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

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

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~its charter)

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

~~Check~~Indicate by check mark whether the ~~issuer~~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 ~~past~~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~~ ☒ 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”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”,~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ~~November 16, 2020,~~July 29, 2022, there were ~~50,855,000~~259,768,376 shares of Class A ~~ordinary shares,~~common stock, $0.0001 par value per share, and ~~13,800,000~~191,756,521 shares of Class B ~~ordinary shares,~~common stock, $0.0001 par value per share, issued and outstanding.

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

~~FOR THE PERIOD FROM FEBRUARY 19, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020~~

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

~~FOR THE PERIOD FROM FEBRUARY 19, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020~~

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

~~VG Acquisition Corp. (formerly known as Bleecker Street Acquisition Corp.) (the “Company”) was incorporated in the Cayman Islands~~This Quarterly Report on February 19, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of September 30, 2020, the Company had not commenced any operations. All activity through September 30, 2020 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”Form 10-Q (this “Form 10-Q”), ~~which is described below. The Company will not generate any operating revenues until after~~including, without limitation, statements under the ~~completion~~headings “Management's Discussion and Analysis of ~~its initial Business Combination, at the earliest. The Company will generate non-operating income in the form~~Financial Condition and Results of ~~interest income from the proceeds derived from the Initial Public Offering.~~

The registration statement for the Company’s Initial Public Offering was declared effective on October 1, 2020. On October 6, 2020 the Company consummated the Initial Public Offering of 48,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), generating gross proceeds of $480,000,000 which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,733,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to VG Acquisition Sponsor LLC (the “Sponsor”), generating gross proceeds of $11,600,000, which is described in Note 4.

On October 14, 2020, the underwriters notified the Company of their intent to partially exercise their over-allotment option on October 16, 2020. As such, on October 16, 2020, the Company sold an additional 2,855,000 Units, at a price of $10.00 per Unit, and the sale of an additional 380,666 Private Placement Warrants to the Sponsor, at $1.50 per Private Placement Warrant, generating total proceeds of $29,121,000. A total of $28,550,000 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $508,550,000.

Transaction costs amounted to $28,641,284, consisting of $10,171,000 of underwriting fees, $17,799,250 of deferred underwriting fees and $671,034 of other offering costs. In addition, at October 6, 2020, cash of $1,524,449 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.

Following the closing of the Initial Public Offering on October 6, 2020, and the partial exercise of the over-allotment option on October 16, 2020, an amount of $508,550,000 from the proceeds of the sale of the Units in the Initial Public Offering and exercise of the over-allotment option, net of underwriting fees, and the sale of the Private Placement Warrants, net of the amount reserved for payment of offering costs and working capital purposes, was placed in a trust account (the “Trust Account”) located in the United States and invested in U.S. government securities,Operations,” includes forward-looking statements within the meaning ~~set forth in~~of Section ~~2(a)(16)~~27A of the ~~Investment Company~~Securities Act of ~~1940,~~1933, as amended, (the ~~“Investment Company~~“Securities Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The rules of the stock exchange that the Company will list its securities on will require that the Company’s initial Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.

The Company will provide the holders of its issued and outstanding Public Shares (the “public shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The public shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations), calculated as of two business days prior to the completion of the Business Combination. The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company. If a shareholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transactions is required by applicable law or stock exchange listing requirements, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote any Founder Shares (as defined in Note 4) and Public Shares held by it in favor of approving a Business Combination. Additionally, each public shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.

Notwithstanding the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 1321E 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), ~~will~~and other assumptions that may cause actual results or performance to be ~~restricted~~materially different from ~~redeeming its shares with respect to more than an aggregate of 15% of~~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 ~~Public Shares, without the prior consent of the Company.~~

~~The Sponsor has agreed to waive: (i) its redemption rights with respect to any Founder Shares and Public Shares held by it in connection~~fiscal year ended March 31, 2022 filed with the ~~completion~~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 ~~the Company’s Business Combination and (ii) their redemption rights with respect to their Founder Shares and~~these risks or uncertainties materialize, or should any ~~Public Shares held by them~~of our assumptions prove incorrect, actual results may vary in ~~connection with a shareholder vote to approve an amendment to the Company’s Amended and Restated Memorandum and Articles of Association (A) to modify the substance or timing of the Company’s~~material respects from those projected in these forward-looking statements. We undertake no obligation to ~~allow redemption~~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 ~~connection~~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 ~~its initial~~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.

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

~~VG ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2020~~

~~(Unaudited)~~

~~Note 2 —~~2. Summary of Significant Accounting Policies

Basis of Presentation

The ~~accompanying~~Company’s unaudited condensed consolidated financial statements have been prepared in ~~accordance~~conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, and variable interest entities in which it holds a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation.

For the three months ended June 30, 2022, the Company had operations primarily in the United States and immaterial operations in the United Kingdom following the Lemonaid Acquisition. For the three months ended June 30, 2021, the Company had operations entirely in the United States.

There have been no changes to the Company’s significant accounting policies described in the audited consolidated financial statements for the year ended March 31, 2022 that have had a material impact on these condensed consolidated financial statements and related notes.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying interim condensed consolidated financial statements as of June 30, 2022 and for the three months ended June 30, 2022 and 2021 and accompanying notes, are unaudited. These unaudited interim condensed consolidated financial statements (the “condensed consolidated financial statements”) have been prepared in accordance with GAAP applicable to interim financial ~~information and~~statements. These financial statements are presented in accordance with the ~~instructions to Form 10-Q~~rules and ~~Article 8~~regulations of ~~Regulation S-X of~~ the U.S. Securities and Exchange Commission ~~(the “SEC”~~(“SEC”)~~. Certain information or footnote~~ and do not include all disclosures normally ~~included~~required in annual consolidated financial statements prepared in accordance with ~~GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all~~GAAP. As such, the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

~~The accompanying unaudited condensed financial statements~~included herein should be read in conjunction with the consolidated financial statements and accompanying notes as of and for the year ended March 31, 2022 (the “audited consolidated financial statements”) that were included in the Company’s ~~prospectus for its Initial Public Offering as~~Annual Report on Form 10-K filed with the SEC on ~~October 5, 2020, as well~~May 27, 2022. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements, which include only normal recurring adjustments, necessary for a fair statement of the Company’s ~~Current Reports on Form 8-K,~~financial position as ~~filed with the SEC on October 6, 2020, October 13, 2020~~of June 30, 2022 and ~~October 22, 2020. The interim~~its condensed consolidated results of operations and cash flows for the three months ended ~~September~~June 30, ~~2020~~2022 and 2021. The results of operations for the ~~period from February 19, 2020 (inception) through September~~three months ended June 30, ~~2020~~2022 are not necessarily indicative of the results ~~to be~~ expected for the ~~period~~year ending ~~December~~March 31, ~~2020~~2023 or ~~for~~ any other future interim or annual periods.

~~Emerging Growth Company~~

~~The Company is an “emerging growth company,” as defined in Section 2(a)~~As a result of the ~~Securities Act, as modified by~~Merger (as defined below), prior period share and per share amounts presented in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxyaccompanying condensed consolidated financial statements and ~~exemptions from~~these related notes have been retroactively converted.

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Fiscal Year

The Company’s fiscal year ends on March 31. References to fiscal year 2023 and 2022, refer to the ~~requirements of holding a nonbinding advisory vote on executive compensation~~fiscal years ending and ~~shareholder approval of any golden parachute payments not previously approved.~~

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition periodended March 31, 2023 and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.2022, respectively.

Use of Estimates

The preparation of ~~unaudited~~ condensed consolidated financial statements in conformity with GAAP requires ~~the Company’s~~ management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the ~~unaudited~~ condensed consolidated financial statements and the reported amounts of ~~revenues~~revenue and expenses during the reporting ~~period.~~

~~Making~~period and the accompanying notes. Significant items subject to such estimates ~~requires management~~and assumptions include, but are not limited to ~~exercise significant judgment. It~~the determination of standalone selling price for various performance obligations; the estimated expected benefit period for the rate and recognition pattern of breakage revenue for purchases where a saliva collection kit (“Kit”) is ~~at least reasonably possible that~~never returned for processing; the ~~estimate~~capitalization and estimated useful life of internal use software; the useful life of long-lived assets; fair value of intangible assets acquired in business combinations; the carrying value of goodwill; the incremental borrowing rate for operating leases; stock-based compensation including the determination of the ~~effect~~fair value of ~~a condition, situation or set of circumstances that existed at~~stock options, as well as the ~~date~~Company’s common stock prior to the Closing Date (as defined below) of the ~~financial statements, which management considered in formulating its estimate, could change in~~Merger; and the ~~near term due~~valuation of deferred tax assets and uncertain tax positions. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to ~~one or more~~ future ~~confirming~~ events. ~~Accordingly, the actual~~Actual results could differ ~~significantly~~ from ~~those estimates.~~

~~VG ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2020~~

~~(Unaudited)~~

~~Cash~~these estimates, and ~~Cash Equivalents~~

~~The Company considers all short-term investments with an original maturity of three months or less when purchased~~such differences could be material to ~~be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020.~~

~~Offering Costs~~

~~Offering costs consist of legal, accounting and other expenses incurred through~~ the condensed ~~balance sheet date~~consolidated financial statements.

The coronavirus (“COVID-19”) pandemic has created significant global economic uncertainty and resulted in the slowdown of economic activity. COVID-19 has disrupted the Company’s general business operations since March 2020 and the Company expects that ~~are directly related~~such disruption will continue for an unknown period. As the Company continues to closely monitor the ~~Initial Public Offering. Offering costs amounting to $28,641,284 were charged to shareholder’s equity upon~~COVID-19 pandemic, its top priority remains protecting the ~~completion~~health and safety of the ~~Initial Public Offering~~ ~~on October 6, 2020. As of September 30, 2020, the Company incurred $560,014 of deferred offering costs.~~

~~Income Taxes~~

~~ASC Topic 740, “Income Taxes,” prescribes a recognition threshold~~Company’s employees. Safety guidelines and ~~a measurement attribute~~procedures, including social distancing and enhanced cleaning, have been developed for ~~the financial statement recognition~~on-site employees and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2020, there were no unrecognized tax benefits and no amounts accrued for interest and penalties.these policies are regularly monitored. The Company is ~~currently~~ not aware of any ~~issues under review~~specific event or circumstance that would require revisions to estimates, updates to judgments, or adjustments to the carrying value of assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could ~~result~~differ from those estimates and any such differences may be material to the condensed consolidated financial statements.

Concentration of Supplier Risk

Certain of the raw materials, components and equipment associated with the deoxyribonucleic acid (“DNA”) microarrays and Kits used by the Company in ~~significant payments, accruals or material deviation~~the delivery of its services are available only from ~~its position.~~

third-party suppliers. The Company ~~is considered~~also relies on a third-party laboratory service for the processing of its customer samples. Shortages and slowdowns could occur in these essential materials, components, equipment, and laboratory services due to be an ~~exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes~~interruption of supply or ~~income tax filing requirements~~increased demand in the ~~Cayman Islands~~industry. If the Company were unable to procure certain materials, components, equipment, or ~~the United States. As such,~~laboratory services at acceptable prices, it would be required to reduce its laboratory operations, which could have a material adverse effect on its results of operations.

