Full Press Release Details
Hims, Inc. and Subsidiaries
Years Ended December 31, 2020 and 2019
With Report of Independent Registered Public Accounting Firm
Hims, Inc. and Subsidiaries
Consolidated Financial Statements
Years Ended December 31, 2020 and 2019
| Report of Independent Registered Public Accounting Firm | 1 | |||
| Consolidated Financial Statements | ||||
| Consolidated Balance Sheets as of December 31, 2020 and 2019 | 2 | |||
| Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2020 and 2019 | 3 | |||
| Consolidated Statements of Mezzanine Equity and Stockholders' Deficit for the Years Ended December 31, 2020 and 2019 | 4 | |||
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 | 5 | |||
| Notes to Consolidated Financial Statements | 6 |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Hims & Hers Health, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hims, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, mezzanine equity and stockholders' deficit, and cash flows for each of the years in the two-year
period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2019.
San Francisco, California
March 22, 2021, except for the effects of the reverse recapitalization described in Note 1 to the consolidated financial statements, as to which the date is February 4, 2022
Hims, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, except Share Data)
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 27,344 | $ | 22,647 | ||||
| Short-term investments | 72,864 | 37,721 | ||||||
| Inventory | 3,543 | 4,217 | ||||||
| Prepaid expenses and other current assets | 5,404 | 5,022 | ||||||
| Deferred transaction costs | 3,929 | - | ||||||
| Total current assets | 113,084 | 69,607 | ||||||
| Restricted cash, noncurrent | 1,006 | 150 | ||||||
| Other long-term assets | 4,607 | 2,313 | ||||||
| Total assets | $ | 118,697 | $ | 72,070 | ||||
| Liabilities, mezzanine equity, and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,066 | $ | 7,231 | ||||
| Accrued liabilities | 4,984 | 2,026 | ||||||
| Deferred revenue | 1,272 | 753 | ||||||
| Term loan, current | - | 1,515 | ||||||
| Warrant liabilities | 906 | 9,097 | ||||||
| Total current liabilities | 15,228 | 20,622 | ||||||
| Deferred rent, noncurrent | 381 | - | ||||||
| Total liabilities | 15,609 | 20,622 | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| Mezzanine equity: | ||||||||
| Redeemable convertible preferred stock - par value $ 0.0001 ; 95,997,674 and 87,366,518 shares authorized and 93,328,118 and 84,514,191 shares issued and outstanding as of December 31, 2020 and 2019, respectively; liquidation preference of $ 268,452 and $ 206,138 as of December 31, 2020 and 2019, respectively | 249,962 | 186,741 | ||||||
| Redeemable Class A common stock - par value $ 0.0001 ; nil and 737,058 shares issued and outstanding as of December 31, 2020 and 2019, respectively | - | 4,500 | ||||||
| Total mezzanine equity | 249,962 | 191,241 | ||||||
| Stockholders' deficit: | ||||||||
| Common stock - Class A shares, par value $ 0.0001 ; 166,696,759 and 150,842,448 shares authorized and 46,025,754 and 44,647,107 shares issued and outstanding as of December 31, 2020 and 2019, respectively; Class F shares, par value $ 0.0001 ; 6,941,352 shares authorized, issued, and outstanding as of December 31, 2020 and 2019 | 5 | 5 | ||||||
| Additional paid-in capital | 24,424 | 13,378 | ||||||
| Accumulated other comprehensive (loss) income | ( 11 | ) | 2 | |||||
| Accumulated deficit | ( 171,292 | ) | ( 153,178 | ) | ||||
| Total stockholders' deficit | ( 146,874 | ) | ( 139,793 | ) | ||||
| Total liabilities, mezzanine equity, and stockholders' deficit | $ | 118,697 | $ | 72,070 |
See accompanying notes to consolidated financial statements.
Hims, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(In Thousands, except Share and Per Share Data)
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenue | $ | 148,757 | $ | 82,558 | ||||
| Cost of revenue | 39,307 | 37,953 | ||||||
| Gross profit | 109,450 | 44,605 | ||||||
| Operating expenses: | ||||||||
| Marketing | 58,989 | 63,156 | ||||||
| Selling, general, and administrative | 65,605 | 55,863 | ||||||
| Total operating expenses | 124,594 | 119,019 | ||||||
| Loss from operations | ( 15,144 | ) | ( 74,414 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( 10 | ) | ( 369 | ) | ||||
| Other (expense) income, net | ( 2,833 | ) | 2,809 | |||||
| Loss before provision for income taxes | ( 17,987 | ) | ( 71,974 | ) | ||||
| Provision for income taxes | ( 127 | ) | ( 90 | ) | ||||
| Net loss | ( 18,114 | ) | ( 72,064 | ) | ||||
| Other comprehensive (loss) income | ( 13 | ) | 4 | |||||
| Total comprehensive loss | $ | ( 18,127 | ) | $ | ( 72,060 | ) | ||
| Net loss per share attributable to common stockholders: | ||||||||
| Basic and diluted | $ | ( 0.51 | ) | $ | ( 2.07 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | 35,353,809 | 34,758,817 |
See accompanying notes to consolidated financial statements.
