What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 144 added, 109 removed, 505 unchanged (33% of the section changed)

3 unchanged sentences

(In Thousands, Except Share and Per Share Data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

24 unchanged sentences

Stockholders' equity:

Common stock – Class A shares, par value $ 0.0001 , 2,750,000,000 shares authorized and 198,472,604 and 196,414,363 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively;

Class V shares, par value $ 0.0001 , 10,000,000 shares authorized and 8,377,623 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock – Class A shares, par value $ 0.0001 , 2,750,000,000 shares authorized and 199,309,580 and 196,414,363 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively;

Class V shares, par value $ 0.0001 , 10,000,000 shares authorized and 8,377,623 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Additional paid-in capital 645,109 613,687

8 unchanged sentences

(In Thousands, Except Share and Per Share Data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Marketing 78,462 38,293 187,045 93,195

Selling, general, and administrative 46,876 36,740 90,458 98,438

Operations and support 21,751 12,808 54,882 33,748

Technology and development 7,977 6,242 20,926 16,807

General and administrative 26,246 25,190 70,624 92,123

Total operating expenses 134,436 82,533 333,477 235,873

5 unchanged sentences

Loss before income taxes ( 18,856 ) ( 19,114 ) ( 54,681 ) ( 79,547 )

Provision for income taxes ( 12 ) ( 34 ) ( 106 ) ( 124 )

Benefit (provision) for income taxes 16 3,173 ( 90 ) 3,049

Net loss ( 18,840 ) ( 15,941 ) ( 54,771 ) ( 76,498 )

Other comprehensive (loss) income ( 145 ) 32 ( 331 ) ( 29 )

Other comprehensive income (loss) 6 ( 12 ) ( 325 ) ( 41 )

Total comprehensive loss $ ( 18,834 ) $ ( 15,953 ) $ ( 55,096 ) $ ( 76,539 )

32 unchanged sentences

Balance as of June 30, 2022 206,850,227 21 634,388 ( 468 ) ( 314,882 ) 319,059

Issuance of common stock upon vesting of RSUs, net of shares withheld for taxes 407,448 — — — — —

Payments for taxes related to net share settlement of equity awards — — ( 1,181 ) — — ( 1,181 )

Exercise of vested stock options 429,528 — 687 — — 687

Vesting of early exercised stock options — — 37 — — 37

Stock-based compensation — — 11,178 — — 11,178

Other comprehensive income — — — 6 — 6

Net loss — — — — ( 18,840 ) ( 18,840 )

Balance as of September 30, 2022 207,687,203 $ 21 $ 645,109 $ ( 462 ) $ ( 333,722 ) $ 310,946

Redeemable Convertible Preferred Stock Common Stock Additional

35 unchanged sentences

Balance as of June 30, 2021 — — 193,243,842 19 524,924 ( 40 ) ( 231,849 ) 293,054

Issuance of common stock for acquisition of business — — 8,074,935 1 50,664 — — 50,665

Issuance of common stock upon Class A common stock warrant redemption — — 1,958,615 — 16,967 — — 16,967

Issuance of common stock upon vesting of RSUs, net of tax withholdings — — 159,247 — ( 651 ) — — ( 651 )

Exercise of vested stock options — — 380,779 — 313 — — 313

Vesting of early exercised stock options, net of cancelations — — ( 169 ) — 41 — — 41

Stock-based compensation — — — — 10,717 — — 10,717

Other comprehensive loss — — — — — ( 12 ) — ( 12 )

Net loss — — — — — — ( 15,941 ) ( 15,941 )

Balance as of September 30, 2021 — $ — 203,817,249 $ 20 $ 602,975 $ ( 52 ) $ ( 247,790 ) $ 355,153

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

8 unchanged sentences

Benefit for deferred taxes ( 380 ) ( 3,178 )

Impairment of long-lived assets 1,127 —

Non-cash operating lease cost 1,156 1,133

17 unchanged sentences

Deferred consideration paid for acquisitions ( 459 ) —

Acquisition of business, net of cash acquired — ( 748 )

Acquisition of businesses, net of cash acquired — ( 46,468 )

Net cash provided by (used in) investing activities 28,696 ( 166,510 )

25 unchanged sentences

Assumption of Merger warrants liability — 51,814

Exercise of Private Placement Warrants and Public Warrants — 20,872

Redemption/exercise of Class A common stock warrants — 37,834

Conversion of Series D preferred stock warrants to Class A common warrants — 1,160

Right-of-use asset obtained in exchange for lease liability 1,206 6,756

Vesting of early exercised stock options 113 147

Common stock issued, contingent consideration, and payables for acquisition of business — 4,064

Common stock issued, contingent consideration, and payables for acquisition of businesses — 99,958

See accompanying notes to unaudited condensed consolidated financial statements.

