Hims & Hers Health, Inc. — Form 8-K Summary
Reporting date: May 3, 2021; filed May 4, 2021. The filing concerns accounting for warrants issued in connection with the company’s January 20, 2021 merger with Oaktree Acquisition Corp., a special purpose acquisition company.
Business Context and Reporting Period
Hims & Hers Health, Inc. provides the post-merger public-company reporting entity. The filing addresses historical Oaktree financial statements covering 2019 and 2020, including quarterly periods through September 30, 2020, and preliminary accounting for the quarter ended March 31, 2021. The historical financial statements of Hims, Inc. were not affected.
Key Financial and Accounting Matters
- Following an April 12, 2021 SEC Staff Statement, management concluded that the public and private placement warrants did not qualify for equity classification and should instead be classified as liabilities measured at fair value each reporting period.
- The company expects to record a preliminary warrant liability of approximately $30 million to $35 million as of March 31, 2021.
- For the first quarter of 2021, the company preliminarily expects less than $5 million of non-cash other expense from mark-to-market accounting.
- The company expects the reclassification to have no impact on historical liquidity, cash flows, or revenues.
- The filing does not provide revenue, profit, margin, debt, cash balance, or other operating performance metrics for the reporting periods.
Material Changes Versus Prior Periods
The company determined that previously issued financial statements should no longer be relied upon and plans to restate them. The affected filings include the 2020 Form 10-K and Form 10-Q filings for the three months ended March 31, 2020; three and six months ended June 30, 2020; and three and nine months ended September 30, 2020, together with related audit reports, review reports, press releases, and stockholder communications.
The restatement will reclassify warrants from equity to liabilities and recognize period-by-period fair-value changes. The company stated that the final adjustments remain subject to a third-party valuation and audit or review procedures.
Outlook, Risks, and Unusual Items
- Management intends to file an amended 2020 Form 10-K as soon as practicable.
- The company is reassessing the effectiveness of its disclosure controls and procedures and internal control over financial reporting as of December 31, 2020.
- The preliminary warrant liability and expense estimates may change materially after completion of valuation work and auditor procedures.
- Risks include further changes in accounting guidance, valuation adjustments, auditor review findings, and other risks to be described in the Form 10-K/A.
- The warrant-related expense is non-cash and relates to mark-to-market accounting rather than operating performance.
Investor Verification Checklist
- Verify the final warrant valuation and liability recorded as of March 31, 2021.
- Review the amended Form 10-K and restated historical financial statements when filed.
- Confirm the final amount and period allocation of non-cash warrant-related gains or expenses.
- Assess any reported material weaknesses or changes in disclosure controls and internal control over financial reporting.
- Confirm that reported revenue, cash flow, liquidity, and operating metrics remain unchanged after the restatement.