What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-07 · 150 added, 226 removed, 423 unchanged (47% of the section changed)

3 unchanged sentences

(In Thousands, Except Share and Per Share Data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

15 unchanged sentences

Deferred revenue 2,866 1,472

Earn-out payable 12,972 42,834

Operating lease liabilities 1,687 1,658

6 unchanged sentences

Stockholders' equity:

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

Common stock – Class A shares, par value $ 0.0001 , 2,750,000,000 shares authorized and 200,934,421 and 200,051,689 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively;

Class V shares, par value $ 0.0001 , 10,000,000 shares authorized and 8,377,623 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Additional paid-in capital 667,531 656,626

8 unchanged sentences

(In Thousands, Except Share and Per Share Data)

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

2022 2021 2022 2021

Three Months Ended March 31,

Revenue $ 190,770 $ 101,314

13 unchanged sentences

Loss before income taxes ( 9,681 ) ( 16,158 )

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

Provision for income taxes ( 386 ) ( 94 )

Net loss ( 10,067 ) ( 16,252 )

7 unchanged sentences

Hims & Hers Health, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(In Thousands, Except Share Data)

10 unchanged sentences

Exercise of vested stock options 131,246 — 245 — — 245

Vesting of early exercised stock options — — 38 — — 38

Stock-based compensation — — 14,317 — — 14,317

2 unchanged sentences

Balance as of March 31, 2023 209,312,044 $ 21 $ 667,531 $ ( 111 ) $ ( 354,696 ) $ 312,745

Issuance of common stock upon vesting of RSUs, net of shares withheld for taxes 427,850 — — — — —

Payments for taxes related to net share settlement of equity awards — — ( 779 ) — — ( 779 )

Exercise of vested stock options 356,265 — 579 — — 579

Vesting of early exercised stock options — — 38 — — 38

Issuance of common stock under employee stock purchase plan 185,103 — 553 — — 553

Stock-based compensation — — 10,777 — — 10,777

Other comprehensive loss — — — ( 145 ) — ( 145 )

Net loss — — — — ( 19,679 ) ( 19,679 )

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

Common Stock Additional

Capital Accumulated

3 unchanged sentences

Stockholders'

Equity (Deficit)

Shares Amount Shares Amount

Shares Amount

Balance as of December 31, 2021 204,791,986 $ 20 $ 613,687 $ ( 137 ) $ ( 278,951 ) $ 334,619

Pre-closing stock repurchase, net of exercise of vested options ( 206,511 ) ( 125 ) ( 1,817,519 ) — ( 21,902 ) — — ( 21,902 )

Conversion of redeemable convertible preferred stock to common stock ( 93,121,607 ) ( 249,837 ) 93,121,607 9 249,828 — — 249,837

Repayment of related-party promissory notes associated with vested shares — — — — 854 — — 854

Forfeiture of related-party promissory notes — — ( 370,734 ) — — — — —

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

Exercise of Class A common stock warrants — — 1,867,292 — 21,678 — — 21,678

Issuance of common stock upon Merger, net of transaction costs of $ 16.2 million

— — 23,892,244 2 129,657 — — 129,659

Issuance of PIPE shares — — 7,500,000 1 74,999 — — 75,000

Issuance of earn-out shares to common stockholders — — 14,153,520 1 — — — 1

Issuance of common stock upon vesting of RSUs, net of shares withheld for taxes 320,296 — — — — —

Payments for taxes related to net share settlement of equity awards — — ( 404 ) — — ( 404 )

Exercise of vested stock options 768,727 1 890 — — 891

Vesting of early exercised stock options — — 38 — — 38

Warrant expense in connection with Merger — — — — 154 — — 154

Stock-based compensation — — 9,009 — — 9,009

2 unchanged sentences

Balance as of March 31, 2022 205,881,009 $ 21 $ 623,220 $ ( 323 ) $ ( 295,203 ) $ 327,715

Issuance of common stock for Merger transaction costs of $ 2.5 million

— — 250,000 — — — — —

Issuance of common stock for acquisition of business — — 624,880 — 1,949 — — 1,949

