SEC Filing | 23andMe, Inc.

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10-Q

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


☐	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.

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.

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.

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


	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