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The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America (“U.S.

The condensed consolidated financial statements as of June 30, 2022 are unaudited.

The condensed consolidated financial statements as of September 30, 2022 are unaudited.

The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.

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There have been no changes to the Company’s significant accounting policies described in the audited consolidated financial statements for the year ended December 31, 2021 that have had a material impact on these condensed consolidated financial statements and related notes.

Reclassifications

Beginning with the quarter ended September 30, 2022, the Company voluntarily reclassified certain operating expenses within the condensed consolidated statements of operations and comprehensive loss.

Prior period amounts have been reclassified to conform to this presentation.

These changes have no impact on the Company’s previously reported financial position or results of operations.

These classification changes are related to breaking out the Company’s previous selling, general, and administrative caption into three new captions entitled:

(i) operations and support, (ii) technology and development, and (iii) general and administrative.

The operations and support caption includes costs related to the Company’s supply chain, fulfillment and customer support functions.

The technology and development caption includes costs related to the operation and enhancement of the Company’s digital platform and product development.

The general and administrative caption includes costs relating to the Company’s corporate functions, including personnel costs, professional services, insurance, depreciation and amortization relating to corporate operating activities, and other general corporate costs.

Use of Estimates

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

significant estimates and assumptions by management include, among others, valuation of inventory, valuation and recognition of stock-based compensation expense, valuation of contingent consideration in business combinations, purchase price allocation for business combinations, and estimates used in the capitalization of website and mobile application development and internal-use software costs.

The more significant estimates and assumptions by management include, among others, valuation of inventory, valuation and recognition of stock-based compensation expense, valuation of contingent consideration in business combinations, purchase price allocation for business combinations, and estimates used in the capitalization of website and mobile application development and internal-use software costs.

Management believes that the estimates and judgments upon which it relies are reasonable based upon information available to it at the time that these estimates and judgments were made.

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When testing goodwill for impairment, the Company may first perform an optional qualitative assessment.

If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary.

If the Company

determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary.

If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed.

Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill.

Goodwill of $ 110.9 million was acquired during the second and third quarters of 2021 and no goodwill impairment was recorded for the three and six months ended June 30, 2022 and 2021.

Goodwill of $ 110.9 million was acquired during the second and third quarters of 2021 and no goodwill impairment was recorded for the three and nine months ended September 30, 2022 and 2021.

Impairment of Long-Lived Assets

Long-lived assets include property and equipment and intangible assets subject to amortization.

Long-lived assets include property and equipment, website and mobile application development and internal-use software, and intangible assets subject to amortization.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

1 unchanged sentence

If such assets are considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated fair values of the assets.

As of June 30, 2022 and December 31, 2021, the Company determined that no events or changes in circumstances existed that would indicate any impairment of its long-lived assets.

As of December 31, 2021, the Company determined that no events or changes in circumstances existed that would indicate any impairment of its long-lived assets.

The Company recognized $ 1.1 million of impairment charges on long-lived assets during the three and nine months ended September 30, 2022 in general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss.

No impairment of long-lived assets was recorded for the three and nine months ended September 30, 2021.

Revenue Recognition

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Revenue consists of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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The stand-alone selling price is based on the prices at which the Company separately sells the products and services, as well as market and cost plus estimates.

For each of the three and six months ended June 30, 2022 and 2021, service revenue represented less than 10% of consolidated revenues.

For each of the three and nine months ended September 30, 2022 and 2021, service revenue represented less than 10% of consolidated revenues.

To fulfill its promise to customers for contracts that include professional medical consultations, the Company maintains relationships with various “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers;

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(iii) the Company incurs costs for consultation services even for visits that do not result in a prescription and the sale of products;

and (iv) the Company, at its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

Additionally, to fulfill its promise to customers for contracts that include sale of prescription products, the Company maintains relationships with (i) certain third-party pharmacies (“Partner Pharmacies” or individually, a “Partner Pharmacy”) and (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment services solely to the Company’s customers.

and (iv) the Company, in its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

The Partner Pharmacies and the Affiliated Pharmacies fill prescriptions that are ordered by the Company’s customers for fulfillment through the Company’s websites and mobile applications.

The Company accounts for prescription

product revenue as a principal in the arrangement with its customers.

The Company accounts for prescription product revenue as a principal in the arrangement with its customers.

This conclusion is reached because (i) the Company has sole discretion in determining which Partner Pharmacy or Affiliated Pharmacy fills a customer’s prescription;

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(iv) the Company is responsible for refunds of the prescription medication after transfer of control to the customer;

and (v) the Company, at its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

and (v) the Company, in its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

The Company estimates refunds using the expected value method based on historical refunds granted to customers.