Exercise of Class A common stock warrants — — 88 — 1 — — 1

Issuance of common stock upon vesting of RSUs, net of tax withholdings — — 725,740 1 ( 1,959 ) — — ( 1,958 )

Exercise of vested stock options — — 294,374 — 178 — — 178

Vesting of early exercised stock options, net of cancelations — — ( 2,643 ) — 48 — — 48

Stock-based compensation — — — — 9,491 — — 9,491

Other comprehensive income — — — — — 32 — 32

Net loss — — — — — — ( 9,153 ) ( 9,153 )

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)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

4 unchanged sentences

Change in fair value of liabilities 295 ( 441 )

Warrant expense in connection with Merger — 154

Amortization of debt issuance costs — 144

Net amortization on securities 986 1,732

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

Net (accretion) amortization on securities ( 1,041 ) 971

Provision (benefit) for deferred taxes 49 ( 112 )

Impairment of long-lived assets 429 —

Non-cash operating lease cost 448 377

Non-cash acquisition-related costs 566 69

Non-cash other 75 ( 163 )

8 unchanged sentences

Earn-out payable — ( 6,848 )

Net cash used in operating activities ( 19,812 ) ( 31,307 )

Net cash provided by (used in) operating activities 9,483 ( 19,403 )

Investing activities

4 unchanged sentences

Purchases of property, equipment, and intangible assets ( 635 ) ( 100 )

Deferred consideration paid for acquisitions ( 459 ) —

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

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

Net cash (used in) provided by investing activities ( 4,113 ) 18,453

Financing activities

Pre-closing stock repurchase — ( 22,027 )

Proceeds from issuance of common stock upon Merger — 197,686

Proceeds from PIPE — 75,000

Payments for transaction costs related to securities issuances — ( 12,851 )

Proceeds from repayment of promissory notes associated with vested and unvested shares — 1,193

Proceeds from exercise of Class A common stock warrants — 787

Proceeds from exercise of vested and unvested stock options, net of repurchases and cancelations 2,157 567

Proceeds from exercise of vested stock options 245 891

Payments for taxes related to net share settlement of equity awards ( 3,657 ) ( 404 )

Payments for earn-out consideration for acquisitions — ( 23,014 )

Proceeds from employee stock purchase plan 553 —

Net cash (used in) provided by financing activities ( 22,668 ) 235,121

Net cash used in financing activities ( 3,412 ) ( 22,527 )

Foreign currency effect on cash and cash equivalents 15 ( 23 )

(Decrease) increase in cash, cash equivalents, and restricted cash ( 13,820 ) 37,278

Increase (decrease) in cash, cash equivalents, and restricted cash 1,973 ( 23,500 )

Cash, cash equivalents, and restricted cash at beginning of period 47,628 72,640

7 unchanged sentences

Non-cash investing and financing activities

Recapitalization from redeemable convertible preferred stock pre-closing stock repurchase $ — $ 125

Conversion of redeemable convertible preferred stock to common stock — 249,837

Assumption of Merger warrants liability — 51,814

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

Purchase of property and equipment included in accounts payable $ 1,290 $ —

Vesting of early exercised stock options — 38

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

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

Hims & Hers Health, Inc.

(the “Company” or “Hims & Hers”), incorporated in Delaware and formerly known as Oaktree Acquisition Corp.

(“OAC”), is a consumer-first platform transforming the way customers fulfill their health and wellness needs.

The Company’s mission is to make health and wellness solutions accessible, affordable, and convenient for everyone.

(the “Company” or “Hims & Hers”), incorporated in Delaware, is a consumer-first platform transforming the way customers fulfill their health and wellness needs.

The Company’s mission is to help the world feel great through the power of better health.

The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical records system, digital prescriptions, and cloud-enabled pharmacy fulfillment.

The Company’s digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health, and primary care.

2 unchanged sentences

Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness.

The Company offers a range of health and wellness products and services available for purchase directly by customers on the Company’s websites and mobile applications.