A single supplier accounted for 100% of the Company’s ~~tax provision was zero~~total purchases of microarrays and a separate single supplier accounted for 100% of the Company’s total purchases of Kits for the ~~period presented. The Company is subject to income tax examinations since inception.~~

~~Net Loss Per Ordinary Share~~

~~Net loss per share is computed by dividing net loss by~~three months ended June 30, 2022 and 2021. One laboratory service provider accounted for 100% of the ~~weighted average number~~Company’s processing of ~~ordinary shares issued and outstanding during the periods, excluding ordinary shares subject to forfeiture. Weighted average shares were reduced~~customer samples for the effect of an aggregate of 1,086,250 Class B ordinary shares that remain subject to forfeiture as a result of the underwriter’s election to partially exercise its over-allotment option (see Notes 5). At Septemberthree months ended June 30, ~~2020, the Company did not have any dilutive securities~~2022 and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.2021.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to ~~concentrations~~a concentration of credit risk ~~consist~~include cash and accounts receivable. The Company maintains its cash with high-quality financial institutions in the United States, the composition and maturities of which are regularly monitored by the Company. The Company’s revenue and accounts receivable are derived primarily from the United States. See Revenue Recognition within Note 2, “Summary of Significant Accounting Policies,” for additional information regarding geographical disaggregation of revenue. The Company grants credit to its customers in the normal course of business, performs ongoing credit evaluations of its customers, and does not require collateral. The Company regularly monitors the aging of accounts receivable balances.

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Significant customer information is as follows:


	June 30,			March 31,
	2022			2022
Percentage of accounts receivable:
Customer C		71	%		25	%
Customer F		14	%		19	%
Customer G		0	%		44	%


	Three Months Ended June 30,
	2022			2021
Percentage of revenue:
Customer C		15	%		14	%
Customer B		13	%		19	%

Revenue Recognition

In accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for transferring the products or services to a ~~cash account~~customer (“transaction price”). The transaction price includes various forms of variable consideration, as discussed below. In general, the transaction price is paid by customers at contract inception.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative stand-alone selling (“SSP”) price basis. The SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. The SSP for each performance obligation is based on the prices at which the Company separately sells the products and services. If an observable price from stand-alone sales is not available, the Company uses the adjusted market assessment approach, using reasonably available information and applicable inputs, to estimate the selling price of each performance obligation.

PGS

The Company generates PGS revenue by providing customers with a broad suite of genetic reports, including information on customers’ genetic ancestral origins, personal genetic health risks, and chances of passing on certain rare carrier conditions to their children, as well as reports on how genetics can impact responses to medication.

The Company’s contracts with customers for PGS services include multiple performance obligations: (1) initial ancestry reports, (2) ancestry updates, (3) initial health reports, (4) health updates, and (5) subscriptions for extended health insights with access to exclusive reports and features. The transaction price for PGS revenue includes the amount of fixed consideration the Company expects to receive, as well as variable consideration related to refunds. The Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method.

The Company bases its estimates of variable consideration related to refunds on historical data and other information. Estimates include: (i) timing of the returns and fees incurred, (ii) pricing adjustments related to returns and fees, and (iii) the quantity of product that will be returned in the future. Significant judgment is used in determining the appropriateness of these assumptions at each reporting period. Provisions for returns are based on service-level return rates, recent unprocessed return claims, as well as relevant market events and other factors.

The Company estimates the amount of sales that may be refunded and records the estimate as a reduction of revenue and a refund liability in the period the related PGS revenue is recognized. Based on the distribution model for PGS services and the nature of the services being provided, the Company believes there will be minimal refunds and has not experienced material historical refunds.

Revenue is recognized at a point in time upon delivery of the initial ancestry reports and initial health reports to the customer, as the customer obtains control when the report is received.

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Revenue is recognized over time for ancestry updates and health updates over the period the customer is estimated to remain active. The Company estimates this period based on the historical average period that the customer continues to engage with the available report updates after the delivery of the initial reports. These updates are provided to the customer, when and if available, throughout the estimated period of activity during which the customer interacts with the PGS service. The Company re-evaluates these estimates at the end of each reporting period and adjusts accordingly. The Company has determined that access to the updates, when and if available, that are provided over the estimated period qualifies as a series of distinct goods or services, for which revenue is recognized ratably over the period estimated by the Company.

Subscription revenue for extended health insights is recognized ratably over the contractual subscription period as the customer benefits from having access to these insights evenly throughout this period.

The Company sells through multiple channels, including direct to consumer via the Company’s website and through online retailers. If the customer does not return the Kit for processing, services cannot be completed by the Company, potentially resulting in unexercised rights (“breakage”) revenue. To estimate breakage, the Company applies the practical expedient available under Topic 606 to assess its customer contracts on a portfolio basis as opposed to individual customer contracts, due to the similarity of customer characteristics, at the sales channel level. The Company recognizes the breakage amounts as revenue, proportionate to the pattern of revenue recognition of the returning Kits in these respective sales channel portfolios. The Company estimates breakage for the portion of Kits not expected to be returned using an analysis of historical data and considers other factors that could influence customer Kit return behavior. The Company updates its breakage rate estimate periodically and, if necessary, adjusts the deferred revenue balance accordingly. If actual Kit return patterns vary from the estimate, actual breakage revenue may differ from the amounts recorded. The Company recognized breakage revenue from unreturned Kits of $5.0 million and $4.5 million for the three months ended June 30, 2022 and 2021, respectively.

Fees paid to certain sales channel partners include, in part, compensation for obtaining PGS contracts. Such contracts have an amortization period of one year or less, and the Company has applied the practical expedient to recognize these costs as sales and marketing expenses when incurred.

During the three months ended June 30, 2022, the Company did not recognize any PGS revenue for performance obligations satisfied in prior periods.

Research Services

The Company generates research services revenue by performing research services under agreements with third parties relating to the use of the Company’s genotypic and phenotypic data to perform various research activities, including identifying promising drug targets and further researching specific ailments or patient treatment areas.

The Company’s contracts with customers for research services can include multiple performance obligations: (1) genotyping, (2) survey, (3) data analysis, (4) recruitment, (5) web development, (6) project management, and (7) dedicated research time. The transaction price for research services revenue includes the amount of fixed consideration the Company expects to receive, as well as variable consideration including, but not limited to, per participant fees, additional compensation for certain industry approvals, payments for milestones achieved early, and penalties for customer delays. The Company estimates the amount of variable consideration that should be included in the transaction price using the most likely amount method.

The Company bases its estimates of variable consideration on historical data and other available information. The Company includes an estimated amount of variable consideration in the transaction price only if it is probable that a subsequent change in the estimate would not result in a ~~financial institution, which,~~significant revenue reversal. Based on the historical data available, the Company believes there will be minimal amounts of variable consideration earned and, as such, does not materially impact the transaction price for research services. Variable consideration estimates are revisited at ~~times,~~the end of each reporting period and adjustments are made accordingly.

To recognize revenue, the Company compares actual hours incurred to date to the overall total expected hours that will be required to satisfy the performance obligation. The use of personnel hours is a reasonable measure of progress as the Company fulfills its contractual obligations through research performed by Company personnel. Revenues are recognized over time as the hours are incurred. All estimates are reviewed by the Company at the end of each reporting period and adjustments are made accordingly.

During the three months ended June 30, 2022, the Company did not recognize any research services revenue for performance obligations satisfied in prior periods.

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Telehealth

The Company generates telehealth revenues from pharmacy fees, patient fees, and membership fees. The transaction price for telehealth services includes the amount of fixed consideration the Company expects to receive, as well as variable consideration related to sales deductions, including (1) product returns, including return estimates and (2) fees for transaction processing and chargebacks. The Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method.

The Company estimates the amount of sales that may ~~exceed~~be refunded and records the ~~Federal Depository Insurance Coverage~~estimate as a reduction of ~~$250,000.~~revenue and a refund liability in the period the related Telehealth revenue is recognized. The Company's customers have limited return rights related to the telehealth services. The Company has not historically experienced ~~losses~~material returns and believes there will be minimal returns in the future, as such the transaction price for telehealth services is not materially impacted.

Provisions for transaction fees and chargebacks are primarily based on ~~this account~~customer-level contractual terms. Accruals and ~~management believes~~related reserves are adjusted as new information becomes available, which generally consists of actual transaction fees and chargebacks processed relating to sales recognized.

Pharmacy fees, net – The Company primarily generates revenue through sale and delivery of prescription medications from the Affiliated Pharmacies (as defined below). A contract is entered into with a patient when the patient accepts the Company’s terms and conditions, requests a prescription, or chooses to refill, and provides access to payment. The Company has determined that these contracts contain one performance obligation. Revenue is recognized at the point in time in which prescription services are rendered for these transactions. Fees are charged as prescription services are rendered. Revenue is recorded net of refunds and transaction fees.

Patient fees, net – The Company primarily generates revenue through the PMCs (as defined below) from patient visit fees, which include healthcare professional consultations, lab testing, and ordering prescriptions. A contract is entered into with a patient when the patient accepts the Company’s terms and conditions and provides access to payment. The Company has determined that each service event is a distinct performance obligation. Revenue is recognized at the point in time in which services are rendered for these transactions. Fees are charged upfront prior to services being rendered and are allocated to each obligation to provide services to the patient. Revenue is recorded net of refunds, transaction fees, and pass-through lab and prescription costs.

Membership fees, net – The Company generates revenue through membership fees from patients, which includes a membership for unlimited medical visits and unlimited prescriptions during the membership period (generally one, three or twelve months). A contract is entered into with a patient when the patient accepts the Company’s terms and conditions and makes a pre-payment for the membership term. The Company has determined that access to the services over the membership period qualifies as a series of distinct goods or services for which revenue is recognized ratably over the respective membership period. Revenue is recorded net of refunds. Deferred revenue consists of advance payments from members related to membership performance obligations that have not been satisfied for memberships.

In providing telehealth services that include professional medical consultations, the Company maintains relationships with various affiliated professional medical corporations (“PMCs”). PMCs are organized under state law as professional entities that are owned by physicians licensed in the applicable state and that engage licensed healthcare professionals (each, a “Provider” and collectively, the “Providers”) to provide consultation services. See Note 4, “Variable Interest Entities,” for additional details. The Company accounts for service revenue as a principal in the arrangement with its patients.

Additionally, with respect to its telehealth services involving the sale of prescription products, the Company maintains relationships with affiliated pharmacies (collectively, the “Affiliated Pharmacies”) to fill prescriptions that are ordered by the Company’s patients. The Company accounts for prescription product revenue as a principal in the arrangement with its patients.

During the three months ended June 30, 2022, the Company did not recognize any telehealth revenue for performance obligations satisfied in prior periods.

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Disaggregation of Revenue

The following table presents revenue by category:


	Three Months Ended June 30,
	2022					2021
	Amount		% of Revenue			Amount		% of Revenue
	(in thousands, except percentages)
Point in Time
PGS	$	39,691		61	%	$	45,023		76	%
Telehealth (1)		9,361		15	%		—		0	%
Consumer services		49,052		76	%		45,023		76	%
Research services		—		0	%		—		0	%
Total (2)		49,052		76	%		45,023		76	%

Over Time
PGS		4,484		7	%		2,827		5	%
Telehealth (1)		2,523		4	%		—		0	%
Consumer services		7,007		11	%		2,827		5	%
Research services		8,454		13	%		11,389		19	%
Total (2)		15,461		24	%		14,216		24	%

Total Revenue
PGS		44,175		68	%		47,850		81	%
Telehealth (1)		11,884		19	%		—		0	%
Consumer services		56,059		87	%		47,850		81	%
Research services		8,454		13	%		11,389		19	%
Total (2)	$	64,513		100	%	$	59,239		100	%

(1) There was no telehealth revenue for the three months ended June 30, 2021, as the Lemonaid Acquisition closed in November 2021.