Hims, Inc. and Subsidiaries
Consolidated Statements of Mezzanine Equity and Stockholders' Deficit
(In Thousands, except Share Data)
| Redeemable Convertible Preferred Stock | Redeemable Class A Common Stock | Class A and Class F Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2018 | 71,095,463 | $ | 94,151 | - | - | 51,152,211 | $ | 5 | $ | 9,754 | $ | ( 2 | ) | $ | ( 81,114 | ) | $ | ( 71,357 | ) | |||||||||||||||||||||
| Issuance of redeemable convertible preferred stock, net of issuance costs, including warrants, of $ 10.2 million | 13,418,728 | 92,590 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Issuance of Class A common stock warrants | - | - | - | - | - | - | 61 | - | - | 61 | ||||||||||||||||||||||||||||||
| Exercise of vested stock options | - | - | - | - | 175,328 | - | 23 | - | - | 23 | ||||||||||||||||||||||||||||||
| Early exercise of unvested stock options | - | - | - | - | 1,005,116 | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | - | - | - | - | - | - | 12 | - | - | 12 | ||||||||||||||||||||||||||||||
| Forfeiture of unvested shares issued for early exercised stock options | - | - | - | - | ( 7,138 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | 8,028 | - | - | 8,028 | ||||||||||||||||||||||||||||||
| Reclassification associated with Class A common stock subject to redemption | - | - | 737,058 | 4,500 | ( 737,058 | ) | - | ( 4,500 | ) | - | - | ( 4,500 | ) | |||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | - | 4 | - | 4 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( 72,064 | ) | ( 72,064 | ) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | 84,514,191 | 186,741 | 737,058 | 4,500 | 51,588,459 | 5 | 13,378 | 2 | ( 153,178 | ) | ( 139,793 | ) | ||||||||||||||||||||||||||||
| Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $ 0.1 million | 7,472,062 | 51,900 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Exercise of Series C redeemable convertible preferred stock warrants | 1,341,865 | 11,321 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Exercise of Class A common stock warrants | - | - | 1,051,206 | - | 561 | - | - | 561 | ||||||||||||||||||||||||||||||||
| Exercise of vested stock options | - | - | - | - | 167,655 | - | 123 | - | - | 123 | ||||||||||||||||||||||||||||||
| Early exercise of unvested stock options | - | - | - | - | 17,924 | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | - | - | - | - | - | - | 31 | - | - | 31 | ||||||||||||||||||||||||||||||
| Forfeiture of unvested early exercised shares | - | - | - | - | ( 595,196 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | 5,831 | - | - | 5,831 | ||||||||||||||||||||||||||||||
| Expiration of the Class A common stock redemption right | - | - | ( 737,058 | ) | ( 4,500 | ) | 737,058 | - | 4,500 | - | - | 4,500 | ||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( 13 | ) | - | ( 13 | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( 18,114 | ) | ( 18,114 | ) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 93,328,118 | $ | 249,962 | - | - | 52,967,106 | $ | 5 | $ | 24,424 | $ | ( 11 | ) | $ | ( 171,292 | ) | $ | ( 146,874 | ) |
See accompanying notes to consolidated financial statements.