Additionally, Hims & Hers products can be found in tens of thousands of top retail locations in the United States.

On January 20, 2021 (the “Closing Date”), OAC completed the acquisition of Hims, Inc.

(“Hims”) pursuant to the Agreement and Plan of Merger dated as of September 30, 2020 (the “Merger Agreement”) by and among OAC, Hims, and Rx Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OAC (“Merger Sub”).

The Merger Agreement provided for, among other things, the combination of Hims and OAC pursuant to the merger of Merger Sub with and into Hims, with Hims continuing as the surviving entity and as a wholly-owned subsidiary of OAC, which changed its name to Hims & Hers Health, Inc.

(the “Merger”).

The Merger was accounted for as a reverse recapitalization with Hims as the accounting acquirer and OAC as the acquired company for accounting purposes.

In addition, the Company offers access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products.

The Company’s products and services are available for purchase directly by customers on the Company’s websites and mobile applications.

Additionally, Hims & Hers non-prescription products can be found in tens of thousands of top retail locations in the United States.

Summary of Significant Accounting Policies

1 unchanged sentence

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 September 30, 2022 are unaudited.

The condensed consolidated financial statements as of March 31, 2023 are unaudited.

The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date.

3 unchanged sentences

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s balance sheet, results of operations, and cash flows for the periods presented, but are not necessarily indicative of the results expected for the full fiscal year or any other period.

The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and variable interest entities in which it holds a controlling financial interest.

The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and variable interest entities in which it is the primary beneficiary.

All intercompany transactions and balances have been eliminated in these condensed consolidated financial statements.

11 unchanged sentences

The preparation of condensed consolidated financial statements in conformity with U.S.

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

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.

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

The more significant estimates, judgements, 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, estimates used in the capitalization of website and mobile application development and internal-use software costs, and judgements relating to impairment triggering events for long-lived assets.

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

Actual results experienced by the Company may differ from management’s estimates.

13 unchanged sentences

In connection with determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.

Any acquired assets from a business combination including intangible assets subject to amortization are continuously monitored and reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In such cases, recoverability of assets to be held and used is assessed by comparing the carrying amount of assets with their future underlying net undiscounted cash flows without interest charges.

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.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination.

2 unchanged sentences

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 nine months ended September 30, 2022 and 2021.

No goodwill impairment was recorded for the three months ended March 31, 2023 and 2022.

Impairment of Long-Lived Assets

4 unchanged sentences

As of December 31, 2022, 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.

The Company recognized $ 0.4 million of impairment charges on long-lived assets during the three months ended March 31, 2023 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 months ended March 31, 2022.

Revenue Recognition

4 unchanged sentences

Revenue consists of the following (in thousands):

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

2022 2021 2022 2021

Three Months Ended March 31,

Online Revenue $ 184,175 $ 94,102

2 unchanged sentences

For Online Revenue, the Company defines its customer as an individual who purchases products or services through its websites or mobile applications.

For Wholesale Revenue, the Company defines its customer as a wholesale partner.

For Wholesale Revenue, the Company defines its customer as a wholesale partner, with the exception of consignment arrangements, where its customer is defined as an individual who purchases products through certain third-party platforms.

The transaction price in the Company’s contracts with customers is the total amount of consideration to which the Company expects to be entitled in exchange for transferring products or services to the customer.

8 unchanged sentences

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

For each of the three months ended March 31, 2023 and 2022, 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;

7 unchanged sentences

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 solely to the Company’s customers.

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 Partner Pharmacies and the Affiliated Pharmacies fill prescription orders for customers who have received a prescription from a prescribing Provider through the Company’s websites and mobile applications.

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

4 unchanged sentences

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.

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

The Company updates its estimate at the end of each reporting period and recognizes the estimated amount as contra-revenue with a corresponding refund liability.