(2) There was no Therapeutics revenue for the three months ended June 30, 2022 and 2021.

Within the Consumer and Research Services segment, substantially all consumer services revenue is recognized at the point in time of the initial transfer of reports to the consumer, the delivery of healthcare services to the patient, or the delivery of prescription medications to the patient. Substantially all research services revenue is recognized over time as services are performed.

The following table summarizes revenue by region based on the shipping address of customers or the location where the services are delivered:


	Three Months Ended June 30,
	2022					2021
	Amount		% of Revenue			Amount		% of Revenue
	(in thousands, except percentages)
United States	$	48,108		75	%	$	40,352		68	%
United Kingdom		11,975		19	%		13,906		23	%
Canada		3,039		4	%		3,240		6	%
Other regions		1,391		2	%		1,741		3	%
International		16,405		25	%		18,887		32	%
Total	$	64,513		100	%	$	59,239		100	%

Contract Balances

Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts associated with contractual rights related to consideration for performance obligations and are included in prepaid expenses and other current assets in the condensed consolidated balance sheets. The amount of contract assets was immaterial as of June 30, 2022 and March 31, 2022.

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Contract liabilities consist of deferred revenue. Revenue is deferred when the Company invoices in advance of fulfilling performance obligations under a contract. Deferred revenue primarily relates to Kits that have been shipped to consumers and non-consigned retail sites but not ~~exposed~~yet returned for processing by the consumer, as well as research services billed in advance of performance. Deferred revenue is recognized when the obligation to ~~significant risks~~deliver results to the customer is satisfied and when research services are ultimately performed. Deferred revenue also consists of advance payments from members related to membership performance obligations and from customers related to subscription for extended health insight performance obligations that have not been satisfied as of the balance sheet date. Deferred revenue is recognized when the obligation to deliver membership services or subscription services is satisfied.

As of June 30, 2022 and 2021, deferred revenue for consumer services was $46.5 million and $45.4 million, respectively. Of the $51.3 million and $39.3 million of deferred revenue for consumer services as of March 31, 2022 and 2021, the Company recognized $24.5 million as revenue for both periods presented.

As of June 30, 2022 and 2021, deferred revenue for research services was $3.4 million and $20.7 million, including related party deferred revenue amounts of $0.9 million and $18.9 million, respectively. Of the $11.6 million and $31.9 million of deferred revenue for research services as of March 31, 2022 and 2021, the Company recognized $8.4 million and $11.4 million as revenue during the three months ended June 30, 2022 and 2021, respectively, of which related party revenue amounts were $8.3 million and $11.2 million, respectively.

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that are expected to be billed and recognized as revenue in future periods. The Company has utilized the practical expedient available under Topic 606 to not disclose the value of unsatisfied performance obligations for PGS and telehealth as those contracts have an expected length of one year or less. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations for research services was $59.3 million. The Company expects to recognize revenue on 93% of this amount over the next 12 months, and the remainder thereafter.

Comprehensive Loss

Comprehensive loss is composed of two components: net loss and other comprehensive income. The Company’s changes in foreign currency translation represents the components of other comprehensive income that are excluded from the reported net loss.

Segment Information

The Company currently operates in two reporting segments: Consumer & Research Services and Therapeutics. The Consumer & Research Services segment consists of revenue and expenses from PGS and telehealth, as well as research services revenue and expenses from certain collaboration agreements (including the GSK Agreement (as defined below)). The Therapeutics segment consists of revenues from the out-licensing of intellectual property associated with identified drug targets and expenses related to therapeutic product candidates under clinical development. Substantially all of the Company’s revenues are derived from the Consumer & Research Services segment. See Revenue Recognition within Note 2, “Summary of Significant Accounting Policies,” for additional information regarding revenue. There are no inter-segment sales.

Certain expenses such ~~account.~~

~~Fair Value~~as Finance, Legal, Regulatory and Supplier Quality, Corporate Communications and CEO Office are not reported as part of ~~Financial Instruments~~

the reporting segments as reviewed by the CODM (as defined below). These amounts are included in Unallocated Corporate in the reconciliations below. The chief operating decision-maker (“CODM”) is the Chief Executive Officer (“CEO”). The CODM evaluates the performance of each segment based on Adjusted EBITDA. Adjusted EBITDA is defined as net income before net interest income, net other income (expense), changes in fair value of warrant liabilities, income tax benefit, depreciation and amortization of fixed assets, amortization of internal-use software, amortization of acquired intangible assets, non-cash stock-based compensation expense, acquisition-related costs, litigation settlements not related to normal and continued business activities and expenses related to restructuring and other charges, if applicable for the period.

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Adjusted EBITDA is a key measure used by the Company’s ~~assets~~management and ~~liabilities, which qualify~~Board of Directors to understand and evaluate the Company’s operating performance and trends, to prepare and approve the annual budget, and to develop short- and long-term operating plans. In particular, the exclusion of the items eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of the Company’s business. Accordingly, Adjusted EBITDA provides useful information in understanding and evaluating the Company’s operating results in the same manner as ~~financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates~~management and the ~~carrying amounts represented~~Board of Directors. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. Other companies, including companies in the Company’s ~~condensed balance sheet, primarily due~~industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their ~~short-term nature.~~performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison. There are a number of limitations related to the use of these non-GAAP financial measures rather than net loss, which is the most directly comparable financial measure calculated in accordance with GAAP.

~~Recent Accounting Standards~~

~~Management~~Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not ~~believe~~properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, the Company will incur expenses similar to the adjustments in this presentation in the future. The presentation of Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by these expenses or any ~~recently~~unusual or non-recurring items. When evaluating the Company’s performance, Adjusted EBITDA should be considered alongside other financial performance measures, including net loss and other GAAP results.

The Company’s revenue and Adjusted EBITDA by segment is as follows:


	Three Months Ended June 30,
	2022			2021
	(in thousands)
Segment Revenue
Consumer and Research Services	$	64,513		$	59,239
Total Revenue (1)	$	64,513		$	59,239
Segment Adjusted EBITDA
Consumer and Research Services Adjusted EBITDA	$	(16,997	)	$	(505	)
Therapeutics Adjusted EBITDA		(18,465	)		(18,303	)
Unallocated Corporate(1)		(14,253	)		(8,467	)
Total Adjusted EBITDA	$	(49,715	)	$	(27,275	)

Reconciliation of net loss to Adjusted EBITDA
Net Loss	$	(89,532	)	$	(42,026	)
Adjustments
Interest (income) expense, net		(245	)		(44	)
Other (income) expense, net		435			(14	)
Change in fair value of warrant liabilities		0			534
Income tax benefit		(254	)		0
Depreciation and amortization		5,104			4,638
Amortization of acquired intangible assets		4,315			—
Stock-based compensation expense		30,462			9,637
Total Adjusted EBITDA	$	(49,715	)	$	(27,275	)

(1) There was no Therapeutics revenue for the three months ended June 30, 2022 and 2021.

Customers accounting for 10% or more of segment revenues were as follows:


	Three Months Ended June 30,
	2022				2021
	(in thousands, except percentages)
Consumer and Research Services Segment Revenue:
Customer C(1)	$	9,628	15	%	$	8,512	14	%
Customer B(2)	$	8,246	13	%	$	11,209	19	%

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(1)

Customer C revenues are primarily in the United States.

(2)

Customer B revenues are in the U.K.

Revenue by geographical region can be found in the revenue recognition disclosures in Note 2, “Summary of Significant Accounting Policies.” All of the Company’s property and equipment, net of depreciation and amortization, was located in the United States during the periods presented. The reporting segments do not present total assets as they are not reviewed by the CODM when evaluating their performance.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ~~but~~ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity, and clarifies the guidance on the computation of earnings per share for those financial instruments. The guidance was effective for the Company beginning April 1, 2022, and interim periods therein. The Company adopted ASU 2020-06 as of April 1, 2022, and the adoption did not ~~yet effective, accounting standards, if currently adopted, would~~ have a material ~~effect~~impact on its consolidated financial statements and related disclosures.

6. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the ~~proceeds~~following:


	June 30,			March 31,
	2022			2022
	(in thousands)
Computer and software	$	10,965		$	10,573
Laboratory equipment and software		51,667			51,557
Furniture and office equipment		9,017			8,926
Leasehold improvements		40,640			40,566
Capitalized asset retirement obligations		853		853
Property and equipment, gross		113,142			112,475
Less: accumulated depreciation and amortization		(66,228	)		(62,624	)
Property and equipment, net	$	46,914		$	49,851

Depreciation and amortization expense was $3.8 million and $4.1 million for the three months ended June 30, 2022 and 2021, respectively.

Internal-use Software, Net

Internal-use software, net consisted of the following:


	June 30,			March 31,
	2022			2022
	(in thousands)
Capitalized internal-use software	$	16,432		$	14,804
Less: accumulated amortization		(6,137	)		(5,169	)
Internal-use software, net	$	10,294		$	9,635

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The Company capitalized $1.9 million and $0.9 million in internal-use software during the three months ended June 30, 2022 and 2021, respectively. For the three months ended June 30, 2022 and 2021, amortization expense related to internal-use software was $1.0 million and $0.6 million, respectively, including approximately $0.1 million of stock-based compensation expense for both periods. Impairment to internal-use software was $0.2 million for the three months ended June 30, 2022. There was 0 impairment to internal-use software for the three months ended June 30, 2021.

Intangible Assets, Net

Intangible assets, net as of June 30, 2022, consisted of the following:


	June 30, 2022
	Weighted Average Remaining Useful Life- Years		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in thousands, except years)
Customer Relationships		1.3	$	14,900	$	(4,967	)	$	9,933
Partnerships		6.4		23,200		(2,454	)		20,746
Trademark		4.3		11,000		(1,467	)		9,533
Developed Technology		6.3		24,100		(2,295	)		21,805
Non-Compete Agreements		4.3		2,800		(373	)		2,427
Patents		6.2		5,500		(551	)		4,949
Total intangible assets			$	81,500	$	(12,107	)	$	69,393

Amortization expense for intangible assets was $4.5 million for the three months ended June 30, 2022. There was 0 amortization expense for the three months ended June 30, 2021.

