amounts of $25,000 and nil as of September 30, 2021 and March 31, 2021, respectively)

 

 

26,707

 

 

 

2,481

 

 

Inventories

 

 

17,732

 

 

 

6,239

 

 

Deferred cost of revenue

 

 

5,526

 

 

 

5,482

 

 

Prepaid expenses and other current assets

 

 

16,964

 

 

 

15,485

 

 

Total current assets

 

 

769,378

 

 

 

313,575

 

 

Property and equipment, net

 

 

53,749

 

 

 

60,884

 

 

Operating lease right-of-use assets

 

 

58,312

 

 

 

63,122

 

 

Restricted cash, noncurrent

 

 

6,974

 

 

 

6,974

 

 

Internal-use software, net

 

 

7,818

 

 

 

6,889

 

 

Other assets

 

 

6,809

 

 

 

654

 

 

Total assets

 

$

903,040

 

 

$

452,098

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable (related party amounts of nil and $4,422 as of September 30, 2021 and March 31, 2021, respectively)

 

$

10,280

 

 

$

12,271

 

 

Accrued expenses and other current liabilities (related party amounts of $12,610 and $7,065 as of September 30, 2021 and March 31, 2021, respectively)

 

 

29,541

 

 

 

31,953

 

 

Deferred revenue (related party amounts of $33,928 and $30,140 as of September 30, 2021 and March 31, 2021, respectively)

 

 

67,681

 

 

 

71,255

 

 

Operating lease liabilities

 

 

6,128

 

 

 

6,140

 

 

Total current liabilities

 

 

113,630

 

 

 

121,619

 

 

Operating lease liabilities, noncurrent

 

 

82,567

 

 

 

87,582

 

 

Other liabilities

 

 

1,211

 

 

 

1,165

 

 

Warrant liabilities

 

 

46,121

 

 

 

 

 

Total liabilities

 

$

243,529

 

 

$

210,366

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.00001 par value per share, 10,000,000 and 209,512,070 shares authorized as of September 30, 2021 and March 31, 2021, respectively; nil and 209,181,855 shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively; aggregate liquidation preference of nil and $874,107 as of September 30, 2021 and March 31, 2021, respectively

 

 

 

 

 

837,351

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

Common Stock - Class A shares, par value $0.0001, 93,409,227 and 20,713,076 shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively; Class B shares, par value $0.0001, 313,759,355 and 103,816,708 shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively

 

 

41

 

 

 

 

 

Additional paid-in capital

 

 

1,695,258

 

 

 

381,619

 

 

Accumulated deficit

 

 

(1,035,788

)

 

 

(977,238

)

 

Total stockholders’ equity (deficit)

 

 

659,511

 

 

 

(595,619

)

 

Total liabilities and stockholders’ equity (deficit)

 

$

903,040

 

 

$

452,098

 

 

 

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

4


 

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended
September 30,

 

 

Six Months Ended
September 30,

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Revenue (related party amounts of $10,002 and $9,840 for the three months ended September 30, 2021 and 2020, respectively, and $21,212 and $21,667 for the six months ended September 30, 2021 and 2020, respectively)

 

$

55,204

 

 

$

51,804

 

 

$

114,443

 

 

$

99,861

 

 

Cost of revenue (related party amounts of $(184) and $(1,063) for the three months ended September 30, 2021 and 2020, respectively, and $264 and $(651) for the six months ended September 30, 2021 and 2020, respectively)

 

 

27,276

 

 

 

27,209

 

 

 

55,818

 

 

 

52,773

 

 

Gross profit

 

 

27,928

 

 

 

24,595

 

 

 

58,625

 

 

 

47,088

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (related party amounts of $5,864 and $4,631 for the three months ended September 30, 2021 and 2020, respectively, and $11,886 and $6,449 for the six months ended September 30, 2021 and 2020, respectively)

 

 

44,523

 

 

 

38,205

 

 

 