5 unchanged sentences

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

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

Short-term investments as of March 31, 2023, consist of the following (in thousands):

Cost Unrealized

Gains Unrealized

Corporate bonds $ 90,254 $ 1 $ ( 18 ) $ 90,237

Government bonds 19,770 ( 44 ) 19,726

Government and government agency 45,378 48 ( 15 ) 45,411

Total short-term investments $ 135,632 $ 49 $ ( 33 ) $ 135,648

1 unchanged sentence

Cost Unrealized

Gains Unrealized

Corporate bonds $ 99,672 $ — $ ( 106 ) $ 99,566

Asset-backed bonds 29,507 ( 19 ) 29,488

Government and government agency 33,317 17 ( 47 ) 33,287

Total short-term investments $ 132,989 $ 17 $ ( 153 ) $ 132,853

Inventory consists of the following (in thousands):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Finished goods $ 15,846 $ 16,477

3 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Wholesale trade receivables $ 4,475 $ 3,231

3 unchanged sentences

Intangible Assets

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

Intangible assets as of March 31, 2023 consist of the following (in thousands):

Amount Accumulated Amortization and Impairment Net

4 unchanged sentences

Intangible assets as of December 31, 2022 consist of the following (in thousands):

Amount Accumulated

Amortization Net

Amount Accumulated Amortization and Impairment Net

Value Weighted

2 unchanged sentences

Intangible assets, net $ 28,751 $ ( 6,910 ) $ 21,841 8.0

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):

Amortization expense for intangible assets was $ 1.0 million for each of the three months ended March 31, 2023 and 2022.

Amortization that will be charged to expense over the remaining life of the intangible assets subsequent to March 31, 2023 is as follows (in thousands):

The remainder of 2023 $ 2,446

2 unchanged sentences

Accrued liabilities consist of the following (in thousands):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Marketing $ 6,611 $ 4,990

Payroll 3,631 4,999

Tax 1,091 963

Professional services 921 643

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

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):

For the three months ended March 31, 2023 and 2022, the Company recorded operating lease costs of $ 0.6 million and $ 0.4 million, respectively, including variable operating lease costs of $ 0.1 million in each period.

For the three months ended March 31, 2023 and 2022, operating cash flows used for operating leases were $ 0.5 million and $ 0.4 million, respectively.

As of March 31, 2023, the weighted average remaining lease term and weighted average discount rate was 2.9 years and 4.8 %, 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 March 31, 2023 are as follows (in thousands):

The remainder of 2023 $ 1,412

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Present value of net future minimum lease payments $ 4,904

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

As of March 31, 2023, the present value of net future minimum lease payments of $ 4.9 million is recorded as operating lease liabilities:

(i) $ 1.7 million within current liabilities;

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

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.

As of March 31, 2023 and December 31, 2022, the Company’s condensed consolidated balance sheets included current assets of $ 12.0 million and $ 7.5 million, respectively, and total assets of $ 12.2 million and $ 7.7 million, respectively, for the VIEs.

As of March 31, 2023 and December 31, 2022, current and total liabilities were $ 5.2 million and $ 3.7 million, respectively.

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

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.

For the three months ended March 31, 2023 and 2022, the VIEs charged $ 22.5 million and $ 12.2 million, respectively, for services rendered.

For the three months ended March 31, 2023 and 2022, operations of the VIEs generated net income of $ 2.7 million and $ 1.2 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 September 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 March 31, 2023, is as follows (in thousands):

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Corporate bonds — 90,237 — 90,237

Government bonds — 19,726 — 19,726

Government and government agency — 45,411 — 45,411

Restricted cash:

1 unchanged sentence

Total assets $ 26,282 $ 135,954 $ — $ 162,236

Earn-out liabilities $ — $ — $ 739 $ 739

Earn-out liability $ — $ — $ 3,977 $ 3,977

Total liabilities $ — $ — $ 3,977 $ 3,977

6 unchanged sentences

Corporate bonds — 99,566 — 99,566

Asset-backed bonds — 29,488 — 29,488

Government and government agency — 33,287 — 33,287

Restricted cash:

1 unchanged sentence

Total assets $ 25,462 $ 144,168 $ — $ 169,630

Earn-out liabilities $ — $ — $ 1,999 $ 1,999

Earn-out liability $ — $ — $ 2,975 $ 2,975

Total liabilities $ — $ — $ 2,975 $ 2,975

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 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 fair values of cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values as of March 31, 2023 and December 31, 2022, due to their short-term nature.