Intangible assets, net as of March 31, 2022, consisted of the following:


	March 31, 2022
	Weighted Average Remaining Useful Life- Years		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in thousands, except years)
Customer Relationships		1.6	$	14,900	$	(3,104	)	$	11,796
Partnerships		6.6		23,200		(1,558	)		21,642
Trademark		4.6		11,000		(917	)		10,083
Developed Technology		6.6		24,100		(1,436	)		22,664
Non-Compete Agreements		4.6		2,800		(233	)		2,567
Patents		6.4		5,500		(347	)		5,153
Total intangible assets			$	81,500	$	(7,595	)	$	73,905

Estimated future amortization expense of the identified intangible assets as of June 30, 2022, is as follows:


	Estimated Amortization
	(in thousands)
Fiscal years ending March 31,
Remainder of 2023	$	13,613
2024		15,086
2025		10,741
2026		10,741
2027		8,728
Thereafter		10,484
Total estimated future amortization expense	$	69,393

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Accrued Expense and Other Current Liabilities

Accrued expense and other current liabilities consisted of the following:


	June 30,		March 31,
	2022		2022
	(in thousands)
Accrued payables	$	29,714	$	27,654
Accrued compensation and benefits		20,871		14,898
Accrued taxes and other		1,456		2,036
Total accrued expenses and other current liabilities	$	52,041	$	44,588

Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to VG Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to VG Acquisition Sponsor LLC. The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the ~~Company’s~~following discussion and analysis of our financial condition and results of operations ~~should be read~~ in conjunction with the Fiscal 2022 Form 10-K, including the audited consolidated financial statements of 23andMe Holding Co. as of March 31, 2022 and 2021 and Management's Discussion and Analysis of Financial Condition and Results of Operations included therein, as well as the accompanying unaudited condensed consolidated financial statements and ~~the~~ notes thereto ~~contained elsewhere~~included in this ~~Quarterly Report. Certain~~Form 10-Q.

In addition to historical information, ~~contained in the~~this discussion and analysis ~~set forth below includes~~contains forward-looking statements. These forward-looking statements ~~that involve~~are subject to risks and ~~uncertainties.~~

~~This Quarterly Report includes “forward-looking statements” within~~uncertainties, including those discussed in the ~~meaning of Section 27A of~~Fiscal 2022 Form 10-K and our subsequent reports filed with the ~~Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties~~SEC, that could cause actual results to differ materially from ~~those expected and projected. All statements, other than statements of~~ historical ~~fact included in this Form 10-Q including, without limitation, statements~~results or anticipated results. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~regarding~~to the ~~Company’s financial position, business strategy~~“Company,” “we,” “us,” and ~~the plans~~“our” refer to 23andMe Holding Co., a Delaware corporation formerly known as VG Acquisition Corp. and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intendedits consolidated subsidiaries. References to ~~identify such forward-looking statements. Such forward-looking statements relate to future events~~VG Acquisition Corp. or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please“VGAC” refer to the ~~Risk Factors section~~Company prior to the consummation of the ~~Company’s final prospectus~~Business Combination.

23andMe Holding Co., formerly known as VG Acquisition Corp., is a mission-driven company dedicated to empowering customers to live healthier lives. Our mission is to help people access, understand, and benefit from the human genome.

We pioneered direct-to-customer genetic testing through our PGS products and services. Our PGS business provides customers with a full suite of genetic reports, including information on customers’ genetic ancestral origins, personal genetic health risks, and chances of passing on certain rare carrier conditions to their children, as well as reports on how genetics can affect responses to medications. We believe that by providing customers with direct access to their genetic information, we can empower them to make better decisions by arming them with information about their risks of developing certain diseases or conditions and by highlighting opportunities for prevention and mitigation of disease. We provide customers with an engaging experience, including access to frequent updates to their genetic health and ancestry reports and new product features, the ability to connect with genetic relatives, and a subscription option for extended health insights. Customers have the option to participate in our research programs and over 80% of our customers have done so. We analyze consenting customers’ genotypic data together with phenotypic data they provide to us concerning their physical characteristics, family origins, lifestyle, and other habits. We analyze this data using our proprietary machine learning and other analytic techniques in order to discover insights into whether and how particular genetic variants affect the likelihood of individuals developing specific diseases. These insights may highlight opportunities to develop a drug to treat or cure a specific disease.

We completed our acquisition of Lemonaid Health, Inc. (“Lemonaid Health”) on November 1, 2021 (the “Lemonaid Acquisition”). Lemonaid Health, an on-demand platform for accessing medical care and pharmacy services online, offers telemedicine, lab, and pharmacy services to patients in all 50 states, the District of Columbia, and the U.K. We believe that the addition of Lemonaid Health's telehealth services to our consumer business will enable us to bring better healthcare to individuals in an affordable and accessible way and offer personalized healthcare, based on a patient’s wellness, choices, and genetics.

Our Therapeutics business focuses on the use of genetic insights to validate and develop novel therapies to improve patients’ lives. We currently have research programs across several therapeutic areas, including oncology, respiratory, and cardiovascular diseases. In July 2018, we signed an exclusive agreement with an affiliate of GlaxoSmithKline plc (“GSK”) GSK to leverage genetic insights to validate, develop, and commercialize promising drugs (the “GSK Agreement”). This multi-year collaboration is expected to identify and prioritize genetically validated drug targets, enable rapid progression of clinical programs, and bring useful new drugs to market. In addition to our collaboration with GSK, we have several proprietary programs, one of which is being pursued in collaboration with Almirall, S.A.

Our second most advanced program, 23ME-00610, is an antibody that blocks the suppression of T-cells by tumors and reactivates their immune response. 23ME-00610 is wholly owned by us, and this program entered Phase 1 clinical trials in January 2022. Following the expiration of the GSK Agreement, we will have the opportunity to collaborate with, or out-license other wholly owned programs to third parties or to develop them independently.

We operate in two reporting segments: Consumer & Research Services and Therapeutics. The Consumer & Research Services segment consists of our PGS and telehealth business, as well as research services that we perform under agreements with third parties, including the GSK Agreement, relating to the use of our genotypic and phenotypic data to identify promising drug targets. The Therapeutics segment consists of revenues from the out-licensing of intellectual property associated with identified drug targets and expenses related to therapeutic product candidates under clinical development. For the three months ended June 30, 2022 and 2021, all our revenues were derived from our Consumer & Research Services segment. There was no Therapeutics revenue for both periods presented.

The table below reflects our revenue for the three months ended June 30, 2022 and 2021:

The table below reflects our two segments’ Adjusted EBITDA (as defined below) for the three months ended June 30, 2022 and 2021:

(1) Adjusted EBITDA is the measure of segment profitability reported to our Chief Executive Officer (“CEO”), who is our chief operating decision-maker (“CODM”). We define Adjusted EBITDA as net income before net interest income, net other income (expense), changes in fair value of warrant liabilities, income tax benefit, depreciation and amortization of fixed assets, amortization of internal use software, amortization of acquired intangible assets, non-cash stock-based compensation expense, acquisition-related costs, and expenses related to other charges, if applicable, for the period. See “—Adjusted EBITDA” below for a reconciliation of Adjusted EBITDA to net loss.

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those set forth in Part I, Item 1A., “Risk Factors,” of the Fiscal 2022 Form 10-K.

PGS. Our ability to attract new customers is a key factor for the future growth of our PGS business and our database. Our historical financial performance has largely been driven by the rate of sales of our PGS kits. Revenue from our PGS business, primarily composed of kit sales, represented approximately 68% and 81% of our total revenues for the three months ended June 30, 2022 and 2021, respectively. In addition, kit sales are a source of subscribers to our new subscription service, which represented approximately 5% and 2% of our total revenue for the three months ended June 30, 2022 and 2021, respectively. We expect PGS revenues to grow through a combination of kit sales, our new subscription service, and new product offerings that enhance or add new product features. This will be achieved by increasing awareness of our current and new offerings in existing markets and expanding into new markets.

Purchasing patterns of our kits are largely influenced by product innovation, marketing spends, and varying levels of price discounting on our products. These promotional windows have typically aligned with gift-giving portions of the year, with an emphasis on the holiday period, other gift-giving and family-oriented holidays such as Mother’s Day and Father’s Day, and Amazon Prime Day, which may change from year to year. Historically, we have experienced higher revenue in the fourth quarter of the fiscal year compared to other quarters. Over time, we expect the seasonality of our business to continue, with pronounced increases in revenue recognized in the fourth fiscal quarter. We generally incur higher sales and marketing expenses during holiday promotional periods, which have included, among others, Mother’s Day, Father’s Day, and the November-December holidays.

Telehealth. Our ability to attract new patients and members is a key factor for the future growth of our telehealth business. Revenue from our telehealth business represented approximately 18% of our total revenues for the three months ended June 30, 2022. Telehealth awareness, acceptance, and usage have been positively impacted by the COVID-19 pandemic, leading to increased consumer acceptance of virtual care. While we anticipate continued growth, there are many participants in the telehealth market, including new entrants and traditional health care systems offering virtual care, and competition is intense.

Our ability to conduct research and grow our database of genotypic and phenotypic information depends on our customers’ willingness to consent to participate in our research. Over 80% of our customers have consented to participate in research. These customers permit us to use their de-identified data in our research and many of them regularly respond to our research surveys, providing us with phenotypic data in addition to the genetic data in their DNA samples. We analyze this genotypic and phenotypic data and conduct genome-wide association studies and phenome-wide association studies, which enable us to determine whether particular genetic variants affect the likelihood of individuals developing certain diseases.

Our customers can withdraw their consent to participate in research at any time. If a significant number of our customers were to withdraw their consent, or if the percentage of consenting customers were to decline significantly in the future, our ability to conduct research successfully could be diminished, which could adversely affect our business.

Our genetics database underpins our research programs and enables us to identify drug targets with novel genetic evidence. As of March 31, 2022, we have identified over 50 drug targets. We expect the current productivity of our genetics database to continue based on the increasing amounts of data that we expect to result from increased kit sales and customer engagement. Any significant decline in such productivity would have a negative impact on our ability to identify drug targets and ultimately to develop and commercialize new drugs.

Our ability to successfully identify and develop therapeutic product candidates will determine the success of our Therapeutics business over time. Developing therapeutic product candidates with novel genetic evidence requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. We have over 50 programs in our pipeline in various stages of research and development that have been selected and are being pursued.

We have one therapeutic product candidate, GSK6097608, our joint immuno-oncology antibody program with GSK, in clinical development, for which we have elected to take a royalty option. Our wholly-owned immuno-oncology antibody, 23ME-00610, entered Phase 1 clinical trials in January 2022. Additional programs are in research or preclinical stages of development. We have incurred, and will continue to incur, significant research and development costs for preclinical studies and clinical trials. We expect that our research and development expenses will continue to constitute a significant portion of our expenses in future periods.

Substantially all of our research services revenues are generated from the GSK Agreement. In January 2022, GSK elected to exercise its ~~Initial Public Offering filed~~option to extend the exclusive target discovery period of the ongoing collaboration with us for an additional year ending in July 2023. We will receive a one-time payment of $50.0 million to extend the period. In addition, we elected to take a royalty option on our joint immuno-oncology antibody collaboration program with GSK targeting CD96 (GSK6097608, a.k.a. GSK’608). GSK will be solely responsible for GSK’608’s subsequent development in later-stage clinical trials, including full development costs moving forward. There was no Therapeutics revenue for the three months ended June 30, 2022 and 2021.

Our ability to enter into new collaboration agreements upon the expiration of the GSK Agreement will affect our research services revenues. If we are unable to enter into additional collaboration agreements, our future research services revenue may decline.

Our ability to generate revenue from our therapeutic product candidates depends on our and our collaborators’ ability to successfully complete clinical trials for our therapeutic product candidates and receive regulatory approval, particularly in the United States, Europe, and other major markets.