88,755

 

 

 

72,575

 

 

Sales and marketing

 

 

13,588

 

 

 

8,329

 

 

 

29,007

 

 

 

18,984

 

 

General and administrative

 

 

16,264

 

 

 

14,315

 

 

 

28,860

 

 

 

28,505

 

 

Total operating expenses

 

 

74,375

 

 

 

60,849

 

 

 

146,622

 

 

 

120,064

 

 

Loss from operations

 

 

(46,447

)

 

 

(36,254

)

 

 

(87,997

)

 

 

(72,976

)

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

92

 

 

 

69

 

 

 

136

 

 

 

143

 

 

Change in fair value of warrant liabilities

 

 

29,828

 

 

 

 

 

 

29,294

 

 

 

 

 

Other (expense) income, net

 

 

3

 

 

 

(6

)

 

 

17

 

 

 

872

 

 

Net and comprehensive loss

 

$

(16,524

)

 

$

(36,191

)

 

$

(58,550

)

 

$

(71,961

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.04

)

 

$

(0.38

)

 

$

(0.20

)

 

$

(0.76

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

406,886,060

 

 

 

94,985,853

 

 

 

288,190,872

 

 

 

94,285,431

 

 

 

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

5


 

23ANDME HOLDING CO.

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

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders'
Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 Capital

 

 

Deficit

 

 

(Deficit)

 

Balance as of March 31, 2021

 

 

91,198,378

 

 

$

837,351

 

 

 

54,292,140

 

 

$

 

 

$

381,619

 

 

$

(977,238

)

 

$

(595,619

)

Recapitalization

 

 

117,983,477

 

 

 

 

 

 

70,237,644

 

 

 

12

 

 

 

(12

)

 

 

 

 

 

 

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 $33,726)

 

 

 

 

 

 

 

 

46,901,747

 

 

 

5

 

 

 

200,574

 

 

 

 

 

 

200,579

 

Issuance of 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

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

736,717

 

 

 

 

 

 

2,905

 

 

 

 

 

 

2,905

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,588

 

 

 

 

 

 

10,588

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,524

)

 

 

(16,524

)

Balance as of September 30, 2021

 

 

 

 

$

 

 

 

407,168,582

 

 

$

41

 

 

$

1,695,258

 

 

$

(1,035,788

)

 

$

659,511

 

 

6


 

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 Capital

 

 

Deficit

 

 

Deficit

 

Balance as of March 31, 2020

 

 

86,443,341

 

 

$

755,083

 

 

 

44,318,298

 

 

$

 

 

$

172,736

 

 

$

(793,619

)

 

$

(620,883

)

Recapitalization

 

 

111,831,592

 

 

 

 

 

 

57,334,501

 

 

 

9

 

 

 

(9

)

 

 

 

 

 

 

Balance as of March 31, 2020

 

 

198,274,933

 

 

 

755,083

 

 

 

101,652,799

 

 

 

9

 

 

 

172,727

 

 

 

(793,619

)

 

 

(620,883

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

676,618

 

 

 

 

 

 

1,139

 

 

 

 

 

 

1,139

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,241

 

 

 

 

 

 

4,241

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,454

 

 

 

 

 

 

11,454

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 

(35,770

)

 

 

(35,770

)

Balance as of June 30, 2020

 

 

198,274,933

 

 

$

755,083

 

 

 

102,329,417

 

 

$

9

 

 

$

189,561

 

 

$

(829,389

)

 

$

(639,819

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

437,913

 

 

 

 

 

 

827

 

 

 

 

 

 

827

 

Issuance of common stock related to early exercise of stock options

 

 

 

 

 

 

 

 

6,881,095

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,241

 

 

 

 

 

 

4,241

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,964

 

 

 

 

 

 

10,964

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,191

)

 

 

(36,191

)

Balance as of September 30, 2020

 

 

198,274,933

 

 

$

755,083

 

 

 

109,648,425

 

 

$

9