All other financial instruments, except for the earn-out liability, 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 three months ended March 31, 2023 and 2022, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

As of March 31, 2023 and December 31, 2022, the 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 liability 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:

2 unchanged sentences

Counterparty discount rate 5.0 %

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

The fair value of the earn-out liability 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 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):

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

Balance at December 31, 2022 $ 2,975

Change in fair value due to revaluation and service-based vesting 1,002

Balance at September 30, 2022 $ 739

Balance at March 31, 2023 $ 3,977

Commitments and Contingencies

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

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.

As of March 31, 2023, purchase obligations were $ 6.0 million, with $ 2.3 million payable in 2023, $ 2.8 million payable in 2024, and $ 0.9 million payable in 2025.

Legal Proceedings

From time to time, the Company is party to litigation and subject to claims incident to the ordinary course of business.

As the Company’s growth continues, it may become party to an increasing number of litigation matters and claims.

The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect the Company’s future results of operations, cash flows, or financial position.

The Company is not presently party to any legal proceedings that, in the opinion of management, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition, or cash flows.

From time to time, the Company is a party to litigation, various claims, and other legal and administrative proceedings arising in the ordinary course of business.

Some of these claims, lawsuits, and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions, or relief.

Management is not currently aware of any matters that are reasonably likely to have a material adverse impact on the Company’s business, financial position, results of operations, or cash flows.

Stockholders’ Equity

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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 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 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.

During the three months ended March 31, 2023, the Company released 1,156,901 gross shares of Class A common stock upon vesting of restricted stock units (“RSUs”).

In connection with the releases, 405,415 shares of Class A common stock were withheld for the payment of employee taxes.

During the three months ended March 31, 2022, the Company released 413,035 gross shares of Class A common stock upon vesting of RSUs.

In connection with the releases, 92,739 shares of Class A common stock were withheld for the payment of employee taxes.

2017 Stock Plan and 2020 Equity Incentive Plan

In July 2017, Hims adopted the 2017 Stock Plan (the “2017 Plan”).

In July 2017, Hims, Inc.

(“Hims”) adopted the 2017 Stock Plan (the “2017 Plan”).

Under the 2017 Plan, the board of directors of Hims granted awards, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, and other stock awards to employees, directors, and consultants of Hims.

In January 2021, in connection with the Merger, the Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and reserved 21,000,000 authorized shares of Class A common stock the Company could issue.

In January 2021, the Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and reserved 21,000,000 authorized shares of Class A common stock the Company could issue.

In addition, up to 19,000,000 shares of Hims Class A common stock subject to awards granted under the 2017 Plan that were forfeited, expired, or lapsed unexercised or unsettled could be added to the 2020 Plan reserve.

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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 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.

As of December 31, 2022, there were 33,101,677 and 10,963,031 shares of Class A common stock reserved and available for issuance, respectively, under the 2020 Plan.

For the three months ended March 31, 2023, 17,314 shares of Class A common stock subject to awards granted under the 2017 Plan that were forfeited after the adoption of the 2020 Plan were added to the 2020 Plan reserve.

Additionally, on January 1, 2023, 10,421,465 shares of Class A common stock were automatically added to the 2020 Plan reserve.

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;

Therefore, as of March 31, 2023, there were 43,540,456 shares of Class A common stock reserved and 12,476,603 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.

2020 Employee Stock Purchase Plan

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.

In January 2021, the Board of Directors adopted the Company’s Employee Stock Purchase Plan (“ESPP”).

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 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.

Beginning on January 1, 2022 and ending on January 1, 2041 (unless extended by the Board of Directors and approved by the Company’s shareholders), 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.