We believe that our broad portfolio of therapeutic product candidates with novel genetic evidence and validated targets enhances the likelihood that our research and development efforts will yield successful therapeutic product candidates. Nonetheless, we cannot be certain if any of our therapeutic product candidates will receive regulatory approvals. Even if such approvals are granted, we will thereafter need to establish manufacturing and supply arrangements and engage in extensive marketing efforts and expenses prior to generating any revenue from such products. The ultimate commercial success of our products will depend on their acceptance by patients, the medical community, and third-party payors, their ability to compete effectively with other therapies in the market, and the appropriate pricing and reimbursement of the products by third-party payors.

The competitive environment is also an important factor with the ~~SEC~~commercial success of our therapeutic product candidates, and our ability to successfully commercialize a therapeutic product candidate will depend on whether there are competing therapeutic product candidates in development or already marketed by other companies.

We launched our 23andMe+ subscription service in October ~~5, 2020. The Company’s securities filings can~~2020, and through the Lemonaid Acquisition, we began providing access to telehealth services in November 2021. We expect to expand into new categories and innovative healthcare models with the goal of driving future growth. Those opportunities include product enhancements, such as our proprietary polygenic risk scores, new product offerings aimed at extending our personalized and customer-centric philosophy to primary healthcare, and potential additional acquisitions of other consumer-oriented healthcare businesses. Such expansion would allow us to increase the number of engaged customers who purchase or subscribe for additional products and services.

Success of our subscription service will depend upon our ability to acquire and retain subscribing customers over an extended period. Retention of customers will be ~~accessed~~based on the ~~EDGAR section~~perceived value of the ~~SEC’s website~~premium content and features they receive. If we are unable to provide sufficiently compelling new content and features, subscribers may not renew.

Similarly, the success of our telehealth business is dependent on our ability to attract and retain patients and members. Category expansion allows us to increase the number of patients to whom we can provide products and services. It also allows us to offer access to treatment of additional conditions that may already affect our current patients. Expanding into new categories will require financial investments in additional headcount, marketing and customer acquisition expenses, additional operational capabilities, and may require the purchase of new inventory. If we are unable to generate sufficient demand in new categories, we may not recover the financial investments we make into new categories and revenue may not increase in the future.

Our research platform is based on a continually growing database of genotypic and phenotypic information. Our database allows us to conduct analyses in a multi-directional fashion, by searching for genetic signatures of particular diseases or the likelihood of a particular genetic variant causing disease in a particular individual or group of individuals who share the same trait. Our platform enables us to rapidly and serially conduct studies across an almost unlimited number of conditions at ~~www.sec.gov. Except~~unprecedented statistical power, yielding insights into the causes and potential treatments of a wide variety of diseases.

We believe that our research platform enables us to rapidly identify genetically validated drug targets with improved odds of clinical success. With our state-of- the-art bioinformatics capabilities, we analyze the trillions of data points in our database, optimizing the use of our resources, to genetically validate drug targets, inform patient selection for clinical trials, and increase the probability of success of our programs. We plan to advance new drugs through the rapid selection of those with compelling clinical promise.

We expect to continue investing in our business to capitalize on market opportunities and the long-term growth of our company. We intend to make significant investments in therapeutics research and development efforts and in marketing to acquire new customers and drive brand awareness, and also expect to incur software development costs as ~~expressly required by applicable securities law,~~we work to enhance our existing products, expand the ~~Company disclaims any intention or obligation~~depth of our subscription service, and design new offerings, including additional primary care offerings. In addition, we expect to ~~update or revise any forward-looking statements whether~~incur additional expenses as a result of ~~new information, future events or otherwise.~~operating as a public company. The expenses we incur may vary significantly by quarter depending, for example, on when significant hiring takes place, and as we focus on building out different aspects of our business.

We are continuing to closely monitor the impact of the COVID-19 pandemic in all aspects of our business. We rely entirely on third-party vendors in our PGS and telehealth supply chain, including our PGS kit and array manufacturers, order fulfillment vendor, our DNA-processing lab vendor, and drug suppliers for our pharmacy business. These vendors have independent responses to managing the effect of the COVID-19 pandemic, and we have not experienced any significant disruptions in our ability to fulfill and process PGS or telehealth orders to date. If we experience delays or other challenges in obtaining supplies necessary for the production, fulfillment, or distribution of the products or services we offer, it could negatively affect our ability to satisfy our obligations to customers and maintain our operations in a ~~blank check company incorporated~~cost-efficient manner and have a material adverse effect on our business.

With respect to our telehealth services, the COVID-19 pandemic has increased awareness, acceptance, and usage of virtual medical care and pharmacy services, resulting in greater consumer trial and use of telehealth. While we believe that these trends present significant opportunities for our telehealth services, it is uncertain whether the increase in demand caused by COVID-19 will continue.

In our Therapeutics segment, the advancement of our programs requires our scientists to have physical access to our laboratory facilities on a continuing basis, and we have implemented health and safety protocols and procedures to keep our laboratory facilities operating during the COVID-19 pandemic. In addition, despite the introduction and continued administration of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including the Omicron, Delta, and other variants and other areas that may affect our business operations. Despite our mitigation efforts, we may experience delays or an inability to execute on our clinical and preclinical development plans, reduced revenues or other adverse impacts to our business, which are described in more detail in Part I, Item 1A., “Risk Factors,” of the Form 10-K. The duration of the COVID-19 pandemic and the impact of the efforts being made to contain it or to flatten the spread of the disease cannot be predicted with any accuracy, and this uncertainty could have a material impact on our financial results for the foreseeable future.

We have taken other measures in response to the ongoing COVID-19 pandemic, including closing our offices and implementing a work-from-home policy for most of our workforce, and amplifying monitoring of our inventory levels and supply chain. Notwithstanding these measures, the spread of COVID-19 has at certain times impacted our staffing and attendance in our laboratory facilities. We may take further actions that alter our business operations that we determine are in the ~~Cayman Islands~~best interests of our employees, customers, and stockholders or as may be required by federal, state, or local authorities.

The condensed consolidated financial statements and accompanying notes of the Company included elsewhere in this Form 10-Q include the accounts of 23andMe Holding Co. and its consolidated subsidiaries and variable interest entities and were prepared in accordance with GAAP. As 23andMe, Inc. is considered the Company’s accounting predecessor, certain historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of 23andMe, Inc. and its wholly owned subsidiary.

As discussed above, we operate in two reporting segments: Consumer & Research Services and Therapeutics. The Consumer & Research Services segment consists of our PGS and telehealth business, as well as research services that we perform under agreements with third parties, including the GSK Agreement, relating to the use of our genotypic and phenotypic data to identify promising drug targets. The Therapeutics segment consists of revenues from the out-licensing of intellectual property associated with identified drug targets and expenses related to therapeutic product candidates under clinical development. Substantially all our revenues are derived from our Consumer & Research Services segment.

We monitor the following key metrics to help us evaluate our business, identify trends, formulate business plans, and make strategic decisions. We believe the following metrics are useful in evaluating our business:

We recognize revenue in accordance with Topic 606 when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Our consolidated revenue is composed primarily of sales of PGS kits to customers and telehealth services which include online medical visits, pharmacy services, and memberships, as well as revenues from target discovery activities as part of our research collaborations through our Consumer & Research Services segment. Additionally, revenue is generated through our collaboration agreements in our Therapeutics segment primarily as a result of the out-licensing of intellectual property to collaboration partners.

See Note 2, “Summary of Significant Accounting Policies,” to our accompanying unaudited condensed consolidated financial statements for a more detailed discussion of our revenue recognition policies.

Cost of revenue for PGS primarily consists of cost of raw materials, lab processing fees, personnel-related expenses, including salaries, benefits, and stock-based compensation, shipping and handling, and allocated overhead. Cost of revenue for telehealth primarily consists of personnel-related expenses that we incur for medical services, prescription drug costs, packaging and shipping, and amortization of intangible assets. Cost of revenue for research services primarily consists of personnel-related expenses, including salaries, benefits, and stock-based compensation, and allocated overhead. We expect cost of revenue to increase in the foreseeable future in absolute dollars but gradually decrease as a percentage of revenue over the long term.

Our gross profit represents total revenue less our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue. Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the volume of PGS kit sales recognized, the prices we charge for our PGS products and research services, the prices we charge for telehealth services (medical visits, pharmacy services, and memberships), the fees we incur for lab processing PGS kits, the costs we incur for medical services and prescription drug costs, the revenues from our collaboration agreements and the personnel costs to fulfill them. We expect our Consumer & Research Services gross margin to increase over the long term as subscription revenues become a higher percentage of revenue mix, although our gross margin may fluctuate from period to period. Substantially all our research services revenue is currently derived from the GSK Agreement. If we are unable to add new research services agreements, our research services revenue may decline substantially following the expiration of the GSK Agreement in July 2023.

Our operating expenses primarily consist of research and development, sales and marketing, and general and administrative expenses. Personnel-related expenses, which include salaries, benefits, and stock-based compensation, is the most significant component of research and development and general and administrative expenses. Advertising and brand-related spend and personnel-related expenses represent the primary components of sales and marketing expenses. Operating expenses also include allocated overhead costs. Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on ~~February 19, 2020 formed for~~headcount. Allocated overhead costs include shared costs associated with facilities (including rent and utilities) and related personnel, information technology and related personnel, and depreciation of property and equipment.

Our research and development expenses support our efforts to add new services and add new features to our existing services, and to ensure the ~~purpose~~reliability and scalability of ~~effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization~~our services across our Consumer and Research Services segment. Research and development expenses also include our efforts to discover and genetically validate new therapeutic product candidates and continue to develop our portfolio of existing therapeutic product candidates, either our own proprietary programs or ~~other similar Business Combination~~those in collaboration with ~~one or more businesses.~~partners across our Therapeutics segment. Research and development expenses primarily consist of personnel-related expenses, including salaries, benefits, and stock-based compensation associated with our research and development personnel, collaboration expenses, preclinical and clinical trial costs, laboratory services and supplies costs, third-party data services, and allocated overhead.

We plan to continue to invest in personnel to support our research and development efforts. We intend to ~~effectuate~~make significant investments in therapeutics research and development efforts as we ramp up our clinical trials and continue the GSK collaboration. This multi-year collaboration with GSK is expected to validate drug targets with novel genetic evidence, enable rapid progression of clinical programs, and bring useful new drugs to market. We expect that research and development expenses will increase on an absolute dollar basis in the foreseeable future as we continue to invest in our products, pipeline, and infrastructure for long-term growth. In addition, our research and development expenses may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

Sales and marketing expenses consist primarily of advertising costs, personnel-related expenses, including salaries, benefits, and stock-based compensation associated with our sales and marketing personnel, amortization of intangible assets, and outside services. Outside services are primarily related to sales consultants that support sales of PGS kits.

Advertising and brand costs consist primarily of direct expenses related to television and radio advertising, including production and branding, paid search, online display advertising, direct mail, affiliate programs, marketing collateral, market research and public relations. Advertising production costs are expensed the first time the advertising takes place, and all other advertising costs are expensed as incurred. Deferred advertising costs primarily consist of vendor payments made in advance to secure media spots across varying media channels, as well as production costs incurred before the first time the advertising takes place. Deferred advertising costs are expensed on the first date the advertisements occur. In addition, advertising costs include platform fees due to brokers related to our third-party retailers.

