Business context and reporting period
Entity mismatch: The supplied filing is Oaktree Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2020, not a filing by Hims & Hers Health, Inc. Oaktree was a blank-check company searching for a business combination and had not begun operations. It intended to target the industrial and consumer sectors.
Financial results and position
- Revenue: No operating revenue; the company expected to generate operating revenue only after a business combination.
- Profit: Net income was $1.334 million, comprising $1.581 million of trust-account interest less $246,783 of general and administrative expense. Class A basic and diluted EPS was $0.08; Class B EPS was a loss of $0.05 under the filing’s allocation method. Operating margins are not meaningful for this pre-operating SPAC.
- Cash flow: Operating cash outflow was $28,639. Cash declined from $1.510 million at December 31, 2019 to $1.482 million at March 31, 2020.
- Liquidity: Working capital was approximately $432,000. Trust-account investments totaled $204.688 million, but were principally reserved for a business combination or shareholder redemptions. Approximately $3.4 million of trust interest was available for permitted regulatory withdrawals, subject to a $325,000 annual limit, and tax obligations.
- Debt and obligations: No long-term debt or working-capital loans were outstanding. Current liabilities totaled $1.167 million; other reported obligations included $7.044 million of deferred underwriting commissions and $150,000 of deferred legal fees, payable from the trust only if a business combination is completed. The company also paid a sponsor affiliate $10,000 monthly for administrative support.
Changes versus prior period
The filing does not provide a comparable first-quarter 2019 income statement or cash-flow statement. Compared with December 31, 2019, trust-account investments rose by approximately $1.581 million, while operating cash fell by $28,639. Shares classified as subject to possible redemption increased by 133,403 to 19,292,606.
Outlook, risks, and contingencies
- Management expected available working capital and potential sponsor or affiliate borrowing capacity to meet needs through the earlier of a business combination or one year from the filing. Such loans were optional, not committed.
- The company had until July 22, 2021 to complete a business combination; otherwise it generally had to redeem public shares and liquidate. Warrants could expire worthless if no combination occurred.
- Management said COVID-19 could adversely affect the company’s financial position, results, or target search, but the specific impact was not determinable; the statements included no related adjustments.
- Completing a transaction could require issuing equity or debt, with potential dilution, senior claims, financing constraints, or increased debt risk. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the filing belongs to Oaktree Acquisition Corp., not Hims & Hers Health, Inc., before using these figures.
- Review trust-account restrictions, redemption terms, and the July 22, 2021 business-combination deadline.
- Assess the distinction between trust assets and cash available for operating expenses, and the reliance on potential, noncommitted sponsor funding.
- Verify transaction-related dilution and deferred fees, and monitor COVID-19’s effect on the target search.