As of December 31, 2022, there were 6,047,919 and 5,654,391 shares of Class A common stock reserved and available for issuance, respectively, under the ESPP.

There were no shares added to the ESPP reserve on January 1, 2023.

Therefore, as of March 31, 2023, there were 6,047,919 shares of Class A common stock reserved for issuance under the ESPP.

No shares were issued under the ESPP during the three months ended March 31, 2023.

As of March 31, 2023, there were 5,654,391 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 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.

As of March 31, 2023, $ 0.9 million has been withheld via employee payroll deductions for employees who have opted to participate in the purchase period ending May 2023.

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 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.

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, and the expense is accelerated if the requirements outlined in (i) and (ii) above are achieved.

The grant date fair value was $ 16.6 million for these awards.

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 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.

The $ 22.99 per share price threshold related to awards for the 3,246,139 stock options was achieved in February 2021.

As of March 31, 2023, 37,882 of these stock options have been exercised at a weighted average exercise price of $ 2.43 .

As of March 31, 2023, there was $ 1.5 million of remaining compensation expense to be recognized for the remaining 1,623,070 stock options over a period of 1.04 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 September 30, 2022, there was $ 3.0 million of remaining compensation expense to be recognized over a period of 3.40 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 nine months ended September 30, 2022:

As of March 31, 2023, no shares have vested and there was $ 2.2 million of remaining compensation expense to be recognized over a period of 2.90 years.

Expected term (in years) 6.02

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Granted 603 11.53

Exercised (including early exercised options vested during the period) ( 1,623 ) 1.41

Exercised ( 95 ) 1.76

Forfeited and expired ( 38 ) 11.33

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):

Outstanding at March 31, 2023 14,920 4.97 7.84 78,114

Exercisable as of March 31, 2023 8,995 3.97 7.08 55,224

The weighted average grant date fair value of options granted for the three months ended March 31, 2023 was $ 6.09 per share, and the intrinsic value of vested options exercised was $ 0.8 million.

As of March 31, 2023, there was $ 23.8 million of unrecognized stock-based compensation expense related to unvested stock options (excluding the stock options granted to the CEO outlined above) which is expected to be recognized over a weighted average period of 2.66 years.

The options outstanding and exercisable as of March 31, 2023 (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

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

RSU activity is as follows (in thousands, except for weighted average grant date fair value):

RSU activity (excluding the 2023 performance RSUs outlined below) is as follows (in thousands, except for weighted average grant date fair value):

Shares Weighted Average Grant Date Fair Value

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Forfeited and expired ( 281 ) 6.91

Unvested at September 30, 2022 10,014 $ 6.68

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 September 30, 2022.

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.

None of the awards vested in the period.

Unvested at March 31, 2023 16,963 $ 7.95

Included in the above activity are 476,308 earn-out RSUs and 9,478 Parent Warrant RSUs issued to the CEO in January 2021 that vest in accordance with the same market conditions as the CEO stock options, of which 317,539 earn-out RSUs and 6,319 Parent Warrant RSUs have vested as of March 31, 2023.

In addition, the Company granted 45,297 RSUs in 2020 and 4,431 earn-out RSUs and 88 Parent Warrant RSUs in January 2021 to a non-executive officer that vest upon meeting certain revenue targets from the sale of specific products, of which 15,099 RSUs, 1,477 earn-out RSUs, and 30 Parent Warrant RSUs have vested as of March 31, 2023.

These grants are also included in the above activity.

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 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.

As of March 31, 2023, there was $ 120.5 million of unrecognized stock-based compensation expense related to unvested RSUs (excluding the 2023 performance RSUs outlined below) which is expected to be recognized over a weighted average period of 3.43 years.

2023 Performance RSUs

On March 1, 2023, the Board of Directors granted awards of 1,115,709 target shares of performance RSUs (“PRSUs”) to certain executive officers.

The PRSUs vest at the end of a three-year period, with the number of shares earned ranging from 0 %

to 200 % of the target, provided that (i) the recipient remains employed at the end of the period and (ii) the Company achieves certain performance metrics related to the 2025 fiscal year.