We expect our sales and marketing expenses to gradually decrease as a percentage of revenue over the long term, although our sales and marketing expenses may fluctuate as a percentage of revenue from period to period due to promotional strategies that drive the timing and amount of these expenses.

General and administrative expenses primarily consist of personnel-related expenses, including salaries, benefits, and stock-based compensation associated with corporate management, including our CEO office, finance, legal, compliance, regulatory, corporate communications and other administrative personnel. In addition, general and administrative expenses include professional fees for external legal, accounting, and other consulting services, as well as credit card processing fees related to PGS kit sales and telehealth services.

We expect general and administrative expenses to increase for the foreseeable future as we increase headcount with the growth of our business. We also expect general and administrative expenses to increase in the near term as a result of operating as a public company, including expenses associated with compliance with SEC rules and regulations, and related increases in legal, audit, insurance, investor relations, professional services, and other administrative expenses. However, we anticipate general and administrative expenses to gradually decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Other income (expense) includes interest income, net, and other income (expense), net. Interest income, net primarily consists of interest income earned on our cash deposits. Other income (expense), net primarily consists of change in fair value of warrants liabilities, effects of changes in foreign currency exchange rates, and other non-operating income and expenditures.

The income tax benefit primarily consists of an adjustment to the Lemonaid Health deferred tax liability recorded in fiscal year 2022. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

The following table sets forth our unaudited condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021, and the dollar and percentage change between the two periods:

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

Total revenue increased by $5.3 million, or 9%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The increase was due primarily to an increase in consumer services revenue of $11.9 million attributable to telehealth services from the Lemonaid Acquisition, offset by a $3.7 million decrease in PGS revenue, driven mainly by lower PGS kit sales volume offset by an increase in subscription services revenue. This increase in consumer services revenue was partially offset by a $2.9 million decrease in research services revenue due primarily to lower project hours incurred pursuant to the GSK Agreement compared to the same period in the prior year.

Total cost of revenue increased by $10.5 million, or 37%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. Cost of revenue for consumer services increased by $11.4 million, driven mainly by a $12.0 million increase in telehealth services cost of revenue, primarily from $5.9 million in personnel-related expenses, $3.0 million in allocated overhead costs, and $0.9 million in amortization expense for developed technology, partially offset by a $0.6 million decrease primarily related to lower PGS kit sales volume. Cost of revenue for research services decreased by $0.9 million primarily due to lower project hours pursuant to the GSK Agreement.

Our gross profit decreased by $5.2 million, or 17%, to $25.5 million for the three months ended June 30, 2022 from $30.7 million for the three months ended June 30, 2021. The decrease in gross profit was primarily due to the increase in consumer services cost of revenue from telehealth services, and the decreases in PGS-related kit revenue and research services revenue as discussed above.

Our gross margin declined year over year, from 52% for the three months ended June 30, 2021 to 40% for the three months ended June 30, 2022, due to the integration of the telehealth business, which generates a lower gross margin than our PGS kit sales, and its share of overhead allocations, as well as increased PGS shipping costs passed on by carriers.

The following table sets forth our research and development expenses for the three months ended June 30, 2022 and 2021, and the dollar and percentage change between the two periods:

Research and development expenses for the three months ended June 30, 2022 was $52.0 million, compared to $44.2 million for three months ended June 30, 2021. This increase of $7.8 million, or 18%, was primarily attributable to the increase in personnel-related expenses of $11.0 million, due to increased salaries and related taxes as a result of inflation, growth in headcount, and stock-based compensation in connection with the new equity awards granted and accrued compensation under the 2022 AIP (as defined in Note 10, “Equity Incentive Plans and Stock-Based Compensation,” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q). In addition, facilities, other overhead allocation, and other increased by $0.5 million due to higher allocated overhead costs driven by increased research and development headcount as well as increased personnel-related expenses for shared-cost departments during the three months ended June 30, 2022. These increases were partially offset by a $3.6 million decrease in lab-related research services primarily due to the opt-out exercised pursuant to the GSK Agreement with respect to sharing the costs of further research on therapeutic product candidate GSK6097608, and a $0.1 million decrease in depreciation, equipment and supplies.

For the three months ended June 30, 2022 and 2021, 54% and 53% of total research and development expenses were attributable to the Consumer and Research Services business, respectively, and 46% and 47% were attributable to our Therapeutics business, respectively.

The following table sets forth our sales and marketing expenses for the three months ended June 30, 2022 and 2021, and the dollar and percentage change between the two periods:

Sales and marketing expenses for the three months ended June 30, 2022 amounted to $33.4 million, as compared to $15.4 million for the three months ended June 30, 2021, representing an increase of $18.0 million, or 117%. This increase was primarily driven by the $11.5 million increase in advertising and brand-related spend in our marketing programs to grow our consumer business, of which $7.9 million was related to advertising and brand-related spend from the telehealth business. Depreciation and amortization increased $3.3 million due to amortization of acquired intangible assets, including customer relationships, trademarks, and partnerships from the Lemonaid Acquisition. Additionally, personnel-related expenses increased by $3.1 million due to increased salaries and related taxes as a result of inflation, growth in headcount, and stock-based compensation in connection with the new equity awards granted and accrued compensation under the 2022 AIP.

Total general and administrative expenses increased by $17.0 million, or 135%, from $12.6 million for the three months ended June 30, 2021 to $29.6 million for the three months ended June 30, 2022. The increase in general and administrative expenses was primarily due to the increase in personnel-related expenses of $11.8 million, which was a result of increased salaries and related taxes as a result of inflation, growth in headcount, and stock-based compensation expense for new equity awards granted. Other operating expenses increased by $2.7 million, primarily due to an increase in director and officer insurance as a public company. Outside services increased by $1.5 million, primarily due to an increase in outside services, mainly attributable to increased advisory, legal and consulting services related to the Business Combination ~~using cash derived~~(as defined in Note 3, “Recapitalization,” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q), the Lemonaid Acquisition, and the related integration fees. Facilities and overhead allocation increased by $1.0 million, primarily due to higher allocated overhead costs driven by increased headcount, as well as increased personnel-related expenses for shared-cost departments during the three months ended June 30, 2022.

Interest income, net was $0.2 million and less than $0.1 million for the three months ended June 30, 2022 and 2021, respectively.

Other income (expense), net was $(0.4) million and less than $0.1 million for the three months ended June 30, 2022 and 2021, respectively.

Benefit from income taxes was $0.3 million for the three months ended June 30, 2022. There was no income tax expense or benefit from the three months ended June 30, 2021.

We evaluate the performance of each segment based on Adjusted EBITDA, which is a non-GAAP financial measure that we define as net income before interest income, net other income (expense), changes in fair value of warrant liabilities, income tax benefit, depreciation and amortization of fixed assets, amortization of internal use software, amortization of acquired intangible assets, non-cash stock-based compensation expense, acquisition-related costs, and expenses related to restructuring and other charges, if applicable for the period. Adjusted EBITDA is a key measure used by our management and our Board of Directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operating plans. In particular, we believe that the exclusion of the items eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating results in the same manner as our management and our Board of Directors. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison. There are a number of limitations related to the use of these non-GAAP financial measures rather than net loss, which is the most directly comparable financial measure calculated in accordance with GAAP.

Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.

The following tables reconcile net loss to Adjusted EBITDA for the three months ended June 30, 2022 and 2021 on a company-wide basis and for each of our segments:

Consumer & Research Services Adjusted EBITDA declined for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to a $11.5 million increase in advertising and brand-related spend in our marketing programs to grow our consumer business, and a $11.6 million increase in expenses, primarily due to personnel-related expenses driven by increased salaries and related taxes as a result of inflation and growth in headcount, mainly attributable to telehealth services.

The foregoing increase to expenses was partially offset by increases in our total revenue of $5.3 million. Revenue growth was primarily driven by an increase in consumer services revenue of $11.9 million attributable to telehealth services from the Lemonaid Acquisition. This increase was partially offset by a $3.7 million decrease in PGS revenue driven mainly by lower PGS kit sales volume offset by an increase in subscription service revenue. The increase was also offset by a $2.9 million decrease in research services revenue due primarily to lower project hours incurred pursuant to the GSK Agreement, compared to the same period in the prior year.

Therapeutics' Adjusted EBITDA slightly declined for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to an $1.9 million increase in personnel-related expenses due to growth in headcount and increased salaries and related taxes as a result of inflation. Additionally, facilities, other overhead allocation and other increased by $1.8 million primarily due to growth in research and development headcount as well as increased personnel-related expenses for shared-cost departments during the three months ended June 30, 2022. This spend increase was partially offset by a $3.6 million decrease in lab-related research and development expenses primarily due to the opt-out exercised pursuant to the GSK Agreement with respect to sharing the costs of further research on therapeutic product candidate GSK6097608.

We have financed our operations primarily through sales of equity securities and revenue from sales of PGS, telehealth, and research services. During the fiscal year ended March 31, 2022, we received gross proceeds of $309.7 million from the ~~Initial Public Offering~~Business Combination and $250.0 million from the ~~sale~~PIPE Investment. Our primary requirements for liquidity and capital are to fund operating needs and finance working capital, capital expenditures, and general corporate purposes.

As of June 30, 2022, our principal source of liquidity was our cash balance of $479.4 million, which is held for working capital purposes. We have generated significant operating losses as reflected in our accumulated deficit and negative cash flows from operations. We had an accumulated deficit of $1,284.3 million as of June 30, 2022. As of the ~~Private Placement Warrants,~~date of this Form 10-Q, we believe our ~~shares, debt or a combination of~~existing cash ~~shares and debt.~~resources are sufficient to continue operating activities for the next 12 months.

We expect to continue to incur ~~significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.~~

~~We have neither engaged in any~~operating losses and generate negative cash flows from operations ~~nor generated any operating revenues to date. Our only activities from inception through September 30, 2020 were organizational activities and those necessary to prepare~~ for the ~~Initial Public Offering, described below. We do not~~foreseeable future due to the investments we intend to continue to make in research and development, additional general and administrative costs we expect to ~~generate any~~incur in connection with operating ~~revenues until after the completion of our initial Business Combination. We~~as a public company, and additional sales and marketing costs we expect to ~~generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will~~ incur ~~increased expenses~~ as a result of ~~being~~the Lemonaid Acquisition. Cash from operations could also be affected from our customers and other risks set forth in Part I, Item 1A., “Risk Factors,” of the Fiscal 2022 10-K. We expect to continue to maintain financing flexibility in the current market conditions. As a ~~public company (for legal,~~result, we may require additional capital resources to execute strategic initiatives to grow our business.

Our future capital requirements will depend on many factors including our revenue growth rate, the timing and extent of spending to support further sales and marketing, and research and development efforts. We may continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, as a result of those arrangements or the general expansion of our business, be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we are unable to raise additional capital when desired, our business, results of operations, and financial ~~reporting, accounting~~condition would be materially and ~~auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.~~adversely affected.

For the three months ended ~~September~~June 30, ~~2020, we had~~2022, there were no material changes outside of the ordinary course of business in our commitments and contractual obligations disclosed in the Fiscal 2022 Form 10-K. See Note 8, “Commitments and Contingencies,” to our condensed consolidated financial statements included elsewhere in this Form 10-Q for additional details.