Hims, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( 18,114 | ) | $ | ( 72,064 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,057 | 260 | ||||||
| Stock-based compensation | 5,831 | 8,028 | ||||||
| Change in fair value of warrant liability | 3,101 | ( 951 | ) | |||||
| Loss on lease termination | 754 | - | ||||||
| Amortization of debt issuance costs | 322 | 70 | ||||||
| Noncash other | 384 | ( 358 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Inventory | 674 | ( 522 | ) | |||||
| Prepaid expenses and other current assets | ( 645 | ) | ( 2,436 | ) | ||||
| Other long-term assets | 8 | ( 755 | ) | |||||
| Accounts payable | 826 | ( 6,075 | ) | |||||
| Accrued liabilities | 2,423 | ( 276 | ) | |||||
| Deferred revenue | 519 | 212 | ||||||
| Deferred rent | 381 | - | ||||||
| Net cash used in operating activities | ( 2,479 | ) | ( 74,867 | ) | ||||
| Investing activities | ||||||||
| Purchases of investments | ( 95,008 | ) | ( 42,012 | ) | ||||
| Maturities of investments | 47,990 | 4,500 | ||||||
| Proceeds from sale of investments | 11,550 | - | ||||||
| Investment in website development, internal-use software, and intangible assets | ( 2,496 | ) | ( 1,479 | ) | ||||
| Purchases of property, equipment, and intangible assets | ( 1,737 | ) | ( 308 | ) | ||||
| Net cash used in investing activities | ( 39,701 | ) | ( 39,299 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of redeemable convertible preferred stock | 52,034 | 102,793 | ||||||
| Payments for issuance costs of redeemable convertible preferred stock | ( 134 | ) | ( 227 | ) | ||||
| Proceeds from exercise of Series C preferred stock warrants | 29 | - | ||||||
| Proceeds from exercise of Class A common stock warrants | 561 | - | ||||||
| Proceeds from exercise of vested and unvested stock options, net of repurchases of unvested shares | 123 | 44 | ||||||
| Borrowings of principal on term loan | - | 2,136 | ||||||
| Repayments of principal on term loan | ( 1,515 | ) | ( 9,051 | ) | ||||
| Payments for debt issuance costs | - | ( 377 | ) | |||||
| Payments for transaction costs | ( 3,356 | ) | - | |||||
| Net cash provided by financing activities | 47,742 | 95,318 | ||||||
| Foreign currency effect on cash and cash equivalents | ( 9 | ) | ( 5 | ) | ||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 5,553 | ( 18,853 | ) | |||||
| Cash, cash equivalents, and restricted cash at beginning of year | 22,797 | 41,650 | ||||||
| Cash, cash equivalents, and restricted cash at end of year | $ | 28,350 | $ | 22,797 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for taxes | $ | 221 | $ | 139 | ||||
| Cash paid for interest | 10 | 361 | ||||||
| Noncash investing and financing activities | ||||||||
| Exercise of preferred stock warrants | $ | 11,292 | $ | - | ||||
| Expiration of Class A common stock redemption right | 4,500 | - | ||||||
| Redeemable Class A common stock reclassification | - | 4,500 | ||||||
| Deferred transaction costs payable | 573 | - | ||||||
| Warrants issued for debt issuance costs | - | 133 | ||||||
| Vesting of early exercised stock options | 31 | 12 |
See accompanying notes to consolidated financial statements.
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Description of Business and Basis of Presentation
Description of the Business
On January 20, 2021 (the "Closing Date"), Oaktree Acquisition Corp. ("OAC"), the predecessor to Hims & Hers Health, Inc. (the "Company") 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. Accordingly, all historical financial information presented herein represents the accounts of Hims and its wholly-owned subsidiaries as if Hims is the predecessor to the Company. The share and per share information in these consolidated financial statements has therefore been retroactively restated to reflect the
ratio established in the Merger
(0.4530 shares of Company Class A common stock for 1 share of Hims Class A common stock).
Hims was incorporated in Delaware on December 30, 2013. Our mission is to make healthcare accessible, affordable, and convenient for everyone. We designed and built our digitally native, cloud-based technology centered around the consumer, and design everything with the consumer in mind. Our proprietary mobile app, websites, telehealth platform, electronic medical records system, and pharmacy integration combine to provide consumers with a seamless, easy-to-use,
mobile-first experience. The Company is leading the transformation in healthcare by becoming the digital front door for healthcare consumers.
We believe the future of healthcare will be driven by consumer brands that empower people and give them full control over their healthcare. We have endeavored to build a healthcare system that squarely focuses on the needs of the healthcare consumer. To enable our mission of making healthcare accessible, affordable, and convenient for everyone, we offer a range of health and wellness products and services available for purchase on our websites directly by customers and through wholesale partners.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America ("U.S. GAAP"). The 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. All intercompany transactions and balances have been eliminated in the consolidated financial statements herein. For the years ended December 31, 2020 and 2019, the Company had operations primarily in the United States and immaterial operations in the United Kingdom.
2. Summary of Significant Accounting Policies
The preparation of 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 and recognition of warrants, and estimates in capitalization
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
of website 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. Actual results experienced by the Company may differ from management's estimates. To the extent that there are material differences between these estimates and actual results, the Company's consolidated financial statements will be affected.
Risks and Uncertainties
The Company's business, operations, and financial results are subject to various risks and uncertainties, including adverse United States economic conditions, legal restrictions, changing laws for medical services and prescription products, or decisions to outsource or modify portions of its supply chain, and competition in its industry could adversely affect its business, financial condition, results of operations, and cash flows. These significant factors, among others, could cause the Company's future results to differ materially from the consolidated financial statements.
The Company's financial instruments that are potentially exposed to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts receivable.
The Company maintains its cash, cash equivalents, short-term investments and restricted cash with high-quality financial institutions with investment- grade ratings. The majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit Insurance Corporation.
The prescription products ordered on the Company's e-commerce
online platform have historically been fulfilled by two pharmacies. If either of the pharmacies were to stop fulfilling orders, it could significantly slow prescription product sales until a new supplier is found. The Company maintains agreements with these pharmacies and is investing in new pharmacy fulfillment capabilities to mitigate any such risk.
As of and for the years ended December 31, 2020 and 2019, a single wholesale customer represented more than 10% of accounts receivable and no single customer represented more than 10% of revenue. In addition, the Company had an immaterial amount of revenue related to sales in foreign countries.
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Foreign Currency Translation
The Company's consolidated financial statements are presented in U.S. dollars. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are presented as foreign currency translation adjustments, a component of other comprehensive income on the consolidated statements of operations and comprehensive
For the years ended December 31, 2020 and 2019, the Company was managed as a single operating segment on a consolidated basis. Furthermore, the Company determined that the Chief Executive Officer ("CEO") is the Chief Operating Decision Maker as he is responsible for making decisions regarding the allocation of resources and assessing performance as well as for strategic operational decisions and managing the organization at a consolidated level.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity or remaining maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash and cash equivalents with financial institutions.
The restricted cash balance is comprised of the cash collateral that is held by the Company's primary financial institution for (i) use of the institution's cash management services and (ii) a letter of credit issued as a security deposit for the Company's warehouse facility in New Albany, Ohio. Refer to Note 9 - Borrowing Arrangements for further details.
Total cash, cash equivalents, and restricted cash are summarized as follows (in thousands):
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash and cash equivalents | $ | 27,344 | $ | 22,647 | ||||
| Restricted cash | 1,006 | 150 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 28,350 | $ | 22,797 |
debt instruments with original maturities at the date of purchase greater than three months and remaining maturities of less than one year are classified as short-term
investments. Available-for-sale
debt instruments with original maturities at the date of purchase and remaining maturities of greater than one year are classified as long-term investments. The Company intends to sell such investments at or close to maturity.
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The investments, if any, are designated as available-for-sale
and are reported at fair value, with unrealized gains and losses, net of tax, recorded in other comprehensive income on the consolidated statements of operations and comprehensive loss, except as noted in the Other-Than-Temporary
Impairment section that follows. The Company determines the cost of the investment sold based on specific identification at the individual security level. The Company records the interest income and realized gains and losses on the sale of these instruments within other income (expense), net on the consolidated statements of operations and comprehensive loss.
Other-Than-Temporary
The Company's investments are subject to a periodic impairment review. Investments are considered impaired when the fair value is below the investment's adjusted cost basis. This would occur for marketable debt instruments when the fair value is below amortized cost and the Company intends to sell the instrument, or when it is more likely than not that the Company will be required to sell the instrument before recovery of its amortized cost basis, or when the Company does not expect to recover the entire amortized cost basis of the instrument (a credit loss exists). When the Company does not expect to recover the entire amortized cost basis of the instrument, it separates other-than-temporary
impairments into amounts representing credit losses, which are recognized in other income (expense), net, and amounts related to all other factors, which are recognized in other comprehensive (loss) income on the consolidated statements of operations and comprehensive loss. The Company incurred no impairments for the years ended December 31, 2020 or 2019.
Fair Value of Financial Instruments
The fair value of a financial instrument is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to ongoing fair value measurement are categorized and disclosed into one of the three categories depending on observable or unobservable inputs employed in the measurement. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows:
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level
input that is significant to the fair value
Inventory primarily consists of finished goods and raw materials that are located at Company-managed and third-party fulfillment warehouses. Inventory is stated at the lower of cost or net realizable value and inventory cost is determined by the weighted average cost method. The Company reserves for expired, slow-moving,
and excess inventory by estimating the net realizable value based on the potential future use of such inventory. Management monitors inventory to identify events that would require impairment due to slow-moving, expired, or obsolete inventory and adjusts the value of inventory when required. Obsolete inventory balances are written-off
against the inventory allowance after management determines that the inventory cannot be sold. For the years ended December 31, 2020 and 2019, the Company recorded write-offs of $0.2 million and $1.4 million, respectively
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of balances related to prepayments or vendor deposits for inventory, software, insurance, marketing and other operating costs, and trade and other accounts receivables. Prepaid expenses are recorded when payment has been made in advance for goods and services. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Receivables are stated at amounts estimated by management to be equal to their net realizable values. The allowance for doubtful accounts is the Company's best estimate of the amount of probable losses and it is recorded when it is probable that amounts will not be collected based on historical collection trends, age of outstanding receivables, specific customer circumstances, and existing economic conditions. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2020 and 2019, accounts receivable was $1.1 million and $0.9 million, respectively, and included within prepaid expenses and other current assets on the consolidated balance sheets. There were no write-offs of accounts receivable for the years ended December 31, 2020 or 2019. As of December 31, 2020 and 2019, the Company had no allowances for doubtful accounts.
Hims, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Company does not have any off-balance