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 December 31, 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

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 January 31, 2022, there were 211,165,602 shares of Class A common stock, $0.0001 par value per share, and 235,962,975 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	36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	55
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	56
Item 1A. Risk Factors	56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3. Defaults Upon Senior Securities	90
Item 4. Mine Safety Disclosures	90
Item 5. Other Information	90
Item 6. Exhibits	91
Signature	92

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)


	December 31,			March 31,
	2021			2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	586,204		$	282,489
Restricted cash		1,599			1,399
Accounts receivable, net (related party amounts of $105 and nil as of December 31, 2021 and March 31, 2021, respectively)		23,560			2,481
Inventories		17,132			6,239
Deferred cost of revenue		16,112			5,482
Prepaid expenses and other current assets (related party amounts of $207 and nil as of December 31, 2021 and March 31, 2021, respectively)		25,253			15,485
Total current assets		669,860			313,575
Property and equipment, net		52,249			60,884
Operating lease right-of-use assets		57,390			63,122
Restricted cash, noncurrent		6,974			6,974
Internal-use software, net		8,410			6,889
Intangible assets, net		78,458			—
Goodwill		351,598			—
Other assets		1,376			654
Total assets	$	1,226,315		$	452,098
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable (related party amounts of nil and $4,422 as of December 31, 2021 and March 31, 2021, respectively)	$	14,418		$	12,271
Accrued expenses and other current liabilities (related party amounts of $12,480 and $7,065 as of December 31, 2021 and March 31, 2021, respectively)		46,297			31,953
Deferred revenue (related party amounts of $26,171 and $30,140 as of December 31, 2021 and March 31, 2021, respectively)		111,961			71,255
Operating lease liabilities		6,875			6,140
Total current liabilities		179,551			121,619
Operating lease liabilities, noncurrent		80,832			87,582
Other liabilities		4,758			1,165
Total liabilities	$	265,141		$	210,366
Commitments and contingencies (Note 10)
Redeemable convertible preferred stock
Redeemable convertible preferred stock, $0.0001 par value per share, 10,000,000 shares authorized as of December 31, 2021, and $0.00001 par value per share, 209,512,070 shares authorized as of March 31, 2021; nil and 209,181,855 shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively; aggregate liquidation preference of nil and $874,107 as of December 31, 2021 and March 31, 2021, respectively		—			837,351
Stockholders' equity (deficit)
Common Stock - Class A shares, par value $0.0001, 199,176,879 shares issued and outstanding as of December 31, 2021, and par value $0.00001, 20,713,076 shares issued and outstanding as of March 31, 2021; Class B shares, par value $0.0001, 246,970,302 shares issued and outstanding as of December 31, 2021 and par value $0.00001, 103,816,708 shares issued and outstanding as of March 31, 2021		44			—
Additional paid-in capital		2,086,350			381,619
Accumulated other comprehensive income		(36	)		—
Accumulated deficit		(1,125,184	)		(977,238	)
Total stockholders’ equity (deficit)		961,174			(595,619	)
Total liabilities and stockholders’ equity (deficit)	$	1,226,315		$	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

(in thousands, except share and per share data)


	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)
Revenue (related party amounts of $8,069 and $8,554 for the three months ended December 31, 2021 and 2020, respectively, and $29,281 and $30,221 for the nine months ended December 31, 2021 and 2020, respectively)	$	56,891		$	55,477		$	171,334		$	155,338
Cost of revenue (related party amounts of $(54) and $59 for the three months ended December 31, 2021 and 2020, respectively, and $209 and $(592) for the nine months ended December 31, 2021 and 2020, respectively)		29,628			30,089			85,446			82,861
Gross profit		27,263			25,388			85,888			72,477
Operating expenses:
Research and development (related party amounts of $6,300 and $4,238 for the three months ended December 31, 2021 and 2020, respectively, and $18,185 and $10,687 for the nine months ended December 31, 2021 and 2020, respectively)		50,298			41,684			139,053			114,260
Sales and marketing		41,979			12,258			70,987			31,242
General and administrative		31,687			16,589			60,547			45,094
Total operating expenses		123,964			70,531			270,587			190,596
Loss from operations		(96,701	)		(45,143	)		(184,699	)		(118,119	)
Other (expense) income:
Interest income		76			53			213			195
Change in fair value of warrant liabilities		3,695			—			32,989			—
Other (expense) income, net		22			445			39			1,318
Loss before benefit for income taxes		(92,908	)		(44,645	)		(151,458	)		(116,606	)
Benefit for income taxes		3,512			—			3,512			—
Net loss	$	(89,396	)	$	(44,645	)	$	(147,946	)	$	(116,606	)
Other comprehensive (loss) income		(36	)		—			(36	)		—
Total comprehensive loss	$	(89,432	)	$	(44,645	)	$	(147,982	)	$	(116,606	)
Net loss per share of Class A and Class B common stock attributable to common stockholders, basic and diluted:
Basic and diluted	$	(0.21	)	$	(0.46	)	$	(0.44	)	$	(1.23	)
Weighted-average shares used to compute net loss per share:
Basic and diluted		426,591,111			96,974,875			334,491,905			95,185,171

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 Other Comprehensive			Accumulated			Total Stockholders' Equity
	Shares			Amount			Shares		Amount		Capital			Income Loss			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
Issuance of common stock for acquisition of business		—			—			30,572,268		3		322,842		$	—		$	—		$	322,845
Issuance of common stock for Class A common stock warrant exercise		—			—			6,016,327		—		42,354		—			—				42,354
Issuance of common stock upon exercise of stock options		—			—			2,390,004		—		8,308		—			—				8,308
Stock-based compensation expense		—			—			—		—		17,588					—				17,588
Other comprehensive loss		—			—			—		—	—				(36	)	—				(36	)
Net Loss		—			—			—		—	—							(89,396	)		(89,396	)
Balance as of December 31, 2021		—		$	—			446,147,181	$	44	$	2,086,350		$	(36	)	$	(1,125,184	)	$	961,174

(in thousands, except share and per share data)

Redeemable Convertible
Preferred Stock

Common Stock

Additional
Paid-In

Accumulated

Total
Stockholders'

Amount

Capital

Deficit

Balance as of March 31, 2020

86,443,341