Net cash used in operating activities of $73.0 million for the three months ended June 30, 2022 was primarily related to a net loss of ~~$159,~~$89.5 million, partially offset by non-cash charges for stock-based compensation of $30.5 million, depreciation and amortization of $8.4 million and amortization and impairment of internal-use software of $1.1 million. The net changes in operating assets and liabilities of $23.4 million were primarily related to a decrease in accounts payable of $19.2 million primarily due to timing of vendor payments, a decrease in deferred revenue of $13.1 million mainly due to a decrease in PGS sales and lower project hours incurred pursuant to the GSK Agreement, a decrease in operating lease liabilities of $2.2 million primarily due to lease payments, which ~~consisted~~were offset by a decrease in prepaid expenses and other current assets of ~~formation~~$7.3 million primarily due to a decrease in other receivables and prepaid usage, an increase in accrued expenses and other current liabilities of $2.5 million primarily due to timing of vendor invoice receipts and accrued stock-based compensation costs under the 2022 AIP, and a decrease in deferred cost of revenue of $1.2 million primarily driven by a decrease in sales.

~~For~~activities of $44.5 million for the ~~period from February 19, 2020 (inception) through September~~three months ended June 30, ~~2020, we had~~2021 was primarily related to a net loss of ~~$10,349,~~$42.0 million, partially offset by non-cash charges for stock-based compensation of $9.6 million and depreciation and amortization of $4.1 million. The net changes in operating assets and liabilities of $17.3 million were primarily related to a decrease in deferred revenue of $5.2 million as a result of reduced deferred revenue balance related to GSK mainly due to revenue recognized during the period for which funds were received in a prior period, a decrease in operating lease liabilities of $1.9 million primarily due to lease payments, an increase in inventories of $9.0 million due to increased purchases aligned with higher forecasted sales, an increase in accounts receivable of $6.9 million due to timing of sales made during the period following significant promotions that occurred late in the current period, an increase in deferred cost of revenue of $0.6 million due to increase in PGS kit sales, and an increase in prepaid expenses and other current assets of $1.1 million due to increase in prepaid insurance and deferred advertising, which were offset by an increase in accounts payable of $5.7 million due to timing of vendor payments and a decrease in operating lease right-of-use assets of $1.8 million due to right-of-use assets amortization.

Cash flows from investing activities primarily relate to purchase of property and equipment, prepayments for intangible assets, as well as capitalization of internal-use software costs.

Net cash used in investing activities was $2.9 million for the three months ended June 30, 2022, which consisted of ~~formation~~purchases of property and ~~operating costs.~~equipment of $1.6 million and capitalization of internal-use software costs of $1.2 million.

Net cash used in investing activities was $1.4 million for the three months ended June 30, 2021, which consisted of purchases of property and equipment of $0.7 million and capitalization of internal-use software costs of $0.7 million.

AsNet cash provided by financing activities was $1.5 million for the three months ended June 30, 2022, which consisted of ~~September 30, 2020, we had cash of $24,682. Until~~$1.5 million in proceeds from the ~~consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B ordinary shares by the Sponsor and loans from our Sponsor.~~

Subsequent to the end of the quarterly period covered by this Quarterly Report, on October 6, 2020, we consummated the Initial Public Offering of 48,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $480,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,733,333 Private Placement Warrants to the Sponsor at a price of $1.50 per Private Placement Warrant generating gross proceeds of $11,600,000.

~~On October 16, 2020, in connection with the underwriters’ election to partially~~ exercise of ~~their over-allotment option,~~stock options.

Net cash provided by financing activities was $533.4 million for the three months ended June 30, 2021, which consisted of $309.7 million in proceeds from the Business Combination, $250.0 million of proceeds from the PIPE Investment, $2.7 million in proceeds from the exercise of stock options, which were partially offset by $29.1 million in payments of deferred offering costs.

Our lease portfolio includes leased offices, dedicated lab facility and storage space, and dedicated data center facility space, with remaining contractual periods from 0.7 years to 9.1 years. Refer to Note 7, “Leases,” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for a summary of our future minimum lease obligations.

In the normal course of business, we ~~consummated the sale~~enter into non-cancelable purchase commitments with various parties for purchases. Refer to Note 8, “Commitments and Contingencies,” of ~~an additional 2,855,000 Units~~our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for a summary of our commitments as of June 30, 2022.

Our condensed consolidated financial statements and the ~~sale of an additional 380,666 Private Placement Warrants, generating total gross proceeds of $29,121,000.~~

Following the Initial Public Offering, the sale of the Private Placement Warrants, and the underwriters election to partially exercise their over-allotment option on October 16, 2020, a total of $508,550,000 was placedrelated notes thereto included elsewhere in the Trust Account, and we had $1,524,449 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $28,641,284this Form 10-Q are prepared in ~~transaction costs, including $10,171,000 of underwriting fees, $17,799,250 of deferred underwriting fees and $671,034 of other offering costs.~~

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.

~~In order to fund working capital deficiencies or finance transaction costs in connection~~accordance with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities, secretarial and administrative support services, provided to the Company. We began incurring these fees on October 1, 2020 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $17,999,250 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

GAAP. The preparation of ~~unaudited~~ condensed consolidated financial statements ~~and related disclosures in conformity with accounting principles generally accepted in the United States of America~~also requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, ~~disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income~~revenue, costs and expenses, ~~during~~and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the ~~periods reported.~~circumstances. Actual results could ~~materially~~ differ significantly from ~~those estimates.~~the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

Goodwill represents the excess purchase price of acquired businesses over the fair values attributed to underlying net tangible assets and identifiable intangible assets. We test goodwill each fiscal year on January 1st for impairment at Consumer & Research Services reporting unit level. Goodwill is also tested for impairment whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Performance of the qualitative impairment assessment requires judgment in identifying and considering the significance of relevant events and circumstances including external factors such as macroeconomic and industry conditions and the legal and regulatory environment, as well as entity-specific factors such as actual and planned financial performance, that could impact the fair value of our Consumer & Research Services reporting unit. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, we will proceed to perform the quantitative impairment test in which the fair value of the reporting unit is compared with its carrying amount, and an impairment charge will be recorded for the amount by which the carrying amount exceeds the reporting unit's fair value, if any.

Our annual assessment for goodwill impairment was performed as of January 1, 2022. The assessment indicated that is it more likely than not that the fair value of the Consumer & Research Services reporting unit exceeds its carrying amount. We are not experiencing constraints on access to capital, poor financial performance, nor do we intend to scale down our business. We have not ~~identified~~experienced any conditions that would require a write-down of our other assets, including long-lived assets. Therefore, no goodwill impairment charges were recorded as a result of our 2022 impairment analysis. Furthermore, in considering potential indicators of impairment, the Company has considered recent events and circumstances and concluded there is no evidence that changes our most recent conclusions.

Except as set forth above, there have been no material changes to our critical accounting ~~policies.~~policies and estimates as compared to those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Fiscal 2022 Form 10-K.

~~Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.~~

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~We have operations primarily within the United States and we are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We do not believe that inflation has had a material effect on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial conditions.

As of ~~September~~June 30, ~~2020,~~2022, we ~~were~~had cash of $479.4 million. Cash consists of cash in banks and bank deposits and is not subject to ~~any~~ market orrisk. A hypothetical 10% change in interest rates during the three months ended June 30, 2022 and 2021 would not have had a material impact on our historical condensed consolidated financial statements.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Currently, substantially all our revenue and expenses are denominated in U.S. dollars. Revenue and expenses are remeasured each day at the exchange rate ~~risk. Following~~in effect on the ~~consummation~~day the transaction occurred. Our results of ~~our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts~~operations and cash flows in the ~~Trust Account,~~future may be adversely affected due to an expansion of non-U.S. dollar denominated contracts and changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have ~~been invested~~had a material impact on our historical condensed consolidated financial statements for the three months ended June 30, 2022 and 2021. To date, we have not engaged in ~~certain U.S. government obligations with a maturity of 185 days or less or~~any hedging strategies. As our international activities grow, we will continue to reassess our approach to manage the risk relating to fluctuations in ~~certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.~~currency rates.

~~ITEM 4. CONTROLS AND PROCEDURES~~Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in ~~our~~company reports filed or submitted under the Exchange Act is accumulated and communicated to ~~our~~ management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

AsJune 30, 2022, as required by Rules ~~13a-15f~~13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and ~~procedures as of September 30, 2020.~~procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules ~~13a-15 (e)~~13a-15(e) and ~~15d-15 (e)~~15d-15(e) under the Exchange Act) were ~~effective.~~

~~There were no changes~~not effective at the reasonable assurance level as of such date, due to the material weakness in our internal control over financial reporting ~~(as defined~~described below. Notwithstanding the identified material weakness, management has concluded that the condensed consolidated financial statements included in ~~Rules 13a-15(f)~~this Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations, and ~~15d-15(f) under~~cash flows for the ~~Exchange Act)~~periods disclosed in accordance with GAAP.

A material weakness in our internal control over financial reporting was identified as of March 31, 2020 and 2021, and remains unremediated at June 30, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. The material weakness identified was a lack of sufficient resources in our finance function to meet our financial reporting requirements. This material weakness resulted in insufficient management review of journal entries, account reconciliations, and review of financial statements. Management continues to review and make necessary changes to the overall design of our internal control environment, including implementing additional internal controls over journal entries, account reconciliation and the review of financial statements. We are in the process of adding additional resources to our finance function to enhance the effectiveness of internal controls over financial reporting. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Although we plan to complete this remediation process as quickly as possible, we cannot estimate at this time how long it will take.

There was no change in our internal control over financial reporting that occurred during the ~~period~~fiscal quarter ended June 30, 2022 covered by this ~~report~~Form 10-Q that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

~~ITEM 1. LEGAL PROCEEDINGS.~~The information set forth in Note 8, “Commitments and Contingencies,” of the Condensed Consolidated Financial Statements of this Form 10-Q is incorporated herein by reference.

Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our final prospectus filed with the SEC on October 5, 2020. As of the date of this Quarterly Report, thereThere have been no material changes to the risk factors ~~disclosed~~set forth in ~~our final prospectus filed with~~Part I, Item 1A., “Risk Factors,” of the ~~SEC.~~Fiscal 2022 Form 10-K.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~None.

On October 6, 2020, we consummated our Initial Public Offering of 508,550,000 Units, inclusive of 2,855,000 Units sold to the underwriters on October 16, 2020 upon the underwriters’ election to partially exercise their over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $508,550,000. Credit Suisse Securities (USA) LLC acted as the Sole book-running manager. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-248844 and 333-249247). The registration statements became effective on October 1, 2020.

Simultaneously with the consummation of the Initial Public Offering, and the exercise of the over-allotment option in part and the sale of the Private Placement Warrants, we consummated a private placement of 8,113,999 Private Placement Warrants to our Sponsor at a price of $1.50 per Private Placement Warrant, generating total proceeds of $12,171,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

Of the gross proceeds received from the Initial Public Offering including the partial exercise of the option to purchase additional Units, and the sale of the Private Placement Warrants, $508,550,000 was placed in the Trust Account.

We paid a total of $10,171,000 in underwriting discounts and commissions and $671,034 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $17,799,250 in underwriting discounts and commissions.