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For wholesale arrangements, payments are collected in accordance with contract terms.

Short-term investments as of June 30, 2022, consist of the following (in thousands):

Short-term investments as of September 30, 2022, consist of the following (in thousands):

Cost Unrealized

1 unchanged sentence

Government bonds 19,770 ( 44 ) 19,726

Asset-backed bonds 13,612 ( 50 ) 13,562

Total short-term investments $ 140,764 $ ( 337 ) $ 140,427

5 unchanged sentences

Inventory consists of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Finished goods $ 16,644 $ 10,428

3 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Wholesale trade receivables $ 3,809 $ 3,577

3 unchanged sentences

Intangible Assets

Intangible assets as of June 30, 2022 consist of the following (in thousands):

Amount Accumulated

Amortization Net

Intangible assets as of September 30, 2022 consist of the following (in thousands):

Amount Accumulated Amortization and Impairment Net

Value Weighted

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Intangible assets, net $ 28,016 $ ( 2,126 ) $ 25,890 8.4

Amortization expense for intangible assets was $ 1.1 million and less than $ 0.1 million for the three months ended June 30, 2022 and 2021, respectively.

Amortization expense for intangible assets was $ 2.1 million and less than $ 0.1 million for the six months ended June 30, 2022 and 2021, respectively.

Amortization that will be charged to expense over the remaining life of the intangible assets subsequent to June 30, 2022 is as follows (in thousands):

Amortization expense for intangible assets was $ 1.0 million for each of the three months ended September 30, 2022 and 2021.

Amortization expense for intangible assets was $ 3.1 million and $ 1.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Impairment expense for intangible assets was $ 0.7 million for each of the three and nine months ended September 30, 2022.

There was no impairment expense for the three and nine months ended September 30, 2021.

Amortization that will be charged to expense over the remaining life of the intangible assets subsequent to September 30, 2022 is as follows (in thousands):

The remainder of 2022 $ 995

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Accrued liabilities consist of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Marketing $ 8,958 $ 3,158

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In January 2022, the Company entered into a 62 -month non-cancelable lease for 24,465 square feet of warehouse, distribution, and pharmacy space in Gilbert, Arizona.

The stated lease term began on May 1, 2022.

The lease commenced on September 1, 2022.

Total minimum lease payments are $ 1.5 million , net of rent abatement for an initial two-month period and with annual escalation of 3.0 % .

The Company has the option to extend the lease term for a period of five years .

The Company had not been given access to the facility as of June 30, 2022, and as a result there are no new lease liabilities during the six-month period then ended.

For each of the three months ended June 30, 2022 and 2021, the Company recorded operating lease costs of $ 0.5 million, including variable operating lease costs of $ 0.1 million.

For each of the six months ended June 30, 2022 and 2021, the Company recorded operating lease costs of $ 0.9 million, including variable operating lease costs of $ 0.1 million.

For each of the six months ended June 30, 2022 and 2021, operating cash flows used for operating leases were $ 0.8 million.

As of June 30, 2022, the weighted average remaining lease term and weighted average discount rate was 3.2 years and 4.0 %, respectively.

Future minimum lease payments under the Company's non-cancelable operating leases with an initial lease term in excess of one year subsequent to June 30, 2022 are as follows (in thousands):

For the three months ended September 30, 2022 and 2021, the Company recorded operating lease costs of $ 0.5 million and $ 0.4 million, respectively, including variable operating lease costs of $ 0.1 million for each period.

For each of the nine months ended September 30, 2022 and 2021, the Company recorded operating lease costs of $ 1.4 million, including variable operating lease costs of $ 0.2 million.

For the nine months ended September 30, 2022 and 2021, operating cash flows used for operating leases were $ 1.2 million and $ 1.1 million, respectively.

As of September 30, 2022, the weighted average remaining lease term and weighted average discount rate was 3.4 years and 4.7 %, respectively.

Future minimum lease payments under the Company's non-cancelable operating leases with an initial lease term in excess of one year subsequent to September 30, 2022 are as follows (in thousands):

The remainder of 2022 $ 440

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Present value of net future minimum lease payments $ 5,680

As of June 30, 2022, the present value of net future minimum lease payments of $ 4.8 million is recorded as operating lease liabilities:

As of September 30, 2022, the present value of net future minimum lease payments of $ 5.7 million is recorded as operating lease liabilities:

(i) $ 1.6 million within current liabilities;

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The Company determined that it is the primary beneficiary of these entities for accounting purposes because it has the ability to direct the activities that most significantly affect the entities’ economic performance and has the obligation to absorb the losses.

