Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Principle of Consolidation The Company’s unaudited condensed consolidated financial statements have been prepared in 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, 2025 and 2024, the Company’s operations were primarily in the United States. Discontinued Operations As previously disclosed, on November 8, 2024, the Company’s Board of Directors approved a reduction in force (the “November 2024 Reduction in Force”), which also included the closure of substantially all operations in the Company’s Therapeutics operating segment (together with the November 2024 Reduction in Force, the “November 2024 Reduction Plan”). The November 2024 Reduction Plan was intended to restructure and strategically align the Company’s workforce and organization with the Company’s current strategy and to reduce the Company’s operating costs. In accordance with Accounting Standards Codification (“ASC”) Topic 205, Presentation of Financial Statements (“ASC 205”), the Company determined that the closure of substantially all operations in the Company’s Therapeutics operating segment on November 11, 2024 represented a strategic shift that had a major effect on the Company’s operations and financial results, thus meeting the criteria to be reported as discontinued operations as of December 31, 2024. As a result, the Company has retrospectively recast its condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2024 to reflect operating results related to the disposed business in discontinued operations. The Company has chosen not to segregate the cash flows of the disposed business in the condensed consolidated statements of cash flows. Supplemental disclosures related to discontinued operations for the statements of cash flows have been provided in Note 4, “Discontinued Operations.” Unless otherwise specified, the disclosures in the accompanying condensed consolidated financial statements refer to continuing operations only. The Company previously operated its business through two reporting segments: (1) Consumer and Research Services; and (2) Therapeutics. With the discontinuation of the Therapeutics operating segment in November 2024, the Company operates its business as one segment. There have been no material changes to the Company’s significant accounting policies during the three months ended June 30, 2025, as compared to the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on June 11, 2025, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on July 25, 2025 (the “Fiscal 2025 Form 10-K”). Bankruptcy Accounting As a result of the Chapter 11 Cases, the Company has applied the provisions of ASC Topic 852, Reorganization (“ASC 852”), in preparing the accompanying condensed consolidated financial statements. ASC 852 requires that, for periods including and after the filing of the Bankruptcy Petitions, the condensed consolidated financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, for the period beginning March 23, 2025, pre-petition unsecured and undersecured claims related to the Debtors that may be impacted by the Chapter 11 Cases have been classified as liabilities subject to compromise in the condensed consolidated balance sheets. Liabilities subject to compromise include pre-petition liabilities for which there is uncertainty about whether such pre-petition liabilities could be impaired as a result of the Chapter 11 Cases. Liabilities subject to compromise are recorded at the expected amount of the total allowed claim, even if they may ultimately be settled for different amounts. In addition, expenses that are incurred or realized as a result of the Chapter 11 Cases are classified as reorganization items in the condensed consolidated statements of operations and comprehensive loss. See Note 3, “Bankruptcy Proceedings,” for additional information. Change in Capital Structure As described more fully in Note 12, “Stockholders’ Equity,” effective October 16, 2024, the Company effected a one-for-twenty reverse stock split of all of its issued and outstanding shares of Class A common stock and Class B common stock (the “Reverse Stock Split”). All share and per share amounts presented in the unaudited condensed consolidated financial statements and accompanying notes, including, but not limited to, shares issued and outstanding, dollar amounts of common stock, additional paid-in capital, earnings/(loss) per share, and options, have been retroactively adjusted for all periods presented in order to reflect this change in capital structure. There were no changes to the total numbers of authorized shares of Class A common stock and Class B common stock or their respective par values per share as a result of this change. Unaudited Interim Condensed Consolidated Financial Information The accompanying interim condensed consolidated financial statements 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 statements. These financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. As such, the information included herein should be read in conjunction with the consolidated financial statements and accompanying notes as of and for the fiscal year ended March 31, 2025 (the “audited consolidated financial statements”) that were included in the Fiscal 2025 Form 10-K. In management’s opinion, the condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, which include only normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of June 30, 2025 and its condensed consolidated results of operations and cash flows for the three months ended June 30, 2025 and 2024. The results of operations for the three months ended June 30, 2025 are not indicative of the results expected for the year ending March 31, 2026 or any other future interim or annual periods, due to, among other factors, the Transaction. Fiscal Year The Company’s fiscal year ends on March 31. References to fiscal 2026 refer to the fiscal year ending March 31, 2026 and references to fiscal 2025 and fiscal 2024 refer to the fiscal years ended March 31, 2025 and March 31, 2024, respectively. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Significant items subject to such estimates and assumptions include, but are not limited to 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 never returned for processing; the 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 incremental borrowing rate for operating leases; stock-based compensation including the determination of the fair value of stock options and annual incentive bonuses payable; the assumptions used in going concern assessments; legal contingencies; liabilities subject to compromise; reorganization items; and the 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 future events. Actual results could differ from these estimates, and such differences could be material to the condensed consolidated financial statements. Additionally, as a result of the Chapter 11 Cases and the Transaction, the Company has and may continue to sell or otherwise dispose of or liquidate assets or settle liabilities for amounts other than those reflected in the accompanying condensed consolidated financial statements. The possibility or occurrence of any such actions could materially impact the amounts and classifications of such assets and liabilities reported in the Company’s condensed consolidated balance sheets. Furthermore, the Chapter 11 Cases and the Transaction have resulted in and are likely to continue to result in significant changes to the Company’s business, which could ultimately result in, among other things, asset impairment charges that may be material. Concentration of Supplier Risk Prior to the Closing Date, certain of the raw materials, components, and equipment associated with the deoxyribonucleic acid (“DNA”) microarrays and kits used by the Company in the delivery of its services were available only from third-party suppliers. The Company also relied on a third-party laboratory service for the processing of its customer samples. A single supplier accounted for 100% of the Company’s total purchases of microarrays, and a separate single supplier accounted for 100% of the Company’s total purchases of kits for the three months ended June 30, 2025 and 2024. One laboratory service provider accounted for 100% of the Company’s processing of customer samples for the three months ended June 30, 2025 and 2024. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk include cash and accounts receivable. The Company maintains a majority of its cash with a single high-quality financial institution, 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 Note 5, “Revenue,” for additional information regarding geographical disaggregation of revenue. The Company grants credit to its customers in the normal course of business, performs credit evaluations of its significant customers on an as-needed basis, and does not require collateral. Concentrations of credit risk are limited as the Company’s trade receivables are primarily related to third parties, which collect its credit card receivables, and large multinational corporations. The Company regularly monitors the aging of accounts receivable balances. Significant customer information is as follows:
(1)Customer C is a reseller. Cash, Cash Equivalents and Restricted Cash Cash consists of bank deposits held at financial institutions. Cash in U.S. banks is insured to the extent defined by the Federal Deposit Insurance Corporation. The Company maintains certain cash amounts restricted as to its withdrawal or use, which are related to letters of credit in connection with the Company’s Sunnyvale Facility (as defined below) operating lease agreement and the Company’s credit card processor, as well as collateral held against the Company’s corporate credit cards. In March 2025, in connection with the Chapter 11 Cases, the Company abandoned the facility in Sunnyvale, California (the “Sunnyvale Facility”). In April 2025, the Sunnyvale Facility landlord elected to draw down in full the letters of credit associated with the Sunnyvale Facility operating lease agreement, resulting in a $7.3 million reduction in the Company’s restricted cash balance. The Company held total restricted cash of $5.7 million and $13.0 million as of June 30, 2025 and March 31, 2025, respectively. Liquidity and Going Concern Going Concern In accordance with ASC Subtopic 205-40, Presentation of Financial Statements – Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements included in this report are issued. Historically, the Company has incurred significant operating losses and negative cash flows from operations, resulting in an accumulated deficit of $2.5 billion and unrestricted cash of $39.8 million as of June 30, 2025. On July 14, 2025, the Company completed the Transaction (see Note 17, “Subsequent Events”). whereby it sold substantially all of the Debtors’ assets to Research Institute for total cash proceeds of $302.5 million. The Company plans to sell Lemonaid Health, and wind down the remainder of the Company’s operations. As a result of the Chapter 11 Cases, realization of the Company’s assets and the satisfaction of its liabilities are subject to uncertainty during the Chapter 11 wind-down process, and the Company has incurred, and continues to incur, material reorganization expenses related to the Chapter 11 Cases. The completion of the Transaction has removed substantially all assets, and all revenue, liabilities and cash generated by such assets, from the Company's business and financial statements. The Company does not expect to engage in any revenue-generating activities other than the operations of Lemonaid Health. The ultimate settlement of the liabilities subject to compromise is dependent on the outcome of the Chapter 11 Cases and may be adjusted based on claims allowed by the Bankruptcy Court. These adjustments could be material. Further, any approved Chapter 11 plan could materially change the amounts of assets and liabilities reported in the accompanying condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include all adjustments that might be necessary as a consequence of the Chapter 11 Cases. For example, the condensed consolidated financial statements do not include all adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty, and such adjustments could be material. Therefore, substantial doubt exists that the Company will be able to continue as a going concern for one year from the issuance date of the accompanying condensed consolidated financial statements. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business as a Chapter 11 plan, as of the date of the filing of this report, has not yet been approved by the Bankruptcy Court and is therefore not imminent. Debtor-in Possession In general, as debtors-in-possession under the Bankruptcy Code, the Company is authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to certain motions and applications intended to limit the disruption of the Chapter 11 Cases on the Company’s operations (the “First Day Motions”) and other motions filed with the Bankruptcy Court, the Bankruptcy Court has authorized the Debtors to conduct their business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing the Debtors to obtain debtor-in-possession (“DIP”) financing, pay employee wages and benefits, settle certain de minimis disputes and pay vendors and suppliers in the ordinary course for all goods and services. For detailed discussion about the Chapter 11 Cases, refer to Note 3, “Bankruptcy Proceedings.” Recently Issued Accounting Pronouncements Not Yet Effective In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is currently evaluating the impacts and method of adoption. In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures, which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. Additionally, in January 2025, the FASB issued ASU No. 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures: Clarifying the Effective Date, to clarify the effective date of ASU No. 2024-03. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods for fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of these new standards.
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