~~For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.~~

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~Cayman Islands~~		~~N/A~~
Delaware	87-1240344
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~65 Bleecker Street, 6~~^th ~~Floor~~ ~~New York, New York~~		~~10012~~

349 Oyster Point Boulevard South San Francisco,California	94080
(Address of principal executive offices)		(Zip Code)


Title of each class		Trading Symbol(s)	Name of each exchange on which registered
Class A ~~ordinary shares,~~common stock, $0.0001 par value ~~$0.0001~~ per share	ME	~~VGAC~~	The ~~New York Stock Exchange~~
~~Redeemable warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50~~		~~VGAC.W~~	~~The New York Stock Exchange~~
~~Units, each consisting of one Class A ordinary share and one-third of one redeemable warrant~~		~~VGAC.U~~	~~The New York Stock Exchange~~Nasdaq Global Select Market


Large accelerated filer	☐ ☒	Accelerated filer	☐
Non-accelerated filer	☒ ☐	Smaller reporting company	☒ ☐
		Emerging growth company	☒ ☐

		~~Page~~
	Page
PART ~~1 –~~I. FINANCIAL INFORMATION
Item 1. Financial Statements		4
~~Item 1.~~ Condensed Consolidated Balance Sheets	~~Financial Statements~~	4

	Condensed ~~Balance Sheet (unaudited)~~	1

	~~Condensed~~Consolidated Statements of Operations ~~(unaudited)~~and Comprehensive Loss	2 5
Condensed Consolidated Statements of Stockholders’ Equity		6
	Condensed ~~Statements of Changes in Shareholder’s Equity (unaudited)~~	3

	~~Condensed~~Consolidated Statements of Cash Flows ~~(unaudited)~~	4 7
Notes to the Condensed Consolidated Financial Statements		8
	~~Notes to Condensed Financial Statements (unaudited)~~	5

Item 2.	~~Management’s~~ Management's Discussion and Analysis of Financial Condition and Results of Operations	13 26

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	15 41
Item 4. Controls and Procedures		42
~~Item 4.~~ PART II. OTHER INFORMATION	~~Control and Procedures~~	15
Item 1. Legal Proceedings		43
~~PART II – OTHER INFORMATION~~Item 1A. Risk Factors	43

~~Item 1.~~	~~Legal Proceedings~~	16

~~Item 1A.~~	~~Risk Factors~~	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16 43

Item 3.	Defaults Upon Senior Securities	17 43

Item 4.	Mine Safety Disclosures	17 43
Item 5. Other Information		43
Item 5.6. Exhibits	~~Other Information~~	17 44
Signature
~~Item 6.~~	~~Exhibits~~	17

~~SIGNATURES~~		18 45


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


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

ASSETS
Current asset - cash	$	24,682
Deferred offering costs		560,014
TOTAL ASSETS	$	584,696

LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities
Accrued offering costs	$	386,251
Promissory note — related party		183,794
Total current liabilities		570,045
Total Liabilities		570,045

Commitments and Contingencies

Shareholder’s Equity
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized; none issued and outstanding
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 13,800,000 shares issued and outstanding(1)		1,380
Additional paid-in capital		23,620
Accumulated deficit		(10,349	)
Total Shareholder’s Equity		14,651
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	584,696

	Three Months Ended September 30,			For the Period from February 19, 2020 (Inception) Through September 30,
	2020			2020
Formation and operating costs	$	159		$	10,349
Net Loss	$	(159	)	$	(10,349	)

Weighted average shares outstanding, basic and diluted ⁽¹⁾		12,713,750			12,713,750

Basic and diluted net loss per ordinary shares	$	(0.00	)	$	(0.00	)

	Class B Ordinary Shares				Additional Paid-in		Accumulated			Total Shareholder’s
	Shares		Amount		Capital		Deficit			Equity
Balance — February 19, 2020 (inception)		—	$	—	$	—	$	—		$	—

Issuance of Class B ordinary shares to Sponsor⁽¹⁾		13,800,000		1,380		23,620		—			25,000

Net loss		—		—		—		(10,031	)		(10,031	)
Balance — March 31, 2020		13,800,000		1,380		23,620		(10,031	)		14,969

Net loss		—		—		—		(159	)		(159	)
Balance — June 30, 2020		13,800,000		1,380		23,620		(10,190	)		14,810

Net loss		—		—		—		(159	)		(159	)
Balance — September 30, 2020		13,800,000	$	1,380	$	23,620	$	(10,349	)	$	14,651

Cash Flows from Operating Activities:
Net loss	$	(10,349	)
Adjustments to reconcile net loss to net cash used in operating activities:
Payment of formation costs through promissory note		10,031
Changes in operating assets and liabilities:
Accrued expenses		—
Net cash used in operating activities		(318	)

Cash Flows from Financing Activities:
Proceeds from issuance of Class B ordinary shares to Sponsor		25,000
Net cash provided by financing activities		25,000

Net Change in Cash		24,682
Cash – Beginning		—
Cash – Ending	$	24,682

Non-cash investing and financing activities:
Payment of offering costs through promissory note – related party	$	173,763
Deferred offering costs included in accrued offering costs	$	386,251
Accrued expenses reclassified to promissory note	$	10,000


	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


	Options Outstanding
	Outstanding Stock Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
	(in thousands, except share, years, and per share data)
Balance as of March 31, 2022		73,609,565		$	4.21	6.9		$	35,979
Granted		1,700,512		$	3.56
Exercised		(1,065,784	)	$	1.44
Cancelled/Forfeited/Expired		(2,263,745	)	$	4.89
Balance as of June 30, 2022		71,980,548		$	4.21		6.6	$	14,170
Vested and exercisable as of June 30, 2022		44,547,740		$	3.96		5.4	$	9,774


	Unvested RSUs			Weighted-Average Grant Date Fair Value Per Share
Balance as of March 31, 2022		10,676,378		$	9.70
Granted		14,655,582		$	3.48
Vested		(1,461,448	)	$	6.73
Cancelled/forfeited		(793,942	)	$	6.92
Balance as of June 30, 2022		23,076,570		$	6.03


	As of June 30,
	2022		2021
Outstanding stock options		71,980,548		65,962,668
Restricted stock units		23,076,570		2,837,769
Shares subject to vesting		3,278,650		0
Warrants		0		25,065,608
ESPP		3,456,238		0
Total		101,792,006		93,866,045


	Three Months Ended June 30,
	2022						2021
	Min			Max			Min			Max
Expected term (years)		6.0			6.8			6.0			6.1
Expected volatility		76	%		77	%		67	%		68	%
Risk-free interest rate		2.8	%		2.8	%		0.4	%		0.5	%
Expected dividend yield	0				0			0			0

~~No.~~	~~Description of Exhibit~~
~~1.1~~ 2.1		~~Underwriting~~ Agreement and Plan of Merger, dated ~~October 1, 2020, between the Company~~as of February 4, 2021, by and ~~Credit Suisse Securities (USA) LLC, as representative of the several underwriters.~~ ⁽¹⁾
~~3.1~~	~~Amended and Restated Memorandum and Articles of Association.~~ ⁽¹⁾
~~4.1~~	~~Warrant Agreement, dated October 1, 2020, between the Company and Continental Stock Transfer & Trust Company, as warrant  agent.~~ ⁽¹⁾
~~10.1~~	~~A Letter Agreement, dated October 1, 2020,~~ among ~~the Company and its officers and directors and~~ VG Acquisition ~~Sponsor LLC.~~ ⁽¹⁾
~~10.2~~	~~Investment Management Trust Agreement, dated October 1, 2020, between~~Corp., Chrome Merger Sub, Inc., and 23andMe, Inc. (incorporated by reference to Exhibit 2.1 to the ~~Company and Continental Stock Transfer & Trust Company, as trustee.~~ ⁽¹⁾
~~10.3~~	~~Registration Rights Agreement, dated October 1, 2020, between the Company and certain security holders.~~ ⁽¹⁾
~~10.4~~	~~Administrative Services Agreement, dated October 1, 2020, between the Company and VG Acquisition Sponsor LLC.~~ ⁽¹⁾
~~10.5~~	~~Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and the Sponsor.~~ ⁽¹⁾
~~10.6~~	~~Indemnity Agreement, dated October 1, 2020, between the Company and Josh Bayliss~~ ⁽¹⁾
~~10.7~~	~~Indemnity Agreement, dated October 1, 2020, between the Company and Evan Lovell~~ ⁽¹⁾
~~10.8~~	~~Indemnity Agreement, dated October 1, 2020, between the Company and Teresa Briggs~~ ⁽¹⁾
~~10.9~~	~~Indemnity Agreement, dated October 1, 2020, between the Company and James B. Lockhart III~~ ⁽¹⁾
~~10.10~~	~~Indemnity Agreement, dated October 1, 2020, between the Company and Douglas R. Brown~~ ⁽¹⁾
31.1*	~~Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
31.2*	~~Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
32.1**	~~Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
32.2**	~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
101.INS*	~~XBRL Instance Document~~
101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
101.SCH*	~~XBRL Taxonomy Extension Schema Document~~
101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document~~
101.LAB*	~~XBRL Taxonomy Extension Labels Linkbase Document~~
101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Filed herewith.~~
**	~~Furnished.~~
⁽¹⁾	~~Previously filed as an exhibit to our~~ Current Report on Form 8-K (File No. 001-39587), filed with the SEC on February 4, 2021).

2.2		First Amendment to the Merger Agreement, dated as of February 13, 2021, by and among VG Acquisition Corp., Chrome Merger Sub, Inc., and 23andMe, Inc. (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-4/A (File No. 333-254772), filed with the SEC on May 13, 2021).

2.3		Second Amendment to the Merger Agreement, dated as of March 25, 2021, by and among VG Acquisition Corp., Chrome Merger Sub, Inc., and 23andMe, Inc. (incorporated by reference to Exhibit 2.3 to the Registration Statement on Form S-4/A (File No. 333-254772), filed with the SEC on May 13, 2021).

2.4		Agreement and Plan of Merger and Reorganization, dated as of October 21, 2021, by and among 23andMe Holding Co., Life Merger Sub One, Inc., Life Merger Sub Two, Inc., Lemonaid Health, Inc., and Fortis Advisors LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-39587), filed with the SEC on October ~~6, 2020 and incorporated~~22, 2021).

10.1+		23andMe Annual Incentive Plan (incorporated by reference ~~herein.~~to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-39587), filed with the SEC on June 13, 2022).

31.1*		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*

31.2*		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*

32.1**		Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**

32.2**		Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

*	Filed herewith
**	Furnished herewith
+	Indicates management contract or compensatory plan or arrangement.

	~~VG ACQUISITION CORP.~~
				23ANDME HOLDING CO.
~~Date: November 16, 2020~~		~~/s/ Josh Bayliss~~
Date:	~~Name:~~ August 9, 2022	~~Josh Bayliss~~	By:	/s/ Anne Wojcicki
	~~Title:~~			Name: Anne Wojcicki
				Chief Executive Officer and President
				(Principal Executive Officer)

Date: ~~November 16, 2020~~	August 9, 2022	~~/s/ Evan Lovell~~	By:	/s/ Steven Schoch
				Name:	~~Evan Lovell~~Steven Schoch
	~~Title:~~	~~Chief Financial Officer~~
		~~(Principal~~ Chief Financial and Accounting Officer
				(Principal Financial Officer)