Under the VIE model, the Company presents the results of operations and the financial position of the VIEs as part of the consolidated financial statements of the Company as if the consolidated group were a single economic entity.

Under the VIE model, the Company presents the results of operations, cash flows, and the financial position of the VIEs as part of the consolidated financial statements of the Company as if the consolidated group were a single economic entity.

The assets of the VIEs can only be used to settle the obligations of the VIEs.

There is no noncontrolling interest upon consolidation of the entities.

The results of operations and cash flows of the VIEs are also included in the Company’s condensed consolidated financial statements.

As of June 30, 2022 and December 31, 2021, the Company’s condensed consolidated balance sheets included current and total assets of $ 5.1 million and $ 2.2 million, respectively, for the VIEs.

As of June 30, 2022 and December 31, 2021, current and total liabilities were $ 3.2 million and $ 3.0 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company’s condensed consolidated balance sheets included current and total assets of $ 8.7 million and $ 2.2 million, respectively, for the VIEs.

As of September 30, 2022 and December 31, 2021, current and total liabilities were $ 3.4 million and $ 3.0 million, respectively.

All amounts are after elimination of intercompany transactions, balances, and non-cash impact of operating leases.

The results of operations and cash flows of the VIEs are included in the Company’s condensed consolidated financial statements.

For the three months ended June 30, 2022 and 2021, the VIEs charged the Company $ 15.0 million and $ 4.2 million, respectively, for services rendered.

For the six months ended June 30, 2022 and 2021, the VIEs charged the Company $ 27.2 million and $ 7.6 million, respectively, for services rendered.

For the three months ended June 30, 2022 and 2021, operations of the VIEs generated net income and a net loss of $ 2.5 million and $ 1.1 million, respectively, inclusive of administrative expenses.

For the six months ended June 30, 2022 and 2021, operations of the VIEs generated net income and a net loss of $ 3.7 million and $ 2.9 million, respectively, inclusive of administrative expenses.

For the three months ended September 30, 2022 and 2021, the VIEs charged $ 16.2 million and $ 7.2 million, respectively, for services rendered and prescription products fulfilled.

For the nine months ended September 30, 2022 and 2021, the VIEs charged $ 43.4 million and $ 14.8 million, respectively, for services rendered and prescription products fulfilled.

For the three months ended September 30, 2022 and 2021, operations of the VIEs generated net income and a net loss of $ 1.2 million and $ 0.7 million, respectively, inclusive of administrative expenses.

For the nine months ended September 30, 2022 and 2021, operations of the VIEs generated net income and a net loss of $ 4.9 million and $ 3.6 million, respectively, inclusive of administrative expenses.

Fair Value Measurements

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022, is as follows (in thousands):

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022, is as follows (in thousands):

Level 1 Level 2 Level 3 Total

5 unchanged sentences

Government bonds — 19,726 — 19,726

Asset-backed bonds — 13,562 — 13,562

Restricted cash:

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Total liabilities $ — $ — $ 1,999 $ 1,999

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and earn-out payable approximated their carrying values as of June 30, 2022 and December 31, 2021, due to their short-term nature.

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and earn-out payable approximated their carrying values as of September 30, 2022 and December 31, 2021, due to their short-term nature.

All other financial instruments, except for earn-out liabilities, are valued either based on recent trades of securities in active markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

During the six months ended June 30, 2022 and 2021, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

As of June 30, 2022 and December 31, 2021, the long-term earn-out liability, which is solely related to the acquisition of Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), is classified as a Level 3 fair value measurement containing significant unobservable inputs including estimates of achieving certain revenue targets.

At inception, the fair value of the earn-out liabilities associated with the HHL acquisition was determined based on revenue projections and probability of achievement of revenue targets as evaluated using a Monte Carlo simulation.

During the nine months ended September 30, 2022 and 2021, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

As of September 30, 2022 and December 31, 2021, the long-term earn-out liability, which is solely related to the acquisition of Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), is classified as a Level 3 fair value measurement containing significant unobservable inputs including estimates of achieving certain revenue targets.

At inception, the fair value of the earn-out liabilities associated with the HHL acquisition was determined based on revenue projections and probability of

achievement of revenue targets as evaluated using a Monte Carlo simulation.

The following assumptions were used to determine the fair value at inception:

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The fair value of the earn-out liabilities is remeasured at each reporting period.

This change in fair value is related to contingent consideration and compensation costs (see Note 12 – Stockholders’ Equity) and is recognized in other income and selling, general, and administrative expenses, respectively, on the condensed consolidated statements of operations and comprehensive loss.