The total grant date fair value of the awards was $ 12.9 million, which is based on the probable achievement of 100 % of the target.

The Company will continue to evaluate the likelihood of achieving the performance metrics on a quarterly basis.

As of March 31, 2023, there was unrecognized stock-based compensation expense related to unvested PRSUs of $ 12.5 million, which is expected to be recognized over a weighted average period of 2.96 years.

As of March 31, 2023, 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 $ 3.8 million.

Upon the exercise of outstanding warrants, vendors also have the right to receive 45,225 additional shares.

As of March 31, 2023, all stock-based compensation expense related to vendor warrants and associated earn-out shares has been recognized.

As of March 31, 2023, there were 98,723 Class A common stock warrants outstanding and exercisable issued in connection with a debt arrangement, with a weighted average exercise price of $ 6.96 , a weighted average contractual term of 6.71 years, and $ 0.3 million 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.

Stock Subject to Vesting and Earn-out Share Liability

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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 nine months ended September 30, 2022 and 2021.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three months ended March 31, 2023 and 2022.

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.

Unrecognized stock-based compensation expense of $ 3.8 million will be recognized over a weighted average period of 2.67 years.

As of March 31, 2023, there was unrecognized stock-based compensation expense of $ 3.2 million, which will be recognized over a weighted average period of 2.11 years.

In July 2021, the Company granted 2,332,557 restricted shares of Class A common stock subject to vesting with an aggregate grant date fair value of $ 24.2 million in connection with the acquisition of YoDerm, Inc.

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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 nine months ended September 30, 2022 and 2021.

Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three months ended March 31, 2023 and 2022.

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.

As of March 31, 2023, there was unrecognized stock-based compensation expense of $ 10.1 million, which will be recognized over a weighted average period of 1.25 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 nine months ended September 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

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 months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Marketing $ 996 $ 823

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Total stock-based compensation expense $ 14,167 $ 8,856

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.

The Company capitalized $ 0.3 million and $ 0.2 million of stock-based compensation as internal-use software for the three months ended March 31, 2023 and 2022, respectively.

Related-Party Transactions

Atomic Labs, LLC (“Atomic Labs”) is a related-party venture capital startup studio that launched the Company, providing initial capital and governance.

The Company utilized operational support from Atomic Labs, primarily consisting of providing office space, conducting back-office professional services, and administering operating expenses.

Additionally, an affiliated company of Atomic Labs provides professional services to the Company, primarily to support engineering and operations functions.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 1.0 million and $ 0.9 million, respectively, for payments made to Terminal, Inc., a related party company that provides professional services to the Company, primarily to support engineering and operations functions.

All services were provided at cost.

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.

In addition, for the three months ended March 31, 2023 and 2022, the Company recorded $ 1.0 million and $ 0.2 million, respectively, for payments made to Vouched, a related-party company that provides identity verification services.

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 nine months ended September 30, 2022 and 2021.

No dividends were declared or paid for the three months ended March 31, 2023 and 2022.

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 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

Class A Class V Class A Class V Class A Class V Class A Class V

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 months ended March 31 (in thousands, except share and per share amounts):

Three Months Ended March 31,

Class A Class V Class A Class V

Net loss attributable to common stockholders $ ( 9,660 ) $ ( 407 ) $ ( 15,580 ) $ ( 672 )

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Basic and diluted net loss per share $ ( 0.05 ) $ ( 0.05 ) $ ( 0.08 ) $ ( 0.08 )

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.

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three months ended March 31, 2023 and 2022, 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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Stock options 21,549,957 17,685,246

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Warrants to purchase Class A common stock 561,058 561,058

2023 PRSUs 384,300 —

Common stock issued for early exercise of stock options — 103,521

Redeemable convertible preferred stock — — — 6,495,364

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 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 income tax rate was ( 4.0 )% and ( 0.6 )%, respectively, for the three months ended March 31, 2023 and 2022 .

The effective tax rate differs from the U.S.

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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