This change in fair value is related to contingent consideration and compensation costs (see Note 12 – Stockholders’ Equity) and is recognized in other income and general and administrative expenses, respectively, on the condensed consolidated statements of operations and comprehensive loss.

The change in the fair value of earn-out liabilities is as follows (in thousands):

1 unchanged sentence

Change in fair value due to revaluation and service-based vesting ( 1,260 )

Balance at June 30, 2022 $ 1,510

Balance at September 30, 2022 $ 739

Commitments and Contingencies

1 unchanged sentence

The Company has contractual obligations to make future purchases, primarily related to cloud-based software contracts used in operations.

As of June 30, 2022, purchase obligations were $ 2.2 million, with $ 0.9 million payable in 2022, $ 1.2 million payable in 2023, and $ 0.1 million payable in 2024.

As of September 30, 2022, purchase obligations were $ 1.5 million, with $ 0.3 million payable in 2022, $ 1.1 million payable in 2023, and $ 0.1 million payable in 2024.

Legal Proceedings

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The rights are identical, including liquidation and dividend rights, except Class V common stock has additional voting rights.

During the three and six months ended June 30, 2022, the Company released 618,848 and 1,031,883 gross shares of Class A common stock upon vesting of restricted stock units (“RSUs”).

During the three and nine months ended September 30, 2022, the Company released 603,020 and 1,634,903 gross shares of Class A common stock upon vesting of restricted stock units (“RSUs”).

In connection with the releases, 195,572 and 479,309 shares of Class A common stock were withheld for the payment of employee taxes.

During the three and six months ended June 30, 2021, the Company released 1,137,152 gross shares of Class A common stock upon vesting of RSUs.

In connection with the releases, 411,412 shares of Class A common stock were withheld for the payment of employee taxes.

During the three and nine months ended September 30, 2021, the Company released 248,659 and 1,385,811 gross shares of Class A common stock upon vesting of RSUs.

In connection with the releases, 89,412 and 500,824 shares of Class A common stock were withheld for the payment of employee taxes.

2017 Stock Plan and 2020 Equity Incentive Plan

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As of the effective date of the 2020 Plan, no further stock awards have been or will be granted under the 2017 Plan.

Through June 30, 2022, 1,791,476 shares of Class A common stock subject to awards granted under the 2017 Plan that were outstanding on the Closing Date and forfeited after the adoption of the 2020 Plan were added to the 2020 Plan reserve.

Through September 30, 2022, 1,878,572 shares of Class A common stock subject to awards granted under the 2017 Plan that were outstanding on the Closing Date and forfeited after the adoption of the 2020 Plan were added to the 2020 Plan reserve.

Additionally, on January 1, 2022, 10,239,599 shares of Class A common stock were automatically added to the 2020 Plan reserve.

Therefore, as of June 30, 2022, there were 33,031,075 shares of Class A common stock reserved and 14,801,714 shares of Class A common stock available for grant under the 2020 Stock Plan;

Therefore, as of September 30, 2022, there were 33,118,171 shares of Class A common stock reserved and 13,270,009 shares of Class A common stock available for grant under the 2020 Stock Plan;

there were no more shares available for grant under the 2017 Plan since the 2017 Plan was replaced by the 2020 Plan.

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In January 2021, the Board of Directors adopted the Company’s Employee Stock Purchase Plan (“ESPP”), which became effective immediately prior to the Closing Date.

The total shares of Class A common stock initially reserved under the ESPP is

limited to 4,000,000 shares of Class A common stock.

The total shares of Class A common stock initially reserved under the ESPP is limited to 4,000,000 shares of Class A common stock.

Beginning on January 1, 2022 and ending on January 1, 2041, the number of authorized shares of common stock under the ESPP will automatically increase each fiscal year by the lesser of (i) 1 % of the total number of Class A and Class V common stock issued and outstanding on the last day of the preceding fiscal year, (ii) 12,000,000 shares of Class A common stock, or (iii) a number of shares of Class A common stock determined by the Board of Directors.

On January 1, 2022, 2,047,919 shares of Class A common stock were automatically added to the ESPP reserve.

Therefore, as of June 30, 2022, 6,047,919 shares of Class A common stock have been reserved for issuance under the ESPP.

During the three and six months ended June 30, 2022 the Company issued 185,103 shares of Class A common stock under the ESPP.

No shares were issued under the ESPP during the three and six months ended June 30, 2021.

As of June 30, 2022, there were 5,862,816 shares of Class A common stock available for issuance under the ESPP.

Therefore, as of September 30, 2022, 6,047,919 shares of Class A common stock have been reserved for issuance under the ESPP.

During the nine months ended September 30, 2022 the Company issued 185,103 shares of Class A common stock under the ESPP.

No shares were issued under the ESPP during the three months ended September 30, 2022 and 2021 or the nine months ended September 30, 2021.

As of September 30, 2022, there were 5,862,816 shares of Class A common stock available for issuance under the ESPP.

Under the ESPP, eligible employees may purchase the Company’s Class A common stock during pre-specified offering periods at a discount established by the Company’s compensation committee.

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Employees participating in the ESPP commence payroll withholdings that accumulate through the end of the respective offering period.

As of June 30, 2022, $ 0.2 million has been withheld via employee payroll deductions for employees who have opted to participate in the purchase period ending November 2022.

As of September 30, 2022, $ 0.7 million has been withheld via employee payroll deductions for employees who have opted to participate in the purchase period ending November 2022.

Stock Options

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On June 17, 2020, the board of directors of Hims granted 3,246,139 and 1,623,070 stock options to the Chief Executive Officer (“CEO”) with an exercise price of $ 2.43 to vest upon either (i) an acquisition of the Company with per share consideration equal to at least $ 22.99 and $ 38.31 , respectively, or (ii) a per share price on a public stock exchange that is at least equal to $ 22.99 and $ 38.31 , respectively.

The CEO is required to be employed at the time the per share consideration/price is achieved in order to receive the awards, but the awards are not subject to any other service condition.

The CEO is required to be employed at the time the per share consideration/price is achieved

in order to receive the awards, but the awards are not subject to any other service condition.

The Company recognizes expense related to these awards based on the fair value and derived service period as measured using a Monte Carlo simulation model, but only upon achieving the requirements outlined in (i) and (ii) above.

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The $ 22.99 per share price threshold related to awards for the 3,246,139 stock options was achieved in February 2021 subsequent to the Merger and, therefore, the Company recognized all $ 11.3 million of expense related to the grant during the three months ended March 31, 2021 due to achievement of the market condition.

As of June 30, 2022, there was $ 2.5 million of remaining compensation expense to be recognized for the remaining 1,623,070 stock options over a period of 1.79 years.

As of September 30, 2022, there was $ 2.1 million of remaining compensation expense to be recognized for the remaining 1,623,070 stock options over a period of 1.54 years.

On February 24, 2022, the Board of Directors granted 2,085,640 stock options to the CEO with an exercise price of $ 5.01 that vest in four equal tranches.

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The total grant date fair value was $ 3.8 million for this award.

As of June 30, 2022, there was $ 3.3 million of remaining compensation expense to be recognized over a period of 3.65 years.

The grant date fair value of the Company’s stock options granted (excluding the stock options granted to the CEO outlined above) was estimated using the following weighted average assumptions for the six months ended June 30, 2022:

As of September 30, 2022, there was $ 3.0 million of remaining compensation expense to be recognized over a period of 3.40 years.

Expected term (in years) 6.02

10 unchanged sentences

Forfeited and expired ( 514 ) 6.49

Outstanding at June 30, 2022 14,535 4.55 8.36 18,347

Exercisable as of June 30, 2022 8,138 3.41 7.44 17,987

The weighted average grant date fair value of options (excluding the stock options granted to the CEO outlined above) granted for the six months ended June 30, 2022 was $ 2.36 per share, and the intrinsic value of vested options exercised was $ 4.3 million.

As of June 30, 2022, there was $ 26.0 million of unrecognized stock-based compensation related to unvested stock options, excluding the CEO stock options, which is expected to be recognized over a weighted average period of 3.01 years.

The options outstanding and exercisable as of June 30, 2022 (excluding the stock options granted to the CEO outlined above) have been aggregated into ranges for additional disclosure as follows (in thousands, except weighted average remaining contractual life and exercise price):

Outstanding at September 30, 2022 14,312 4.67 8.14 26,289

Exercisable as of September 30, 2022 8,063 3.68 7.23 23,022

The weighted average grant date fair value of options (excluding the stock options granted to the CEO outlined above) granted for the nine months ended September 30, 2022 was $ 2.42 per share, and the intrinsic value of vested options exercised was $ 6.1 million.

As of September 30, 2022, there was $ 24.5 million of unrecognized stock-based compensation related to unvested stock options, excluding the CEO stock options, which is expected to be recognized over a weighted average period of 2.84 years.

The options outstanding and exercisable as of September 30, 2022 (excluding the stock options granted to the CEO outlined above) have been aggregated into ranges for additional disclosure as follows (in thousands, except weighted average remaining contractual life and exercise price):

Options Outstanding Options Exercisable

9 unchanged sentences

895 8.38 369 8.09

RSUs for new employees generally vest over four years , with 25 % vesting one year after the vesting commencement date on the first Company Quarterly Vesting Date (defined below) and the remaining grant vesting quarterly thereafter on the specified vesting dates of March 15, June 15, September 15, and December 15 (each, a “Company Quarterly Vesting Date” or

collectively, “Company Quarterly Vesting Dates”).

Additional RSUs granted to current employees generally vest quarterly on Company Quarterly Vesting Dates over four years .

5 unchanged sentences

Forfeited and expired ( 550 ) 8.51

Unvested at June 30, 2022 9,118 $ 6.76

Included in the above activity are 476,308 earn-out RSUs and 9,478 Parent Warrant RSUs issued to the CEO as part of the Merger that vest in accordance with the same market conditions as the CEO stock options granted on June 17, 2020, of which 317,539 earn-out RSUs and 6,319 Parent Warrant RSUs have vested as of June 30, 2022.

Unvested at September 30, 2022 10,014 $ 6.68

In addition, the Company granted 45,297 RSUs in 2020 and 4,431 earn-out RSUs and 88 Parent Warrant RSUs as part of the Merger in January 2021 to a non-executive officer that vest upon meeting certain revenue targets from the sale of specific products.

1 unchanged sentence

These grants are also included in the above activity.

As of June 30, 2022, there was unrecognized stock-based compensation related to unvested RSUs of $ 48.3 million, which is expected to be recognized over a weighted average period of 3.16 years.

As of June 30, 2022, there were 462,335 Class A common stock warrants outstanding and exercisable issued to nonemployees in connection with vendor service arrangements, with a weighted average exercise price of $ 1.75 , a weighted average contractual term of 7.01 years, and an aggregate intrinsic value of $ 1.3 million.

As of September 30, 2022, there was unrecognized stock-based compensation related to unvested RSUs of $ 52.9 million, which is expected to be recognized over a weighted average period of 3.03 years.

As of September 30, 2022, there were 462,335 Class A common stock warrants outstanding and exercisable issued to nonemployees in connection with vendor service arrangements, with a weighted average exercise price of $ 1.75 , a weighted average contractual term of 7.01 years, and an aggregate intrinsic value of $ 1.8 million.

Upon the exercise of outstanding warrants, vendors also have the right to receive 45,225 shares of Merger consideration, consisting of the holders’ allocation of earn-out consideration.

As of June 30, 2022, all stock-based compensation expense related to vendor warrants and associated earn-out shares has been recognized.

As of June 30, 2022, there were 98,723 Class A common stock warrants outstanding and exercisable issued in connection with a pre-Merger debt arrangement, with a weighted average exercise price of $ 6.96 , a weighted average contractual term of 6.71 years, and no aggregate intrinsic value.

As of September 30, 2022, all stock-based compensation expense related to vendor warrants and associated earn-out shares has been recognized.

As of September 30, 2022, there were 98,723 Class A common stock warrants outstanding and exercisable issued in connection with a pre-Merger debt arrangement, with a weighted average exercise price of $ 6.96 , a weighted average contractual term of 6.71 years, and no aggregate intrinsic value.

These debt warrants were settled in additional paid-in capital as a result of their conversion to equity-classified Class A common stock warrants in connection with the Merger.

4 unchanged sentences

Vesting of the restricted shares and a portion of total earn-out payable to specific individuals are contingent on each recipient’s continued employment.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three and six months ended June 30, 2022 and 2021.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three and nine months ended September 30, 2022 and 2021.

The expense will be recognized over a four-year vesting period with 25 % vesting one year after the acquisition date and the remaining vesting quarterly thereafter.

3 unchanged sentences

Vesting of the restricted shares is contingent on each recipient’s continued employment.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three and six months ended June 30, 2022 and 2021.

The expense will be recognized over a three-year vesting period with 17 % vesting 6 months after the acquisition date and the remaining

vesting quarterly thereafter.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three and nine months ended September 30, 2022 and 2021.

The expense will be recognized over a three-year vesting period with 17 % vesting 6 months after the acquisition date and the remaining vesting quarterly thereafter.

Unrecognized stock-based compensation expense of $ 14.2 million will be recognized over a weighted average period of 1.75 years.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense for employees and nonemployees, by category, on the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes stock-based compensation expense for employees and nonemployees, by category, on the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Marketing $ 1,241 $ 2,328 $ 3,136 $ 4,946

Selling, general, and administrative 9,560 8,388 17,593 40,772

Operations and support 695 612 1,848 2,433

Technology and development 1,003 1,040 2,999 3,492

General and administrative 8,040 7,889 22,484 44,388

Total stock-based compensation expense $ 10,979 $ 11,869 $ 30,467 $ 55,259

The Company capitalized $ 0.1 million and $ 0.3 million of stock-based compensation as internal-use software for the three months ended June 30, 2022 and 2021, respectively.

The Company capitalized $ 0.3 million of stock-based compensation as internal-use software for each of the six months ended June 30, 2022 and 2021, respectively.

The Company capitalized $ 0.1 million and $ 0.2 million of stock-based compensation as internal-use software for the three months ended September 30, 2022 and 2021, respectively.

The Company capitalized $ 0.4 million and $ 0.5 million of stock-based compensation as internal-use software for the nine months ended September 30, 2022 and 2021, respectively.

Related-Party Transactions

3 unchanged sentences

All services were provided at cost.

For the three months ended June 30, 2022 and 2021, the Company recorded a total of $ 0.9 million and $ 0.7 million, respectively, for payments made to an affiliated company of Atomic Labs for services performed and costs incurred on behalf of the Company.

For the six months ended June 30, 2022 and 2021, the Company recorded a total of $ 1.8 million and $ 1.5 million, respectively, for payments made to an affiliated company of Atomic Labs for services performed and costs incurred on behalf of the Company.

In addition, for each of the three months ended June 30, 2022 and 2021, the Company recorded $ 0.2 million for payments made to Vouched, a related-party company that provides identity verification services.

For the six months ended June 30, 2022 and 2021, the Company recorded $ 0.4 million and $ 0.3 million, respectively, for payments made to Vouched.

For the three months ended September 30, 2022 and 2021, the Company recorded a total of $ 1.0 million and $ 0.8 million, respectively, for payments made to an affiliated company of Atomic Labs for services performed and costs incurred on behalf of the Company.

For the nine months ended September 30, 2022 and 2021, the Company recorded a total of $ 2.8 million and $ 2.3 million, respectively, for payments made to an affiliated company of Atomic Labs for services performed and costs incurred on behalf of the Company.

In addition, for the three months ended September 30, 2022 and 2021, the Company recorded $ 0.3 million and $ 0.2 million, respectively, for payments made to Vouched, a related-party company that provides identity verification services.

For the nine months ended September 30, 2022 and 2021, the Company recorded $ 0.7 million and $ 0.5 million, respectively, for payments made to Vouched.

Basic and Diluted Net Loss per Share

The Company uses the two-class method to calculate net loss per share.

No dividends were declared or paid for the three and six months ended June 30, 2022 and 2021.

No dividends were declared or paid for the three and nine months ended September 30, 2022 and 2021.

Undistributed earnings for each period are allocated equally to participating securities based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed.

The Company’s basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average shares of common stock outstanding during periods with undistributed losses.

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the three and six months ended June 30 (in thousands, except share and per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the three and nine months ended September 30 (in thousands, except share and per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

Basic and diluted net loss per share $ ( 0.09 ) $ ( 0.09 ) $ ( 0.08 ) $ ( 0.08 ) $ ( 0.27 ) $ ( 0.27 ) $ ( 0.42 ) $ ( 0.42 )

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2022 and 2021, because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented.

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three and nine months ended September 30, 2022 and 2021, because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented.

The following table discloses weighted-average securities that were not included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Common stock issued subject to vesting 1,886,735 2,754,756 2,150,443 961,130

Warrants to purchase Class A common stock 561,058 8,145,046 561,058 7,940,334

Common stock issuable under the ESPP 899,701 — 443,495 —

Warrants to purchase Class A common stock 561,058 2,773,408 561,058 6,199,099

Common stock issued for early exercise of stock options 57,400 130,925 80,151 235,766

1 unchanged sentence

Common stock issued for exercise of stock options subject to nonrecourse promissory notes — — — 1,168,952

The effective income tax rate was ( 0.1 )% and ( 0.4 )%, respectively, for the three months ended June 30, 2022 and 2021 and ( 0.3 )% and ( 0.2 )%, respectively, for the six months ended June 30, 2022 and 2021 .

The effective income tax rate was 0.1 % and 16.6 %, respectively, for the three months ended September 30, 2022 and 2021 and ( 0.2 )% and 3.8 %, respectively, for the nine months ended September 30, 2022 and 2021 .

During the third quarter of 2021, the Company recorded a one-time benefit of approximately $ 3.1 million due to the release of the valuation allowance as a result of the Apostrophe acquisition.

The effective tax rate differs from the U.S.

federal rate primarily due to the impacts of the valuation allowance placed on the Company’s deferred tax assets and state taxes.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The new legislation imposes a 15% minimum tax on certain corporation’s book income and a 1% excise tax on certain stock buybacks.

While we may be subject to the new excise tax on certain stock buybacks in the future, the enactment of the IRA did not result in any material adjustments to our financial statements for the three and nine months ended September 30, 2022 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements