What changed in this filing

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Item 9A. Controls and Procedures

2024-02-28 compared with 2023-03-09 · 388 added, 639 removed, 797 unchanged (56% of the section changed)

3 unchanged sentences

Based upon that evaluation, as a result of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023 due to the material weaknesses described below.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

1 unchanged sentence

In assessing the effectiveness of our internal control over financial reporting, our management used the framework established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on that assessment and due to the material weaknesses described below, our management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022.

Attestation Report of Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due to an exemption established for “emerging growth companies”

under the Jumpstart Our Business Startups (JOBS) Act.

As such, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002.

Previously Reported Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented

or detected on a timely basis.

As previously reported in the Annual Report on Form 10-K for the year ended December 31, 2021, in connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2019, we identified material weaknesses in our internal control over financial reporting, which continue to exist as of December 31, 2022.

The material weaknesses we identified were as follows:

1 unchanged sentence

This material weakness contributed to the following additional material weaknesses:

We did not maintain formal accounting policies and procedures, and did not design and maintain controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries.

• We did not maintain formal accounting policies and procedures, and did not design and maintain effective controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries.

These material weaknesses resulted in material misstatements related to the identification and valuation of intangible assets acquired in business combinations that impacted the classification of intangible assets and goodwill, related impacts to amortization and income tax expense, and the restatement of our previously issued annual consolidated financial statements as of and for the years ended December 31, 2019 and 2018 with respect to such intangibles assets acquired in business combinations.

9 unchanged sentences

Accordingly, we have determined these deficiencies in the aggregate constitute a material weakness.

Our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Remediation Plan for Material Weaknesses

1 unchanged sentence

As of December 31, 2023, our remediation measures are ongoing and include the following:

hired additional accounting and IT personnel to enhance our technical reporting, transactional accounting, and IT capabilities.

We designed and implemented controls to support training, development, and technical research capabilities for those personnel, along with development and implementation of policies and procedures to support the external financial reporting functions.

• hired a new head of Internal Audit with extensive Sarbanes-Oxley Act experience;

• engaged with external consultants with healthcare and IT expertise to assist with enhancing our internal control environment design and development;

• hired additional accounting and IT personnel, including a new Senior Vice President of IT and Security, to enhance our technical reporting, transactional accounting, and IT capabilities.

We designed and implemented controls to support training, development, and technical research capabilities for those personnel, along with the development and implementation of policies and procedures to support the external financial reporting functions.

We continue to evaluate our staffing needs and plan to hire additional personnel as necessary to support our operations;

performed detailed risk assessments for significant financial processes to identify, design, and implement control activities related to internal control over financial reporting;

developed and implemented controls related to the formalization of our accounting policies and procedures and financial reporting;

• performing detailed risk assessments for significant financial processes to identify, design, and implement control activities related to internal control over financial reporting;

• development and implementation of controls related to the formalization of our accounting policies and procedures and financial reporting;

• development and implementation of controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries;

developed and implemented IT security and governance controls to address program change of internally and externally developed systems and computer operations associated with information systems impacting the preparation of our consolidated financial statements;

developed and implemented controls related to the periodic monitoring and review of user access rights, the identification and risk ranking of segregation of duties conflicts, and, where it is determined there is a need for an individual to having conflicting access, a periodic review of the underlying activities is performed by an independent person who does not have such conflicting access;

developed and implemented controls related to computer operations surrounding critical batch jobs and data backups;

• development and implementation of IT security and governance controls to address program change of internally and externally developed systems and computer operations associated with information systems impacting the preparation of our consolidated financial statements;

• development and implementation of controls related to the periodic monitoring and review of user access rights, segregation of duties conflicts, and, where it is determined there is a need for an individual to have conflicting access, a periodic review of the underlying activities is performed by an independent person who does not have such conflicting access;

• development and implementation of controls related to computer operations surrounding critical batch jobs and data backups;

• development and implementation of program change management controls, including new or material modifications, related to testing, authorization and implementation of program and data changes affecting financial IT applications and accounting records.

We have made progress towards designing and implementing the plan to remediate the material weaknesses and will continue to review, revise, and improve the design and implementation of our internal controls as appropriate.

Although we have made enhancements to our control procedures, these material weaknesses will not be considered remediated until our controls are operational for a sufficient period of time, tested, and management concludes that these controls are operating effectively.

Although we have made enhancements to our control procedures, these material weaknesses will not be considered remediated until our controls are effectively designed and operational for a sufficient period of time, tested, and management concludes that these controls are operating effectively.

We intend to evaluate current and projected resource needs on a regular basis and hire additional qualified resources as needed.

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In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Other Information

During our fiscal quarter ended December 31, 2023 , none of our directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) entered into, modified (as to amount, price or timing of trades) or terminated (i) contracts, instructions or written plans for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information or (ii) non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).

Di s closure Regarding Foreign Jurisdictions that Prevent Inspections.

1 unchanged sentence

Directors, Executive Officers and Corporate Governance

The information required by this item will be set forth in the definitive proxy statement to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after December 31, 2022 (the “Proxy Statement”) and is incorporated into this Annual Report on Form 10-K by reference.

The information required by this item will be set forth in the definitive proxy statement to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after December 31, 2023 (the “Proxy Statement”) and is incorporated into this Annual Report on Form 10-K by reference.

Executive Compensation

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The following financial statements and schedules of the Registrant are contained in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K:

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statement of Changes in Stockholders' Equity, Consolidated Statements of Changes in Redeemable Units and Stockholders'/Members' Equity and Consolidated Statement of Changes in Redeemable Convertible Preferred Units and Members' Deficit

Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statement of Changes in Redeemable Units and Stockholders'/Members' Equity

Consolidated Statements of Cash Flows

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All schedules are omitted because the required information is either not present, not present in material amounts or presented within the consolidated financial statements.

(b) The exhibits listed in the following “Exhibits Index”

are filed, furnished or incorporated by reference as part of this Annual Report.

(b) The exhibits listed in the following “Exhibits Index” are filed, furnished or incorporated by reference as part of this Annual Report.

Exhibit Index

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Amended and Restated Certificate of Incorporation of LifeStance Health Group, Inc.

Amended and Restated Bylaws of LifeStance Health Group, Inc.

Second Amended and Restated Bylaws of LifeStance Health Group, Inc.

Form of Common Stock Certificate

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Stock Transfer Restriction Agreement, dated as of June 9, 2021, by and among the Company and each of the other person from time to time party thereto

Employment Agreement, dated September 7, 2022, between LifeStance Health Group, Inc.

and Kenneth Burdick

Amended and Restated Employment Agreement, dated May 14, 2020, between LifeStance Health, Inc.

and Danish Qureshi

Letter Agreement, dated September 7, 2022, between LifeStance Health Group, Inc.

and Danish Qureshi

Employment Agreement, dated as of November 2, 2022, between LifeStance Health Group, Inc.

and David Bourdon

LifeStance Health Group, Inc.

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and each of its directors and executive officers

Form of Management Services Agreement with Affiliated Practices

Form of Management Services Agreement with Supported Practices

Form of RSU Agreement under the 2021 Plan

Form of Notice of Amended Award Terms for Class B Unit Award Agreement

Credit Agreement, dated as of May 4, 2022, among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., and Capital One, National Association

Separation and General Release Agreement, dated as of May 22, 2022, between LifeStance Health Group, Inc.

and Gwendolyn Booth

Independent Contractor Agreement, dated as of July 1, 2022, between LifeStance Health Group, Inc.

and Gwendolyn Booth

Amendment to Restricted Stock Unit Award Agreement, dated as of June 30, 2022, between LifeStance Health Group, Inc.

and Gwendolyn Booth

Amendment to Stock Transfer Restriction Agreement, dated as of June 30, 2022, between LifeStance Health Group, Inc.

and Gwendolyn Booth

Severance and Change in Control Policy

Separation and General Release Agreement, dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Consulting Agreement, dated September 8, 2022, between LifeStance Health Group, Inc., Alert5 Consulting LLC, and Michael K.

Amendment to Restricted Stock Unit Award Agreement, dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Description of Exhibit Incorporated Herein by Reference

Filed Herewith

Amendment to Stock Transfer Restriction Agreement, dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Amendment to Time and Performance-Based Restricted Stock Unit Award Agreement (Time-Based Award), dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Amendment to Time and Performance-Based Restricted Stock Unit Award Agreement (Performance-Based Award), dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Amendment to the Partnership Interest Award Agreement, dated as of September 7, 2022, between LifeStance Health Group, Inc.

and Michael K.

Employment Agreement, dated September 7, 2022, between LifeStance Health Group, Inc.

and Kenneth Burdick

Letter Agreement, dated September 7, 2022, between LifeStance Health Group, Inc.

and Danish Qureshi

Form of Non-Qualified Stock Option Agreement

1 unchanged sentence

Form of RSU Agreement (Time and Performance) (Sell to Cover) under the 2021 Plan

Employment Agreement, dated as of November 2, 2022, between LifeStance Health Group, Inc.

and David Bourdon

Stock Award Agreement, dated as of November 10, 2022, between LifeStance Health Group, Inc.

and David Bourdon

Transition Agreement, dated as of November 2, 2022, between LifeStance Health Group, Inc.

Michael Bruff

Amendment to Partnership Interest Award Agreement, dated as of November 2, 2022, between LifeStance Health Group, Inc.

Michael Bruff

Amendment to Time and Performance Based Restricted Stock Unit Award Agreement (Time-Based Award), dated as of November 2, 2022, between LifeStance Health Group, Inc.

Michael Bruff

Credit Agreement, dated as of May 4, 2022, among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., and Capital One, National Association

First Amendment to Credit Agreement, dated as of November 7, 2023, among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., and Capital One, National Association

Severance and Change in Control Policy

List of subsidiaries of LifeStance Health Group, Inc.

Consent of PricewaterhouseCoopers LLP

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Description of Exhibit Incorporated Herein by Reference

Filed Herewith

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

LifeStance Health Group, Inc.

Policy for Recoupment of Incentive Compensation

Inline XBRL Instance Document

Description of Exhibit Incorporated Herein by Reference

Filed Herewith

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Document

The Cover page from the Annual Report on Form 10-K of LifeStance Health Group, Inc.

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LifeStance Health Group, Inc.

March 9, 2023

February 28, 2024

/s/ Kenneth Burdick

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Chief Executive Officer and Chairman

March 9, 2023

February 28, 2024

Kenneth Burdick

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Chief Financial Officer and Treasurer

March 9, 2023

February 28, 2024

David Bourdon

1 unchanged sentence

/s/ Robert Bessler

March 9, 2023

February 28, 2024

Robert Bessler

/s/ Darren Black

March 9, 2023

February 28, 2024

/s/ Jeffrey Crisan

March 9, 2023

February 28, 2024

Jeffrey Crisan

/s/ William Miller

March 9, 2023

February 28, 2024

William Miller

/s/ Jeffrey Rhodes

March 9, 2023

February 28, 2024

Jeffrey Rhodes

/s/ Eric Shuey

March 9, 2023

February 28, 2024

/s/ Seema Verma

March 9, 2023

February 28, 2024

/s/ Katherine Wood

March 9, 2023

February 28, 2024

Katherine Wood

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statement of Changes in Stockholders' Equity, Consolidated Statements of Changes in Redeemable Units and Stockholders'/Members' Equity, and Consolidated Statement of Changes in Redeemable Convertible Preferred Units and Members' Deficit

Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statement of Changes in Redeemable Units and Stockholders'/Members' Equity

Consolidated Statements of Cash Flows

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To the Board of Directors and Stockholders of LifeStance Health Group, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of LifeStance Health Group, Inc.

and its subsidiaries (Successor) (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of changes in redeemable units and stockholders'/members' equity and of cash flows for the years ended December 31, 2022 and 2021, and for the period from April 13, 2020 to December 31, 2020, including the related notes (collectively referred to as 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, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021, and for the period from April 13, 2020 to December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss and of cash flows for each of the three years in the period ended December 31, 2023, of changes in stockholders’ equity for the years ended December 31, 2023 and 2022, and of changes in redeemable units and stockholders’/members’ equity for the year ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company did not (i) design and maintain an effective control environment commensurate with the Company's financial reporting requirements due to an insufficient complement of resources in the accounting/finance and IT functions, with an appropriate level of knowledge, experience and training, (ii) maintain formal accounting policies and procedures, and did not design and maintain effective controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries, and (iii) design and maintain effective controls over IT general controls for information systems that are relevant to the preparation of the consolidated financial statements related to (a) program change management controls, (b) user access controls, (c) computer operations controls, and (d) testing and approval controls for program development.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in Management's Annual Report on Internal Control Over Financial Reporting appearing under Item 9A.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2022.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s 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 of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

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.

/s/ PricewaterhouseCoopers LLP

Seattle, Washington

March 9, 2023

We have served as the Company's auditor since 2020.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Members of LifeStance TopCo, L.P.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations and comprehensive loss, of changes in redeemable convertible preferred units and members’

deficit and of cash flows of LifeStance Health, LLC and its subsidiaries (Predecessor) (the “Company”) for the period from January 1, 2020 to May 14, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the period from January 1, 2020 to May 14, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements 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.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements 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.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Patient Accounts Receivable, Net

As described in Note 2 to the consolidated financial statements, total revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care.

The Company reports revenue net of price concessions provided to patients.

The differences between the price at which the Company expects to receive from patients and the standard billing rates are accounted for as contractual adjustments, discounts or implicit price concessions, which are deducted from gross revenue to arrive at net revenue.

Patient accounts receivable are carried at the original charge for the services provided adjusted for explicit and implicit price concessions.

Management regularly reviews data about the major payor sources of revenue and determines its estimates based on contractual agreements, its discount policies, and its historical experience.

Patient accounts receivable, net were $125.4 million as of December 31, 2023.

The principal considerations for our determination that performing procedures relating to the valuation of patient accounts receivable, net is a critical audit matter are (i) the significant judgment by management when developing the estimate of patient accounts receivable, net and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence obtained related to the estimate.

As described above in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, there is a material weakness related to the Company’s control environment, which impacted this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing the estimate of patient accounts receivable, net, (ii) evaluating the relevance and use of historical experience data as an input into the estimate, (iii) testing the completeness and accuracy of underlying historical experience data used in the estimate, and (iv) evaluating the historical accuracy of management’s estimate of the amount expected to be collected by (a) testing, on a sample basis, the completeness and accuracy of revenue transactions and cash collections used in management’s analysis and (b) comparing actual cash collections to the previously recorded patient accounts receivable.

/s/ PricewaterhouseCoopers LLP

Seattle, Washington

April 12, 2021, except for the effects of the reclassification of certain operating expense categories discussed in Note 2 (not presented herein) to the consolidated financial statements appearing in the Company’s Registration Statement on Form S-1 dated May 17, 2021, as to which the date is May 12, 2021.

February 28, 2024

We have served as the Company's auditor since 2020.

2 unchanged sentences

(In thousands, except for par value)

December 31, 2022

December 31, 2021

CURRENT ASSETS

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COMMITMENTS AND CONTINGENCIES (see Note 13 )

STOCKHOLDERS’

Preferred stock –

par value $ 0.01 per share;

STOCKHOLDERS’ EQUITY

Preferred stock – par value $ 0.01 per share;

25,000 shares authorized as of

2 unchanged sentences

of December 31, 2023 and December 31, 2022

Common stock –

par value $ 0.01 per share;

Common stock – par value $ 0.01 per share;

800,000 shares authorized as of

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Total stockholders' equity

Total liabilities and stockholders’

Total liabilities and stockholders’ equity

The accompanying Notes are an integral part of these consolidated financial statements.

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(In thousands, except for Net Loss per Share)

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

TOTAL REVENUE

OPERATING EXPENSES

Center costs, excluding depreciation and

amortization shown separately below

Center costs, excluding depreciation and amortization

shown separately below

General and administrative expenses

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Total operating expenses

(LOSS) INCOME FROM OPERATIONS

OTHER (EXPENSE) INCOME

(Loss) gain on remeasurement of

contingent consideration

LOSS FROM OPERATIONS

OTHER EXPENSE

Gain (loss) on remeasurement of contingent consideration

Transaction costs

Interest expense

Interest expense, net

Other expense

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Accretion of Redeemable Class A units

Accretion of Series A-1 redeemable

convertible preferred units (Note 12)

Cumulative dividend on Series A

redeemable convertible preferred

units (Note 12)

NET LOSS AVAILABLE TO COMMON

STOCKHOLDERS/MEMBERS

NET LOSS PER SHARE, BASIC AND

Weighted-average shares used to compute

basic and diluted net loss per share

OTHER COMPREHENSIVE INCOME

Unrealized gains on cash flow hedge, net

NET LOSS PER SHARE, BASIC AND DILUTED

Weighted-average shares used to compute basic and diluted

net loss per share

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized (losses) gains on cash flow hedge, net of tax

COMPREHENSIVE LOSS

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LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)

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Balances at December 31, 2022

Adoption of ASU 2016-13

Issuance of common stock upon

vesting of restricted stock units

Other comprehensive loss

Stock-based compensation expense

Balances at December 31, 2023

Accumulated Other Comprehensive

Total Stockholders'

Balances at December 31, 2021

Issuance of common stock upon

vesting of restricted stock units

Surrender of common stock

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LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE UNITS AND MEMBERS’

EQUITY (Successor) AND CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED UNITS AND MEMBERS' DEFICIT (Predecessor)

(In thousands)

Class A Redeemable Units

Class A-1 Common Units

Class A-2 Common Units

Class B Common Units

Total Members'

Balances at April 13, 2020

redeemable/common units

at TPG Acquisition

Issuance of common units to

TPG at TPG Acquisition

Issuance of common units to

new investors

Issuance of common units for

acquisitions of businesses

Issuance of common units for

convertible promissory note

Unit-based compensation

Balances at December 31, 2020

Series A Redeemable Convertible Preferred Units

Series A-1 Redeemable Convertible Preferred Units

Class A Common Units

Class C Common Units

Total Members'

Balances at December 31, 2019

Repurchases of Series A

redeemable convertible

preferred units

Accretion of Series A-1

redeemable convertible

preferred units

Balances at May 14, 2020

The accompanying Notes are an integral part of these consolidated financial statements.

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF CAS H FLOWS

(In thousands)

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash

provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating

Depreciation and amortization

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Amortization of discount and debt issue costs

Loss (gain) on remeasurement of contingent consideration

Loss on disposal of assets

(Gain) loss on remeasurement of contingent consideration

Endowment of shares to LifeStance Health Foundation

Change in operating assets and liabilities, net of businesses

Patient accounts receivable

Change in operating assets and liabilities, net of businesses acquired:

Patient accounts receivable, net

Prepaid expenses and other current assets

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Other accrued expenses

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

Acquisition of Predecessor, net of cash acquired

Acquisitions of businesses, net of cash acquired

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discounts and commissions and deferred offering costs

Contributions from Members related to acquisition of

Issuance of common units to new investors

Repurchase of Series A redeemable convertible preferred

Proceeds from long-term debt, net of discount

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Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents - Beginning of period

CASH AND CASH EQUIVALENTS –

END OF PERIOD

The accompanying Notes are an integral part of these consolidated financial statements.

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

December 31, 2022

December 31, 2021

December 31, 2020

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

Cash paid for interest

CASH AND CASH EQUIVALENTS – END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest, net

Cash paid for taxes, net of refunds

SUPPLEMENTAL DISCLOSURES OF NON CASH

INVESTING AND FINANCING ACTIVITIES

SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND

FINANCING ACTIVITIES

Equipment financed through finance leases

Contingent consideration incurred in acquisitions of

Contingent consideration incurred in acquisitions of businesses

Acquisition of property and equipment included in liabilities

Surrender of common stock

Issuance of common units for convertible promissory

note conversion

Issuance of common units for acquisitions of businesses

Taxes related to net share settlement of equity awards

included in liabilities

Taxes related to net share settlement of equity awards included in

The accompanying Notes are an integral part of these consolidated financial statements.

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LifeStance Health Group, Inc.

(“LifeStance Health Group”) was formed as a Delaware corporation on January 28, 2021 for the purpose of completing an initial public offering (“IPO”) and related transactions in order to carry on the business of LifeStance TopCo, L.P.

(“LifeStance TopCo”) and subsidiaries.

Prior to the IPO, LifeStance Health Group had no operations.

LifeStance Health Group is the sole equity holder of LifeStance TopCo and operates and controls all of the business and affairs.

As a result, LifeStance Health Group consolidates the financial results of LifeStance TopCo, its wholly-owned subsidiaries and variable interest entities.

LifeStance Health Group and LifeStance TopCo are collectively referred to herein as the “Company”, "LifeStance" or "LifeStance Health".

As a result, LifeStance Health Group consolidates the financial results of LifeStance TopCo, its wholly-owned subsidiaries and variable interest entities and the financial statements for the periods prior to the IPO have been adjusted to combine the previously separate entities for presentation purposes.

LifeStance Health Group and LifeStance TopCo are collectively referred to herein as the “Company” or "LifeStance".

The Company operates as a provider of outpatient mental health services, spanning psychiatric evaluations and treatment, psychological and neuropsychological testing, and individual, family and group therapy.

Initial Public Offering

On June 14, 2021, the Company completed its IPO in which it issued and sold 32,800 shares of common stock and affiliates of TPG Inc.

("TPG"), affiliates of Silversmith Capital Partners ("Silversmith"), and affiliates of Summit Partners ("Summit") (collectively, the "Selling Shareholders") sold 7,200 shares of common stock at an offering price of $ 18.00 per share.

The Selling Shareholders granted the underwriters an option to purchase an additional 6,000 shares of common stock.

The underwriters exercised in full their option to purchase additional shares, and the sale of the option shares was completed on June 25, 2021.

The Company received net proceeds of $ 548,905 , after deducting underwriting discounts and commissions of $ 32,472 and deferred offering costs of $ 9,023 .

The Company did not receive any proceeds from the sale of shares by the Selling Stockholders, including the option shares.

Deferred, direct offering costs were capitalized and consisted of fees and expenses incurred in connection with the sale of the Company’s common stock in the IPO, including legal, accounting, printing and other offering related costs.

Upon completion of the IPO, these deferred offering costs were reclassified from current assets to stockholders’

equity and recorded against the net proceeds from the offering.

Prior to the IPO, each of the holders of partnership interests in LifeStance TopCo contributed its partnership interests to LifeStance Health Group in exchange for shares of common stock (including shares of common stock issued as restricted stock subject to vesting) of LifeStance Health Group (the "Organizational Transactions").

Following the contribution of partnership interests, LifeStance TopCo became wholly-owned by LifeStance Health Group.

The number of shares of common stock that each such holder of partnership interests in LifeStance TopCo received was determined based on the value that such holder would have received under the distribution provisions of the limited partnership agreement of LifeStance TopCo, with shares of common stock valued by reference to the IPO price.

All 1,046,196 of LifeStance TopCo’s outstanding redeemable and common Class A units and 152,620 Class B units (the "Class B Common Units", "Profits Interests Units" or "Profits Interests") were contributed in exchange for 310,083 shares of common stock of LifeStance Health Group plus 30,766 shares of common stock issued as restricted stock ("RSAs") subject to vesting.

As a result of this contribution and exchange, the Company reclassified $ 71,648 of redeemable units and $ 1,008,688 of common units to additional paid-in capital and $ 3,408 to common stock on the Company’s consolidated balance sheets.

In connection with the IPO, the Company established the LifeStance Health Foundation, a non-profit organization that focuses on youth mental health, and the mental health of underrepresented minority communities, the underemployed and the uninsured.

While the LifeStance Health Foundation was founded by LifeStance and will be operated by a board of directors that the Company expects to include from time to time certain of its officers and employees, including its Chief Executive Officer, the LifeStance Health Foundation was established as an independent legal entity and will not be owned or controlled by LifeStance or its stockholders.

Concurrently with the closing of the IPO, the Company endowed the LifeStance Health Foundation through a combination of $ 1,000 in cash and 500 shares of its common stock, representing aggregate cash and equity value of $ 10,000 .

Following the effective date of the IPO, LifeStance Health Group consolidates the financial results of LifeStance TopCo, its wholly-owned subsidiaries and variable interest entities ("VIEs") and the financial statements for the periods prior to the IPO have been adjusted to combine the previously separate entities for presentation purposes.

Prior to the IPO restructuring transactions, LifeStance Health Group had no operations .

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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These consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The accompanying consolidated financial statements include the results of the Company, its wholly-owned subsidiaries, and variable interest entities in which the Company has an interest and is the primary beneficiary (see “Variable Interest Entities”

generally accepted accounting principles (“GAAP”).

Intercompany transactions and balances have been eliminated in consolidation.

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The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities.

The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment;

therefore, actual results could differ from these estimates.

Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves.

Changes in estimates are made when circumstances warrant.

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Segment Information

The Company’s chief operating decision maker, its Chief Executive Officer, reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating its financial performance.

Accordingly, the Company has determined that it operates in a single operating and reportable segment, mental health services, for all periods presented.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”).

These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available information.

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and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

The Company acquires and operates certain care centers which are deemed to be Friendly-Physician Entities (“FPEs”).

The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

The Company acquires and operates certain care centers which are deemed to be Friendly-Physician Entities (“FPEs”).

As part of an FPE acquisition, the Company acquires 100 % of the non-medical assets, however due to legal requirements the physician-owners must retain 100% of the equity interest.

The Company’s agreements with FPEs generally consist of both a Management Service Agreement, which provide for various administrative and management services to be provided by the Company to the FPE, and Stock Transfer Restriction (“STR”) agreements with the physician-owners of the FPEs, which provide for the transition of ownership interest of the FPEs under certain conditions.

The outstanding voting equity instruments of the FPEs are owned by the nominee shareholders appointed by the Company under the terms of the STR.

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The Company has exclusive responsibility for the provision of all nonmedical services including facilities, technology and intellectual property required for the day-to-day operation and management of each of the FPEs, and makes recommendations to the FPEs in establishing the guidelines for the employment and compensation of the physicians and other employees of the FPEs.

In addition, the STR provides that the Company has the right to designate a person(s) to purchase the equity interest of the FPE for a nominal amount in the event of a succession event at the Company’s discretion.

Based on the provisions of these agreements, the Company determined that the FPEs are VIEs due to its equity holder having insufficient capital at risk, and the Company has a variable interest in the FPEs.

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As noted previously, the Company acquires 100% of the non-medical assets of the VIEs.

The aggregate carrying values of the VIEs total assets and total liabilities not purchased by the Company but included on the consolidated balance sheets were not material at December 31, 2022 and 2021 (Successor) .

Total Revenue

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Revenue is recognized as the related performance obligation is satisfied.

In patient revenue, the patient is the Company’s customer, and a signed patient treatment consent generally represents a written contract between the Company and the patient.

Performance obligations are determined based on the nature of the services provided by the Company.

Generally, the Company’s performance obligations are satisfied over time and relate to counselling sessions that are discrete in nature and commence and terminate at the discretion of the patient and thus each individual counselling session is a performance obligation.

Revenue for performance obligations satisfied over time is recognized when the services are rendered based on the amount the Company expects to be entitled to for the services provided to the patient.

The Company believes this method provides a faithful depiction of the transfer of services.

Because all of its performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in Accounting Standards Codification (“ASC”) 606-10-50-14(A) and, therefore, is not required to disclose the aggregate amount of the transaction prices allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Company determined the underlying nature of the services provided are consistent irrespective of the payor type.

Therefore, management assesses price concessions using a portfolio approach in its contracts with patients.

The Company reports revenue net of price concessions related to contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy and/or implicit price concessions provided to patients.

The differences between the price at which the Company expects to receive from patients and the standard billing rates, deemed implicit price concessions, are accounted for as contractual adjustments or discounts, which are deducted from gross revenue to arrive at net revenues.

The Company determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies, and its historical experience.

The Company determines its estimates of contractual adjustments, discounts and implicit price concessions based on contractual agreements, its discount policies, and its historical experience.

Settlements with third-party payors for retroactive adjustments due to audits, review or investigations and disputes by either the Company or the third-party payors within the allowable specific timeframe are considered variable consideration and are included in the determination of estimated transaction price for providing patient services.

These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved.

These settlements are estimated based on the terms of

the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved.

Estimated settlements are adjusted in future periods as new information becomes available, or as years are settled or are no longer subject to such audits, reviews and investigations.

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Adjustments arising from a change in the estimate of the transaction price were not material for all periods presented.

Subsequent changes that are determined to be the result of an adverse change in the patient’s or third-party payor’s ability to pay are recorded as bad debt expense.

Services are occasionally provided to patients with a reduced ability to pay for their care.

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The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts the Company expects to collect based on its collection history with those patients.

Patients who meet the Company’s criteria for discounted pricing are provided care at amounts less than established rates.

Such amounts determined to be financial assistance are not reported as revenue.

Center Costs, Excluding Depreciation and Amortization

Center costs, excluding depreciation and amortization includes the costs the Company incurs to operate its centers, consisting primarily of salaries, wages and employee benefits for clinicians and patient support, occupancy costs such as rent and utilities,

medical supplies, insurance and other operating expenses.

Center costs, excluding depreciation and amortization excludes stock and unit-based compensation.

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Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less at the time of purchase.

Cash and cash equivalents consist of demand deposits held with financial institutions.

Cash and cash equivalents consist of demand deposits held with financial institutions and investments in money market funds.

Cash and cash equivalents are stated at cost, which approximates fair value.

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For receivables associated with services provided to patients who have third-party insurance coverage, the Company analyzes contractually due amounts and provides an allowance for contractual adjustments.

In evaluating the collectability of patient receivables, the Company analyzes its past history and identifies trends for each of its major payor sources of revenue to estimate the appropriate allowance for credit losses and provision for bad debts.

Management determines the allowance for credit losses by identifying troubled accounts, by using historical experience applied to an aging of accounts, and by considering a patient’s financial history, credit history, and current economic conditions.

Patient accounts receivable are written off as bad debt expense when deemed uncollectible.

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The Company grants credit without collateral to its patients, most of whom are insured under third-party payor agreements.

Revenue and cash flows from the Medicare program are dependent upon the rates set by, and the promptness of payment from, federally administered programs, and in management’s opinion do not create a significant credit risk to the Company.

Property and Equipment, net

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Computers and peripherals

Internal-use software

Medical equipment

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When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.

The Company adopted ASC 842, Leases (“ASC 842”) using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2022 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).

As of January 1, 2022, the impact of the adoption to the Company’s consolidated balance sheets includes the recognition of operating lease liabilities, current, of $ 16,753 , operating lease liabilities, noncurrent, of $ 200,247 based on the present value of the remaining lease payments for existing operating leases with corresponding right-of-use assets of $ 190,013 .

The difference between the amount of right-of-use assets and lease liabilities recognized upon the adoption of ASC 842 is related to adjustments to existing deferred rent and lease incentives.

The Company determines if a contract meets the definition of a lease at inception and evaluates the lease classification at that time.

The Company has elected not to recognize on the consolidated balance sheet leases with terms of one year or less.

The Company has elected not to recognize on the consolidated balance sheets leases with terms of one year or less.

Options to extend or terminate the lease are included in the determination of the lease term when it is reasonably certain that the Company will exercise such options.

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Variable lease costs are the portion of lease payments that are not fixed over the lease term.

Variable lease costs

include real estate payments that are adjusted periodically for inflation or other variables as well as payments for taxes and insurance.

Variable lease costs include real estate payments that are adjusted periodically for inflation or other variables as well as payments for taxes and insurance.

The Company expenses variable lease costs in the period incurred.

Operating leases are included in right-of-use assets, operating lease liabilities, current and operating lease liabilities, noncurrent on the Company’s consolidated balance sheets.

Finance leases are included in property and equipment, net, other current liabilities, and other noncurrent liabilities on the Company’s consolidated balance sheets.

Operating leases are included in right-of-use assets, operating lease liabilities, current and operating lease liabilities, noncurrent on the Company’s consolidated balance sheets.

Finance leases are included in property and equipment, net, other current liabilities, and other noncurrent liabilities on the Company’s consolidated balance sheets.

Finance leases are not material.

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The consideration the Company transfers in exchange for the acquiree may also include equity interests which the Company records at fair value at closing of the transaction.

Transaction costs incurred as a result of the acquisitions are expensed in the Company’s consolidated financial statements in the period incurred.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

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Fair value estimates are based on the assumptions the Company believes a market participant would use in pricing the asset or liability.

Management’s estimates of fair value are based upon assumptions determined to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from the estimates.

During the measurement period, which is not to exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

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Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

There was no impairment of long-lived assets for all periods presented.

There was an immaterial impairment of long-lived assets for the year ended December 31, 2023 and no impairment of long-lived assets for the years ended December 31, 2022 and 2021 .

Intangible Assets

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These tiers include:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date.

• Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date.

Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Inputs are other than quoted prices included in Level 1, which are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument’s anticipated life.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the reporting date.

• Level 2—Inputs are other than quoted prices included in Level 1, which are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument’s anticipated life.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the reporting date.

Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable.

The carrying values of the Company’s financial instruments approximate fair value due to their short-term maturities.

The Company has obligations to transfer contingent consideration to former owners and sellers of certain entities in conjunction with its acquisitions, if specified future operational objectives and/or financial results are met.

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Stock and Unit-Based Compensation

The Company accounts for stock-based compensation awards approved by the Board of Directors, including RSAs, restricted stock units ("RSUs"), and stock options, based on their estimated grant date fair value.

The Company estimates the fair value of the RSAs and RSUs based on the fair value of the underlying common stock on their grant date.

The Company accounts for stock-based compensation awards approved by the Board of Directors, including restricted stock awards ("RSAs"), restricted stock units ("RSUs"), and stock options, based on their estimated grant date fair value.

The Company estimates

the fair value of the RSAs and RSUs based on the fair value of the underlying common stock on their grant date.

The Company's stock awards are granted on service-, performance-, and/or market-based vesting conditions.

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For stock option awards issued with time- and market-based vesting conditions, the grant date fair value is determined through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the market condition may not be satisfied.

A Monte Carlo simulation requires the use of various assumptions, including the underlying stock price, volatility and the risk-free

interest rate as of the valuation date, corresponding to the length of the time remaining in the performance period, and expected dividend yield.

A Monte Carlo simulation requires the use of various assumptions, including the underlying stock price, volatility and the risk-free interest rate as of the valuation date, corresponding to the length of the time remaining in the performance period, and expected dividend yield.

The expected term represents the derived service period for the respective tranches, which is the longer of the specified service period or the period in which the market conditions are expected to be met.

The Company has elected to account for forfeitures as they occur.

The Company is subject to income taxes in both the United States and several state jurisdictions.

The Company is subject to income taxes in both the United States and various state jurisdictions.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or tax returns.

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Its evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of audit and effective settlement of audit issues.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits as a component of interest expense in the consolidated statements of operations and comprehensive loss .

Advertising and Marketing Costs

Advertising and marketing costs include all communications and campaigns to the Company’s clients and target audience.

Advertising costs are charged to expense as they are incurred in general and administrative expenses within the Company’s consolidated statements of operations and comprehensive loss.

Advertising expense for the years ended December 31, 2022 and 2021 (Successor), the period from April 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to May 14, 2020 (Predecessor) were $ 8,632 , $ 11,696 , $ 1,942 , and $ 663 , respectively.

Advertising and marketing costs include all communications and campaigns to the Company’s clients and target audience.

Advertising costs are charged to expense as they are incurred in general and administrative expenses within the Company’s consolidated statements of operations and comprehensive loss.

Advertising expense for the years ended December 31, 2023, 2022 and 2021, were $ 9,399, $ 8,632 and $ 11,696 , respectively.

Debt Issue Costs

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For revolving loans and delayed draw term loan commitments, the Company presents the debt issue costs as an asset and amortizes the costs on a straight-line basis over the term of the revolving loan and delayed draw term loan commitment, respectively.

Amortization of discount and debt issue costs, which includes loss on debt extinguishment, is recorded as interest expense in the consolidated statements of operations and comprehensive loss and amounted to $ 3,720 , $ 7,417 , $ 3,825 and $ 215 for the years ended December 31, 2022 and 2021 (Successor), the period from April 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to May 14, 2020 (Predecessor) , respectively.

Comprehensive Loss

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Retirement Plan

The Company maintains a profit sharing and retirement savings 401(k) plan (the “401(k) Plan”) for full-time employees.

Participants may elect to contribute to the 401(k) Plan, through payroll deductions, subject to Internal Revenue Service limitations.

401(k) Plan provides for a 401(k) matching program under which the Company will match 100% of the employees’

contribution up to 3% of the employees’

compensation, plus 50% of salary deferrals between 3% and 5% of employees’

compensation.

The Company 401(k) Plan provides for a 401(k) matching program under which the Company will match 100% of the employees’ contribution up to 3% of the employees’ compensation, plus 50% of salary deferrals between 3% and 5% of employees’ compensation.

The matching contribution is subject to certain eligibility and vesting conditions.

The Company recorded expense of $ 15,746 , $ 11,375 , $ 4,231 , and $ 1,819 for the years ended December 31, 2022 and 2021 (Successor), the period from April 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to May 14, 2020 (Predecessor) , respectively, for discretionary matching and profit-sharing contributions to the 401(k) Plan.

The Company recorded expense of $ 18,846 , $ 15,746 and $ 11,375 for the years ended December 31, 2023, 2022 and 2021 , respectively, for discretionary matching and profit-sharing contributions to the 401(k) Plan.

Indemnification

The Company’s arrangements generally include certain provisions for indemnifying patients against liabilities if there is a breach of a patient’s data or if the Company’s service infringes on a third party’s intellectual property rights.

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as a director or officer or that person’s services provided to any other company or enterprise at the Company’s request.

The Company maintains director and officer liability insurance coverage that would generally enable it to recover a portion of any future amounts paid.

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Concentrations of Risk and Significant Customers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and patient accounts receivable.

Although the Company deposits its cash with multiple financial institutions in the U.S., its deposits, at times, may exceed federally insured limits.

The Company does not have any individual customer that exceeded 10% of the Company’s patient accounts receivable balance at December 31, 2022 and 2021 (Successor).

Two payors individually exceeded 10% of the Company’s patients accounts receivable balance at December 31, 2022 and 2021 (Successor).

These payors comprise 16 % and 16 % , of the patient accounts receivable balance, respectively, as of December 31, 2022 (Successor), and 17 % and 19 % , respectively, as of December 31, 2021 (Successor) .

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act").

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, the Company's consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The Company does not have any individual customer that exceeded 10% of the Company’s patient accounts receivable balance at December 31, 2023 and 2022.

Two payors individually exceeded 10% of the

Company’s patients accounts receivable balance at December 31, 2023 and 2022.

These payors comprise 17 % and 15 % , of the patient accounts receivable balance, respectively, as of December 31, 2023, and 16 % and 16 % , respectively, as of December 31, 2022 .

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and also issued subsequent amendments to the initial guidance:

ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20, ASU 2019-01, ASU 2020-02, and ASU 2020-05 (collectively, “ASC 842”).

ASC 842 outlines a comprehensive lease accounting model and supersedes the current lease guidance.

The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months.

It also changes the definition of a lease and expands the disclosure requirements of lease arrangements.

The Company adopted Accounting Standards Codification, Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2022 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).

There was no cumulative effect adjustment to the opening balance of accumulated deficit as of January 1, 2022.

In addition, the Company elected to adopt certain practical expedients permitted under the transition guidance within the new standard.

The Company elected the package of practical expedients which applied to leases that commenced prior to the adoption date of the new standard and permitted a reporting entity not to reassess:

(i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases.

The Company has elected not to use hindsight for leases existing at adoption date.

The difference between the amount of right-of-use assets and lease liabilities recognized upon the adoption of ASC 842 is related to adjustments to existing deferred rent and lease incentives.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , (“ASU 2019-12”).

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The Company adopted the new guidance on January 1, 2022, noting it did not have a material effect on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and also issued subsequent amendments to the initial guidance:

ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11 (collectively, "ASC 326").

ASC 326 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss”

and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326)-Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

The estimate of expected credit losses requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts.

The CECL model is expected to result in more timely recognition of credit losses.

ASC 326 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities.

ASC 326 is effective for public companies for annual periods beginning after December 15, 2019, including interim periods within those fiscal years and private entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

ASC 326 will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

The Company is in the process of evaluating the impact of the adoption of ASC 326 on the Company’s consolidated financial statements and disclosures.

NOTE 3 TPG ACQUISITION

On April 14, 2020 , LifeStance Holdings entered into a merger agreement among LifeStance Holdings, Lynnwood Intermediate Holdings, Inc., Merger Sub and Shareholder Representatives Services LLC.

Immediately prior to the TPG Acquisition, LifeStance Health, LLC completed a reorganization pursuant to which the equity holders of LifeStance Health, LLC, including affiliates of Summit and affiliates of Silversmith (together with TPG and Summit, the Company’s “Principal Stockholders”) received a distribution of 100 % of the equity interests of LifeStance Health Holdings, a direct subsidiary of LifeStance Health, LLC, in complete redemption of their equity interests of LifeStance Health, LLC.

Pursuant to the TPG Acquisition, (i) the historic equity holders of LifeStance Health, LLC contributed a portion of their units of LifeStance Holdings to LifeStance TopCo in exchange for equity interests of LifeStance TopCo and (ii) an indirect subsidiary of LifeStance TopCo, merged with and into LifeStance Holdings, with shareholders of LifeStance Holdings receiving cash consideration in connection with cancellation of the remainder of their shares.

LifeStance TopCo has a controlling financial interest in LifeStance Holdings under the voting interest model.

Therefore, the Company determined LifeStance TopCo would consolidate LifeStance Holdings.

Further, the TPG Acquisition is considered to constitute a change in control of the LifeStance business, with LifeStance TopCo being deemed the acquirer.

The TPG Acquisition has been accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations , which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

Immediately prior to the transaction, LifeStance Health, LLC was the reporting entity.

As noted above, this entity will be considered the predecessor entity and the period prior to and including May 14, 2020 will be the predecessor period.

LifeStance Health, LLC was subsequently dissolved as part of the transaction.

Given that LifeStance TopCo is the accounting acquirer, it will be considered the successor entity and the successor period will begin on April 13, 2020.

For the period from April 13, 2020 through May 13, 2020, the operations of LifeStance TopCo were limited to those incident to its formation and the TPG Acquisition, which were not significant.

Pursuant to the merger, LifeStance TopCo issued 979,563 Class A-1 Units and 35,845 Class A-2 Units to certain of its equity holders, including TPG, Summit, Silversmith and members of the Company’s management team.

Following the acquisition, the Company has conducted its business through LifeStance TopCo, L.P.

and its consolidated subsidiaries.

All previously owned preferred units were converted into LifeStance TopCo common units upon the acquisition.

Total consideration transferred consisted of the following:

Cash consideration

Class A-1 units

Class A-2 units

Total consideration transferred

The total consideration of $ 1,052,764 consisted of $ 381,823 equity, including 345,978 Class A-1 Units and 35,845 Class A-2 Units at $ 1 per unit and $ 670,941 cash, including $ 4,500 cash placed in escrow, transaction fees, cash for debt repayment, and a working capital adjustment.

The Company recorded the fair value of net assets acquired of $ 126,106 and recorded goodwill of $ 926,658 on May 14, 2020.

Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition:

Allocation of Purchase Price

Patient accounts receivable

Property and equipment

Prepaid expenses and other current assets

Other noncurrent assets

Intangible assets

Total assets acquired

Accounts payable

Accrued payroll expenses

Other accrued expenses

Current portion of contingent consideration

Other current liabilities

Long-term debt, net

Other noncurrent liabilities

Contingent consideration, net of current portion

Deferred tax liability, net

Total liabilities assumed

Fair value of net assets

The fair value of assets and liabilities other than intangible assets approximate the carrying amount as of acquisition date.

The liquidity of receivables are based on contractual rates to payors.

The identifiable intangible assets acquired include the LifeStance corporate trade name, trade names related to the regional clinics, non-competition agreements with the Company’s executives, and non-competition agreements with providers.

In order to value trade names, the “relief-from-royalty”

method was utilized.

This method is based on the supposition that in lieu of ownership, the Company would be willing to pay a royalty in order to exploit the related benefits of the trade names.

The value of the trade names was determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name over the expected useful life.

The selected royalty rate (pre-tax) was based on an analysis of various factors, including an analysis of market data and comparable trade name agreements.

As it pertains to the non-competition agreements, the “with-and-without”

method was utilized to determine the value.

Revenue with the non-competition agreement in place was based on the Company’s forecast.

The values indicated from the “with-and-without”

method were adjusted to reflect the ability, feasibility, and desire for the partners to compete.

Subsequent to the closing of the TPG Acquisition, there was an additional cash payment of $ 2,977 related to a working capital adjustment, which was accounted for as a measurement period adjustment.

The following table summarizes the fair values of acquired intangible assets as of the date of the TPG Acquisition:

Trade names –

Non-competition agreements –

Total intangible assets

Goodwill represented the excess of the purchase price over the net identifiable assets acquired and liabilities assumed.

Goodwill is primarily attributable to the assembled workforce, customer and payor relationships and anticipated synergies and economies of scale expected from the integration of the businesses.

The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the acquisition.

There is no tax-deductible goodwill from the TPG Acquisition.

The Company’s unaudited pro forma revenue and net loss for the year ended December 31, 2020 below have been prepared as if the TPG Acquisition occurred on January 1, 2020.

December 31, 2020

The transaction costs related to the TPG Acquisition were $ 32,942 , all of which were expensed as incurred.

Management Fees

In addition, management fees to TPG and certain executives of the Company were identified as related party transactions.

For the year ended December 31, 2021 (Successor), the period from April 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to May 14, 2020 (Predecessor), the Company incurred related party management fees of $ 1,445 , $ 142 and $ 14 , respectively.

As a result of the Company's IPO, the Company incurred a termination fee of $ 1,213 under its management services agreement in the second quarter of 2021, and no management fees were recognized in the remainder of 2021.

The Company adopted the standard on January 1, 2023 using the modified retrospective adoption method and did not have a material impact to the consolidated financial statements.

The Company makes estimates of expected credit losses based on a combination of factors, including historical losses adjusted for current market conditions, the Company's customers' financial condition, delinquency trends, aging behaviors of receivables and credit and liquidity indicators, and future market and economic conditions and regularly reviews the adequacy of the allowance for credit losses.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07").

ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis.

ASU 2023-07 is effective for public companies for annual periods beginning on or after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 will apply retrospectively to all prior periods presented in the financial statements.

The Company is in process of evaluating the impact of adoption of ASU 2023-07 on the Company's consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09").

ASU 2023-09 improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-09 will apply on a prospective basis and retrospective application is permitted.

The Company is in process of evaluating the impact of adoption of ASU 2023-09 on the Company's consolidated financial statements and disclosures.

NOTE 3 TOTAL REVENUE

The Company’s total revenue is dependent on a series of contracts with third-party payors, which is typical for providers in the health care industry.

The Company’s total revenue is dependent on a series of contracts with third-party payors, which is typical for providers in the healthcare industry.

The Company has determined that the nature, amount, timing and uncertainty of revenue and cash flows are affected by the payor mix with third-party payors which have different reimbursement rates.

The payor mix of fee-for-service revenue from patients and third-party payors consists of the following:

December 31, 2022

December 31, 2021

December 31, 2020

% of Total Revenue

Year Ended December 31,

% of Total Revenue

1 unchanged sentence

% of Total Revenue

Total patient service

Nonpatient service

Total patient service revenue

Nonpatient service revenue

Among the commercial payors, the table below represents insurance companies that individually represented 10 % or more of revenue:

December 31, 2022

December 31, 2021

December 31, 2020

Top one payor

Top two payor

Top three payor

Year Ended December 31,

NOTE 4 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

December 31, 2022

December 31, 2021

Leasehold improvements

7 unchanged sentences

Depreciation expense consists of the following:

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

Depreciation expense

3 unchanged sentences

Some leases contain clauses for renewal at the Company's option with renewal terms that generally extend the lease term fro m 1 to 7 years.

The Company incurred $ 54,217 in operating lease costs related to its operating leases in its consolidated statements of operations and comprehensive loss for the year ended December 31, 2022 (Successor) .

The components of lease expense for the Company's operating leases in its consolidated statements of operations and comprehensive loss were as follows:

Year Ended December 31,

Operating lease costs

Variable lease costs and short-term lease costs were no t material.

The Company incurred $ 1,565 in related-party lease expense in its consolidated statements of operations and comprehensive loss for the year ended December 31, 2022 (Successor).

The Company has $ 5,058 in right-of-use assets, $ 1,324 in operating lease liabilities, current, and $ 3,902 in operating lease liabilities, noncurrent, with related parties as of December 31, 2022 (Successor).

The weighted-average remaining lease term and discount rate for operating lease liabilities included in the consolidated balance sheets are as follows:

December 31, 2022

Weighted-average remaining lease term (in years)

1 unchanged sentence

Supplemental cash flow information related to operating leases was as follows:

December 31, 2022

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

Right-of-use lease assets obtained in exchange for new operating lease liabilities

The future minimum lease payments under noncancellable operating leases as of December 31, 2022 (Successor) are as follows:

The future minimum lease payments under noncancellable operating leases as of December 31, 2023 are as follows:

Year Ended December 31,

2 unchanged sentences

Total lease liabilities

Related party lease transactions were not material as of and for the year ended December 31, 2023.

The Company incurred $ 1,565 in related-party lease expense in its consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

The Company had $ 5,058 in right-of-use assets, $ 1,324 in operating lease liabilities, current, and $ 3,902 in operating lease liabilities, noncurrent, with related parties as of December 31, 2022.

Real Estate Optimization and Restructuring Charges

In 2023, the Company announced a strategic re-focus, to prioritize resources and close certain centers as a direct result of changes to the Company's business model driven by a shift to more virtual visits initiated by the COVID-19 pandemic.

During the year ended December 31, 2023, the Company substantially completed a significant reduction in physical space and exited several underoccupied offices by both negotiating terminations of and abandoning certain real estate leases.

The Company accounts for real estate optimization restructuring charges in accordance with ASC 420, Exit or Disposal Cost Obligations and ASC 360-10, Property, Plant, and Equipment .

The costs are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2023, the Company recorded $ 10,970 of office space reductions, including primarily of $ 4,734 of right-of-use asset impairment, $ 4,618 of property and equipment disposal and impairment costs, and $ 2,419 of gains related to early lease terminations.

The portion of these amounts to be settled by cash disbursements was accounted for as an exit cost liability within other current liabilities and other noncurrent liabilities within the consolidated balance sheets and are not material as of December 31, 2023.

Leases - ASC 840

2 unchanged sentences

December 31, 2021

December 31, 2020

Related-party rent expense

1 unchanged sentence

Total lease cost

Under ASC 840, the future minimum lease payments under noncancellable operating leases as of December 31, 2021 (Successor) were as follows:

Year Ended December 31,

NOTE 6 GOODWILL AND INTANGIBLE ASSETS

The following table summarizes changes in the carrying amount of goodwill:

Balance as of December 31, 2020 (Successor)

Balance as of December 31, 2021

Business acquisitions (Note 7)

Measurement period adjustments

Balance as of December 31, 2021 (Successor)

Balance as of December 31, 2022

Business acquisitions (Note 7)

Measurement period adjustments

Balance as of December 31, 2022 (Successor)

Balance as of December 31, 2023

Intangible Assets

Intangible assets consist of the following:

December 31, 2022 (Successor)

December 31, 2023

Carrying Amount

5 unchanged sentences

Total intangible assets

December 31, 2021 (Successor)

December 31, 2022

Carrying Amount

7 unchanged sentences

Total intangible asset amortization expense consists of the following:

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

Amortization expense

The future amortization of intangible assets as of December 31, 2022 (Successor) is as follows:

The future amortization of intangible assets as of December 31, 2023 is as follows:

Year Ended December 31,

NOTE 7 BUSINESS COMBINATIONS

During the years ended December 31, 2022 and 2021 (Successor), the Company completed the acquisitions of 13 and 24 , outpatient mental health practices, respectively.

During the years ended December 31, 2023 and 2022, the Company completed the acquisitions of 3 and 13 , outpatient mental health practices, respectively.

The Company accounted for the acquisitions as business combinations using the acquisition method of accounting.

5 unchanged sentences

Contingent consideration, at initial fair value

Class A-2 common units

Total consideration transferred

The results of the acquired business have been included in the Company’s consolidated financial statements beginning after their acquisition date.

It is impracticable to provide historical supplemental pro forma financial information along with revenue and earnings subsequent to the acquisition date for acquisitions during the period due to a variety of factors, including access to historical information and the operations of acquirees were integrated within the Company shortly after closing and are not operating as a discrete entity within the Company’s organizational structure.

The results of the acquired business have been included in the Company’s consolidated financial statements beginning after their acquisition date.

Fair Values of Assets Acquired and Liabilities Assumed

5 unchanged sentences

Property and equipment

Right-of-use assets

Other noncurrent assets

22 unchanged sentences

All goodwill is deductible for tax purposes.

Acquisitions Subsequent to December 31, 2022

Subsequent to December 31, 2022, the Company completed acquisitions of several mental health practices.

The allocation of purchase price, including any fair value of contingent consideration, to the assets acquired and liabilities assumed as of the acquisition dates have not been completed.

For the acquisitions completed subsequent to December 31, 2022, total contractual consideration included cash consideration of $ 19,950 , funded through credit facility financing, and contingent consideration with a maximum value of $ 2,650 .

Management Fees

Management fees to TPG and certain executives of the Company were identified as related party transactions.

For the year ended December 31, 2021, the Company incurred related party management fees of $ 1,445 .

NOTE 8 PREPAID EXPENSES AND OTHER CURRENT ASSETS AND OTHER ACCRUED EXPENSES

Prepaid expenses and other current assets consist of the following:

December 31, 2022

December 31, 2021

Clinician advances

Prepaid fixed fee bonuses

Prepaid bonuses and advances

Other receivables

1 unchanged sentence

Other accrued expenses consist of the following:

December 31, 2022

December 31, 2021

Patient credits payable

7 unchanged sentences

This valuation incorporates certain assumptions and projections in determining the fair value assigned to such liability.

The following is a summary of the significant assumptions used for the fair value measurement of the contingent consideration liability as of December 31, 2022 and 2021 (Successor).

The following is a summary of the significant assumptions used for the fair value measurement of the contingent consideration liability as of December 31, 2023 and 2022.

Valuation Technique

Range of Significant Assumptions

December 31, 2022

December 31, 2021

Probability-weighted analysis

1 unchanged sentence

Discount rate

As of December 31, 2022 and 2021 (Successor), the Company adjusted the fair value of the contingent consideration liability due to remeasurement at the reporting date.

As of December 31, 2023 and 2022, the Company adjusted the fair value of the contingent consideration liability due to remeasurement at the reporting date.

The noncurrent portion of the contingent consideration liability is included within other noncurrent liabilities on the consolidated balance sheets.

1 unchanged sentence

The Company uses derivative financial instruments, including an interest rate swap, for hedging and non-trading purposes to manage its exposure to changes in interest rates.

The Company entered into a hedge transaction (interest rate swap) using a derivative financial instrument for the purpose of hedging the Company’s exposure to interest rate risks, which the contractual terms of the hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation.

The objective of entering into the interest rate swap is to eliminate the variability of cash flows in the Secured Overnight Financing Rate ("SOFR") interest payments associated with the variable-rate loan over the life of the loan.

2 unchanged sentences

The interest rate swap matures on September 30, 2025.

As of December 31, 2022 (Successor), the notional value was $ 188,528 .

As of December 31, 2023, the notional value was $ 186,638 .

As changes in interest rates impact the future cash flow of interest payments, the hedge provides a synthetic offset to interest rate movements.

2 unchanged sentences

Amounts recorded in accumulated other comprehensive income are released to earnings in the same period that the hedged transaction impacts consolidated earnings within interest expense.

The cash flows from the derivative treated as a cash flow hedge are classified in the Company’s consolidated statements of cash flows in the same category as the item being hedged.

For the year ended December 31, 2022 (Successor), the Company included an immaterial gain on the hedged item (that is, variable-rate borrowings) in the same line item - interest expense - as the offsetting gain on the related interest rate swap.

The following table summarizes the location of the interest rate swap in the consolidated balance sheets as of December 31, 2022 (Successor):

The cash flows from the derivative treated as a cash flow hedge are classified in the Company’s consolidated statements of cash flows in the same category as the item being hedged.

For the years ended December 31, 2023 and 2022, the Company included an immaterial gain on the hedged item (that is, variable-rate borrowings) in the same line item - interest expense - as the offsetting gain on the related interest rate swap.

The following table summarizes the location of the interest rate swap in the consolidated balance sheets:

Consolidated balance sheets location

December 31, 2022

Interest rate swap

2 unchanged sentences

Fair Value Measured on a Recurring Basis

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis:

December 31, 2022

December 31, 2021

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis:

Assets Measured at Fair Value

Money market funds

Interest rate swap asset

5 unchanged sentences

Payments of contingent consideration

Loss on remeasurement

(Gain) loss on remeasurement

Ending balance

3 unchanged sentences

The term loans and delayed draw term loans were payable in quarterly principal and interest payments through May 14, 2026 .

On May 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto.

The 2022 Credit Agreement established commitments in respect of a term loan facility of $ 200,000 , a revolving loan facility of up to $ 50,000 and a delayed draw term loan facility of up to $ 100,000 .

8 unchanged sentences

The 2022 Credit Agreement term loans are treated as a new issuance of debt.

In relation to the May 2020 Credit Agreement, the Company recognized an extinguishment of debt charge within interest expense of $ 3,380 , consisting of $ 1,609 prepayment charge and the write-off of unamortized debt issue costs associated with the extinguished term loans of $ 1,771 .

As part of the 2022 Credit Agreement restructuring, TPG provided arrangement and structuring services.

The Company incurred related party fees of $ 4,375 during the year ended December 31, 2022 (Successor) included within debt issue costs.

As part of the 2022 Credit Agreement refinancing, TPG provided arrangement and structuring services.

The Company incurred related party fees of $ 4,375 during the year ended December 31, 2022 included within debt issue costs.

The 2022 Credit Agreement requires the Company to maintain compliance with certain restrictive financial covenants related to earnings, leverage ratios, and other financial metrics.

The Company was in compliance with all debt covenants at December 31, 2022 and 2021 (Successor).

The Company was in compliance with all debt covenants at December 31, 2023 and 2022.

Long-term debt consists of the following:

December 31, 2022

December 31, 2021

Delayed Draw loans

Delayed Draw term loans

Total long-term debt

6 unchanged sentences

The current portion of long-term debt is included within other current liabilities on the consolidated balance sheets.

In October and December 2023, the Company drew $ 8,000 and $ 25,000 , respectively, from the aforementioned delayed draw term loan commitment.

Interest expense consists of the following:

December 31, 2022

December 31, 2021

December 31, 2020

Interest expense

Future principal payments on long-term debt as of December 31, 2022 (Successor) are as follows:

Year Ended December 31,

Interest expense, net

Future principal payments on long-term debt as of December 31, 2023 are as follows:

Year Ended December 31,

The fair value of long-term debt is based on the present value of future payments discounted by the market interest rate or the fixed rates based on current rates offered to the Company for debt with similar terms and maturities, which is a Level 2 fair value measurement.

Long-term debt is presented at carrying value on the consolidated balance sheets.

The fair value of long-term debt at December 31, 2022 and 2021 (Successor) was $ 235,049 and $ 186,497 , respectively.

The fair value of long-term debt at December 31, 2023 and 2022 was $ 304,955 and $ 235,049 , respectively.

Revolving Loan

4 unchanged sentences

The unused revolving loan incurs a commitment fee of 0.50 % per annum.

There are no amounts outstanding on the revolving loan as of December 31, 2022 and 2021 (Successor) .

NOTE 12 REDEEMABLE CONVERTIBLE PREFERRED UNITS

On July 20, 2017, the Company executed the Amended and Restated Limited Liability Company Agreement which established the terms of the Series A-1 redeemable convertible preferred units (“Series A-1 Preferred Units”) and Series A redeemable convertible preferred units (“Series A Preferred Units”) (collectively, referred to as the “Preferred Units”), which were issued to various investors and employees of the Company.

In connection with the TPG Acquisition, the holders of LifeStance Health, LLC’s Preferred Units exchanged 100 % of their units for equity interest in LifeStance Holdings and the historic Preferred Unit holders contributed all of their interest in LifeStance Holdings to LifeStance TopCo, in exchange for LifeStance TopCo’s Class A Common Units and Class A-1 Common Units.

The Preferred Units

had a reverse stock split and were converted to Common Units of LifeStance TopCo.

The Preferred Units are classified as mezzanine equity on the consolidated balance sheets and remeasured to their redemption value at each reporting date.

The Series A Preferred Units’

redemption value is equal to its issuance price;

as such, no remeasurement adjustment amount was recorded for the period ended May 14, 2020.

The Series A-1 Preferred Units’

redemption value is equal to the greater of i) fair value at the redemption date, or ii) the sum of the issuance price plus any accumulated but unpaid dividends.

Changes in the carrying amount of the Series A-1 Preferred Units will be charged against retained earnings (or additional paid-in capital in the absence of retained earnings until exhausted, at which point any remainder would increase accumulated deficit).

The table below includes the number of authorized units and issued units, as well as the issuance price, liquidation preference and initial carrying amount of the Preferred Units immediately prior to the TPG Acquisition which occurred on May 14, 2020.

Issuance Price

Initial Carrying

The holders of Preferred Units shall be entitled to receive, out of funds legally available therefore, cumulative cash distributions at the annual rate of 8 % of the Series A-1 accrued value or the Series A accrued value (each accrued value equal to the issuance price plus any accumulated but unpaid dividends on the respective Preferred Units), as applicable (as the same may be adjusted from time to time), prior and in preference to any declaration or payment of any distribution to the holders of Class A, Class B and Class C units (collectively, the “Common Units”).

Distributions on the Preferred Units shall be payable when, as, and if declared by the Board, shall be cumulative and shall accrue daily from and after, but shall compound annually on each anniversary of, the date of original issuance of each Preferred Unit, whether or not earned or declared, and whether or not there are earnings or profits, surplus or other funds or assets of the Company legally available for the payment of distributions.

If any accrued distributions have not been paid in cash on or prior to any such annual distribution payment date, such accrued distribution shall be added to the accrued value of Series A-1 or Series A, as applicable.

In the event that the Board shall declare a distribution payable upon the then outstanding Common Units, the holders of Preferred Units shall be entitled, in addition to any cumulative distributions to which the Preferred Units may be entitled, to receive the amount of distributions per unit of Preferred Units that would be payable on the number of whole units of the Common Units into which each Preferred Unit held by each holder could be converted.

The Company will, upon each written request from the Series A holders between March 10, 2018 to March 10, 2020, redeem all or any portion of the Series A Preferred Units.

Each Series A Preferred Unit shall be redeemed at issuance price.

There were no requests for redemption through March 10, 2020.

An enterprise valuation approach was utilized to determine the value of the Series A-1 Preferred Units.

Assumptions utilized by the Company in determining the valuation included revenue multiple and lack of marketability discount.

The revenue multiple was based on the median enterprise value of transactions deemed to be most closely aligned with the Company’s business model.

A lack of marketability discount was applied to adjust the valuation for the unit holder’s limitation of immediate liquidity.

In the event of any liquidation event, after payment of all debts and liabilities of the Company, each holder of Preferred Units shall be entitled to be paid out of the assets of the Company available for distribution to its members before any payment shall be made to the holders of Common Units or any other class or series of units ranking on liquidation junior to the Preferred Units by an amount in cash (i) per Series A-1 Preferred Unit equal to the greater of (A) the sum of the Series A-1 Preferred Unit issuance price plus an accrued and unpaid dividends, or (B) such amount as would have been payable to the Class A Common Units into which such Series A-1 Preferred Unit would have converted had all Series A-1 Preferred Units and Series A Preferred Units been converted into Class A Common Units and Class B Common Units, and per Series A Preferred Unit equal to the greater of (A) issuance price plus an accrued and unpaid dividends, or (B) such amount as would have been payable to the Class B Common Units into which such Series A Preferred Unit would have converted had all Series A-1 Preferred Units and Series A Preferred Units been converted into Class A Common Units and Class B Common Units, as applicable.

Upon (i) the written consent of the Preferred Unit holders or (ii) the closing of a Qualified Public Offering, all Series A Preferred Units shall be converted into Class B Common Units, and Series A-1 Preferred Units shall be converted into Class A Common Units.

A “Qualified Public Offering”

shall mean an IPO, at a price of at least 350 % of the effective Series A-1 purchase price per unit (subject to appropriate adjustment for stock splits, stock distributions, combinations and other similar recapitalizations affecting such shares), in a firm commitment underwritten public offering pursuant to an effective registration statement, resulting in at least $ 50,000 of proceeds to the Company (net of the underwriting discounts or commissions and offering expenses) and after which the equity securities are listed on a National Exchange.

As discussed above, pursuant to the TPG Acquisition (see Note 3), the historic holders of Series A and Series A-1 Preferred Units exchanged all the units for equity interest in LifeStance Holdings, and subsequently exchanged equity interest for the successor’s Class A Units and Class A-1 Units.

See Note 13 for more details on the exchange.

Liquidation Preference

Upon the occurrence of a liquidation event the Preferred Unit holders are entitled to the greater of (a) the Preferred Units unpaid capital plus any unpaid 8 % preferential return or (b) the ratable distribution of proceeds on an as converted basis as follows:

Series A-1 Preferred Units, Series A-1 Preferred Units on an as-converted basis into Class A Common Units followed by Series A Preferred Units on an as-converted basis into Class B Common Units.

Any remaining assets available for distribution to its members are to be distributed ratably to the Class A and Class B Common unit holders and vested Common C unit holders.

Voting Rights

Each Series A-1 Preferred Unit shall be entitled to cast one (1) vote for each Class A Common Unit into which such Series A-1 Preferred Unit is then convertible (on an aggregate basis for each Holder of Series A-1 Preferred Units) on any matter requiring approval of such Units.

Class B Common Units, Class C Common Units and Series A Preferred Units have no voting rights.

NOTE 13 STOCKHOLDERS'/MEMBERS’

EQUITY (DEFICIT)

Common Stock - Post-IPO

As discussed in Note 1, upon completion of the Company’s IPO in June 2021, the Company sold 32,800 shares of common stock at an offering price of $ 18.00 per share.

In connection with the IPO, the Company increased its authorized shares from 1 to 800,000 shares of common stock, par value $ 0.01 per share.

Common Units - Pre-IPO

The former chief executive officer (“Former CEO”) had 35,000 redeemable Class A units prior to the completion of the IPO.

The Former CEO had the right, upon termination for any reason other than proper cause, to put his redeemable Class A units back to the partnership at fair value (“Put Right”).

The Former CEO (or permitted transferee) shall have this Put Right also upon death or disability.

As this was both outside of the Company’s control and probable to eventually occur, the redeemable Class A units subject to this Put Right were classified as mezzanine equity and carried at fair value (i.e., redemption price).

There was no change to the fair value between May 14, 2020 and December 31, 2020.

There was a change to the fair value during the period from January 1 to June 9, 2021 (Successor) of $ 36,750 resulting from a change in the probability assumption of an IPO.

On June 9, 2021, the redeemable Class A units were converted into 10,234 shares of the Company’s common stock.

Class A and Class A-1 Common Units had equal voting rights.

Class A-2, Class B and Class C Common Units were nonvoting units.

All Common Units had no par value.

Upon the closing of the TPG Acquisition, the Company initiated two share exchanges for all outstanding shares, including Class A and Class C Units, as well as Series A and Series A-1 Preferred Units.

Subsequent to the share exchanges, holders of the units received cash consideration for a portion of their units, and the remaining units were exchanged for Class A-1 and Class A-2 units of LifeStance TopCo based on a predetermined exchange ratio.

There were 345,978 Class A-1 units, inclusive of 35,000 redeemable units, and 35,845 Class A-2 units outstanding a result of the exchange of equity on May 14, 2020.

No Class A Units or Class C Units were outstanding after the TPG Acquisition as a result of the conversion.

Preferred Stock

In connection with the Company’s IPO, the Company authorized the issuance of 25,000 shares of its preferred stock, par value $ 0.01 per share.

There are no shares of preferred stock outstanding as of December 31, 2022 and 2021 (Successor) .

NOTE 14 STOCK AND UNIT-BASED COMPENSATION

In April 2023, the Company drew $ 25,000 from the aforementioned revolving loan and converted the outstanding balance on the revolving loan to a delayed draw term loan in May 2023.

There are no amounts outstanding on the revolving loan as of December 31, 2023 and 2022 .

NOTE 11 STOCK AND UNIT-BASED COMPENSATION AND STOCKHOLDERS'/MEMBERS’ EQUITY

2021 Equity Incentive Plan

Effective June 9, 2021, the Company’s Board of Directors (the "Board") and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc.

2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”).

Effective June 9, 2021, the Company’s Board of Directors (the "Board") and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc.

2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”).

All equity-based awards subsequent to June 9, 2021 will be granted under the 2021 Equity Incentive Plan.

The 2021 Equity Incentive Plan permits the grant of awards of restricted or unrestricted common stock, stock options, stock appreciation rights, restricted stock units, performance awards, and other stock-based awards to employees and directors of, and consultants and advisors to, the Company and its affiliates.

The maximum number of shares of the Company’s common stock that may be delivered in satisfaction of awards under the 2021 Equity Incentive Plan was initially reserved at 47,037 shares.

The share pool will automatically increase on January 1 of each year through and including 2031 by the lesser of (i) five percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the Board on or prior to such date for such year.

The 2021 Equity Incentive Plan permits the grant of awards of

restricted or unrestricted common stock, stock options, stock appreciation rights, restricted stock units, performance awards, and other stock-based awards to employees and directors of, and consultants and advisors to, the Company and its affiliates.

The maximum number of shares of the Company’s common stock that may be delivered in satisfaction of awards under the 2021 Equity Incentive Plan was initially reserved at 47,037 shares.

On January 1, 2023, the number of shares of common stock reserved and available for issuance under the 2021 Equity Incentive Plan increased by 18,798 shares.

Restricted Stock

The RSAs were issued as part of the Organizational Transactions (see Note 1).

The following is a summary of RSA transactions as of and for the years ended December 31, 2022 and 2021 (Successor):

The following is a summary of RSA transactions as of and for the years ended December 31, 2023 and 2022:

Unvested Shares

1 unchanged sentence

Grant Date Fair Value

Unvested, December 31, 2020 (Successor)

Unvested, December 31, 2021 (Successor)

Unvested, December 31, 2022 (Successor)

Unvested, December 31, 2021

Unvested, December 31, 2022

Unvested, December 31, 2023

Restricted Stock Units

The RSUs were granted in connection with the IPO and subsequent to the IPO.

RSUs are accounted for as equity using the fair value method, which requires measurement and recognition of compensation expense for all awards granted to employees, directors and consultants based upon the grant-date fair value.

The following is a summary of RSU transactions as of and for the years ended December 31, 2022 and 2021 (Successor):

The following is a summary of RSU transactions as of and for the years ended December 31, 2023 and 2022:

Unvested Shares

1 unchanged sentence

Grant Date Fair Value

Outstanding, December 31, 2020 (Successor)

Outstanding, December 31, 2021

Canceled and forfeited

Outstanding, December 31, 2021 (Successor)

Outstanding, December 31, 2022

Canceled and forfeited

Outstanding, December 31, 2022 (Successor)

Outstanding, December 31, 2023

Stock Options

The following is a summary of stock option activity as of and for the year ended December 31, 2022 (Successor):

The following is a summary of stock option activity as of and for the years ended December 31, 2023 and 2022:

Number of Options

4 unchanged sentences

Aggregate Intrinsic Value

Outstanding, December 31, 2021 (Successor)

Outstanding, December 31, 2021

Canceled and forfeited

Outstanding, December 31, 2022 (Successor)

Vested or expected to vest at December 31, 2022 (Successor)

The total grant-date fair value of stock options granted during the year ended December 31, 2022 (Successor) was $ 56,917 .

Outstanding, December 31, 2022

Canceled and forfeited

Outstanding, December 31, 2023

Exercisable at December 31, 2023

Vested or expected to vest at December 31, 2023

The total grant-date fair value of stock options granted during the year ended December 31, 2022 was $ 56,917 .

The Company estimated the fair value of stock option grants with time-based vesting conditions using a Black-Scholes option-pricing model with the following assumptions presented on a weighted-average basis:

21 unchanged sentences

The Company recognized stock and unit-based compensation expense related to RSAs, RSUs, stock options, and the Class B Profits Interests within general and administrative expenses in the consolidated statements of operations and comprehensive loss as follows:

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

Stock and unit-based compensation expense

As of December 31, 2022 (Successor), the Company had $ 165,827 in unrecognized compensation expense related to all non-vested awards (RSAs, RSUs and stock options) that will be recognized over the weighted-average remaining service period of 1.9 years.

As of December 31, 2023, the Company had $ 142,811 in unrecognized compensation expense related to all non-vested awards (RSAs, RSUs and stock options) that will be recognized over the weighted-average remaining service period of 1.9 years.

2021 Employee Stock Purchase Plan

Effective June 9, 2021, the Board and its stockholders as of that date adopted and approved the LifeStance Health Group, Inc.

2021 Employee Stock Purchase Plan (the “ESPP”).

The ESPP permits the grant to eligible employees of the Company and its participating subsidiaries of options to purchase shares of the Company’s common stock.

The aggregate number of shares of the Company common stock available for purchase pursuant to the exercise of options under the ESPP was 6,817 shares, plus an automatic annual increase, as of January 1 of each year beginning in 2022 and continuing through and including 2031, equal to the lesser of (i) one percent of the number of shares of the Company’s common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares determined by the Board on or prior to such date for such year, up to a maximum of 42,500 shares of the Company’s common stock in the aggregate.

2021 Employee Stock Purchase Plan (the “ESPP”).

The ESPP permits the grant to eligible employees of the Company and its participating subsidiaries of options to purchase shares of the Company’s common stock.

On January 1, 2023, the number of shares of common stock reserved and available for issuance under the ESPP increased by 3,760 shares.

The ESPP allows participants to purchase common stock through payroll deductions of up to 15 % of their eligible compensation.

The purchase price of the shares will be 85 % of the lower of the fair market value of the Company’s common stock on the grant date or the exercise date.

The ESPP will generally be implemented by a series of separate offerings referred to as “Option Periods”.

Unless otherwise determined by the administrator, the Option Periods will be successive periods of approximately six months commencing on the first business day in January and July of each year, anticipated to be on or around January 1 and July 1, and ending approximately six months later on the last business day in June or December, as applicable, of each year, anticipated to be on or around June 30 and December 31.

The last business day of each Option Period will be an “Exercise Date”.

The purchase price of the shares will be 85 % of the lower of the fair market value of the Company’s common stock on the grant date or the exercise date.

The ESPP will generally be implemented by a series of separate offerings referred to as “Option Periods”.

The last business day of each Option Period will be an “Exercise Date”.

The administrator may change the Exercise Date, the commencement date, the ending date and the duration of each Option Period, in each case, to the extent permitted by Section 423 of the Internal Revenue Code;

provided, however, that no option may be exercised after 27 months from its grant date.

As of December 31, 2022 and 2021 (Successor) , no shares of common stock have been purchased under the Company’s ESPP.

As of December 31, 2023 and 2022 , no shares of common stock have been purchased under the Company’s ESPP.

Initial Public Offering

On June 14, 2021, the Company completed its IPO in which it issued and sold 32,800 shares of common stock and affiliates of TPG, Silversmith, and Summit (collectively, the "Selling Shareholders") sold 7,200 shares of common stock at an offering price of $ 18.00 per share.

The Selling Shareholders granted the underwriters an option to purchase an additional 6,000 shares of common stock.

The underwriters exercised in full their option to purchase additional shares, and the sale of the option shares was completed on June 25, 2021.

The Company received net proceeds of $ 548,905 , after deducting underwriting discounts and commissions of $ 32,472 and deferred offering costs of $ 9,023 .

The Company did not receive any proceeds from the sale of shares by the Selling Stockholders, including the option shares.

Upon completion of the IPO, these deferred offering costs were reclassified from current assets to stockholders’ equity and recorded against the net proceeds from the offering.

Following the contribution of partnership interests, LifeStance TopCo became wholly-owned by LifeStance Health Group.

All 1,046,196 of LifeStance TopCo’s outstanding redeemable and common Class A units and 152,620 Class B units were contributed in exchange for 310,083 shares of common stock of LifeStance Health Group plus 30,766 shares of common stock issued as RSAs subject to vesting.

As a result of this contribution and exchange, the Company reclassified $ 71,648 of redeemable units and $ 1,008,688 of common units to additional paid-in capital and $ 3,408 to common stock.

In connection with the IPO, the Company increased its authorized shares from 1 to 800,000 shares of common stock, par value $ 0.01 per share and authorized the issuance of 25,000 shares of its preferred stock, par value $ 0.01 per share.

Common Units - Pre-IPO

The former chief executive officer (“Former CEO”) had 35,000 redeemable Class A units prior to the completion of the IPO.

The Former CEO had the right, upon termination for any reason other than proper cause, to put his redeemable Class A units back to the partnership at fair value (“Put Right”).

The Former CEO (or permitted transferee) shall have this Put Right also upon death or disability.

There was a change to the fair value during the period from January 1 to June 9, 2021 of $ 36,750 resulting from a change in the probability assumption of an IPO.

On June 9, 2021, the redeemable Class A units were converted into 10,234 shares of the Company’s common stock.

Class A and Class A-1 Common Units had equal voting rights.

Class A-2, Class B and Class C Common Units were nonvoting units.

All Common Units had no par value.

NOTE 12 INCOME TAXES

1 unchanged sentence

The benefit from income taxes is comprised of the following components:

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

Total current

2 unchanged sentences

The net deferred tax assets and liabilities consist of the following:

December 31, 2022

December 31, 2021

Deferred tax assets

1 unchanged sentence

Net operating losses

Stock and unit-based compensation

Stock-based compensation

Interest limitation

9 unchanged sentences

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before benefit from income taxes as follows:

December 31, 2022

December 31, 2021

December 31, 2020

Year Ended December 31,

Tax provision at U.S.

5 unchanged sentences

Other adjustments

Tax provision at U.S.

federal statutory rate

State income taxes, net of federal benefit

Transaction costs

Other adjustments

Differences between the statutory rate are primarily the result of permanent book/tax differences between non-deductible equity awards and state income taxes.

As of December 31, 2022 (Successor), the Company has $ 139,346 of federal net operating loss carryforwards and $ 44,350 of state net operating loss carryforwards.

As of December 31, 2021 (Successor) , the Company has $ 75,981 of federal net operating loss carryforwards and $ 21,260 of state net operating loss carryforwards.

Differences between the statutory rate are primarily the result of permanent book/tax differences between non-deductible equity awards, valuation allowance activity and state income taxes.

As of December 31, 2023, the Company has $ 191,668 of federal net operating loss carryforwards and $ 163,177 of state net operating loss carryforwards.

As of December 31, 2022 , the Company has $ 139,346 of federal net operating loss carryforwards and $ 44,350 of state net operating loss carryforwards.

$ 11,199 federal net operating loss carryforwards begin to expire in 2037, and the remaining federal net operating loss carryforwards have no expiration.

The state net operating loss carryforwards begin to expire in 2028.

Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits (under IRC Section 383), in any taxable year may be limited if it experiences an ownership change.

As of December 31, 2022 and 2021 (Successor), the Company has not completed a formal Section 382 study on the potential limitation of its tax attributes.

However, if an ownership shift had occurred, the Company believes that

existing net operating losses are not permanently limited as of December 31, 2022 and 2021 (Successor).

Any limitation may limit the Company’s future use of net operating losses.

As of December 31, 2023 and 2022, the Company has not completed a formal Section 382 study on the potential limitation of its tax attributes.

However, if an ownership shift had occurred, the Company believes that existing net operating losses are not permanently limited as of December 31, 2023 and 2022.

Any limitation may limit the Company’s future use of net operating losses.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.

As of December 31, 2022 (Successor), the Company had a valuation allowance of $ 1,424 against a portion of its charitable contribution carryforward for which realization cannot be considered more likely than not at this time.

The Company did not have a valuation allowance as of December 31, 2021 (Successor).

As of December 31, 2023 and 2022, the Company had a valuation allowance of $ 14,974 and $ 1,424 , respectively, against a portion of its charitable contribution carryforward and net operating loss carryforwards for which realization cannot be considered more likely than not at this time.

The valuation allowance increased by $ 13,549 and $ 1,424 for the years ended December 31, 2023 and 2022, respectively.

Uncertain Income Tax Positions

4 unchanged sentences

Earlier years may be examined to the extent that loss carryforwards are used in future periods.

There are no tax matters under discussion with taxing authorities that are expected to have a material effect on the Company’s consolidated financial statements.

As of December 31, 2022 and 2021 (Successor), the Company had accrued interest and penalties, net of federal income tax benefit, related to tax contingencies of $ 0 and $ 54 , respectively.

There are no tax matters under discussion with taxing authorities that are expected to have a material effect on the Company’s consolidated financial statements.

The Company had no amounts accrued for interest and penalties, net of federal income tax benefit, related to tax contingencies for the years ended December 31, 2023 and 2022 .

NOTE 13 COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Should the claims-made policy not be renewed or replaced with equivalent insurance, claims based on occurrences during its term, but reported subsequently, would be uninsured.

The Company is not aware of any unasserted claims, unreported incidents, or claims outstanding, which are expected to exceed malpractice insurance coverage limits as of December 31, 2022 and 2021 (Successor).

Health Care Industry

The health care industry is subject to numerous laws and regulations of federal, state, and local governments.

These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government health care program participation requirements, reimbursement for patient services, and Medicare fraud and abuse.

Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers.

Violation of these laws and regulations could result in expulsion from government health care programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed.

The Company is not aware of any unasserted claims, unreported incidents, or claims outstanding, which are expected to exceed malpractice insurance coverage limits as of December 31, 2023 and 2022.

Healthcare Industry

The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments.

These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government healthcare program participation requirements, reimbursement for patient services, and Medicare fraud and abuse.

Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers.

Violation of these laws and regulations could result in expulsion from government healthcare programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed.

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation.

As a result of investigations by governmental agencies, various health care companies have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in companies entering into significant settlement agreements.

As a result of investigations by governmental agencies, various healthcare companies have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in companies entering into significant settlement agreements.

Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs.

There can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Company.

In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.

6 unchanged sentences

These risks are covered by commercial insurance purchased from independent third parties.

There has been no significant reduction in insurance coverage from the previous year in any of the Company’s policies.

The Company may be involved from time-to-time in legal actions relating to the ownership and operations of its business.

In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

On August 10, 2022, a shareholder class action lawsuit captioned Nayani v.

LifeStance Health Group, Inc., et al.

was filed in the United States District Court for the Southern District of New York (the “Court”) against the Company and certain executives and board members (the “LifeStance Defendants”), as well as the underwriters of the Company’s initial public offering (the “IPO”) (collectively, “Defendants”).

The lawsuit alleges, in part, that the Defendants violated Section 11 of the Securities Act of 1933 (the

“Securities Act”) because the IPO registration statement purportedly contained inaccurate and misleading statements and/or failed to disclose certain facts concerning patient visits and clinician retention.

The lawsuit also asserts that the LifeStance Defendants violated Section 15 of the Securities Act because they are control persons of the Company.

The lawsuit seeks unspecified monetary damages and purports to represent all shareholders who purchased the Company’s common stock pursuant to the IPO registration statement.

22cv6833, was filed in the United States District Court for the Southern District of New York (the “Court”) against the Company and certain executives and board members (the “LifeStance Defendants”), as well as the underwriters of the Company’s initial public offering (the “IPO”) (collectively, “Defendants”).

The lawsuit alleges that the Defendants violated Section 11 of the Securities Act of 1933 (the “Securities Act”) because the IPO registration statement purportedly contained inaccurate and misleading statements and/or failed to disclose certain facts concerning the Company's clinician retention rate.

The lawsuit also asserts that certain of the LifeStance Defendants violated Section 15 of the Securities Act because they are control persons of the Company.

The parties to the Nayani action have agreed to settle that action, with the settlement contemplating a monetary payment of $ 50,000 .

The Court approved the settlement and entered a final judgment on January 30, 2024.

The Company expects the settlement and related legal costs to be approximately $ 50,000 net of insurance, of which the Company paid the settlement and substantially all of the related legal costs during the second half of 2023.

The settlement amount, net of insurance recovery, was recorded as general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

In the first half of 2023, two related hybrid collective/class action lawsuits, captioned Armand et al.

LifeStance Health Group, Inc.

and Jessica McAfee et al.

LifeStance Health Group, Inc.

, were filed against the Company, in the United States District Court for the Middle District of Florida on January 1, 2023 and the United States District Court for the District of Arizona on June 22, 2023, respectively, by a putative collective or class representing employees of the Company related to advance on compensation and alleged underpayments for time worked.

The lawsuit seeks unspecified monetary damages.

The process of resolving these matters is inherently uncertain and may develop over an extended period of time;

therefore, at this time, the ultimate resolution cannot be predicted.

The Company has not recorded any material accruals for loss contingencies and in management's opinion no material range of loss is estimable for this matter as of December 31, 2022 (Successor) .

The Company has not recorded any material accruals for loss contingencies and in management's opinion no material range of loss is estimable for this matter as of December 31, 2023.

On April 26, 2023, a class action litigation captioned Strong v.

LifeStance Health Group, Inc.

was filed in the United States District Court for the District of Arizona against the Company by a putative class representing users of the Company's website who allege various privacy-related claims premised on the Company's use of pixel technologies on its website.

The lawsuit seeks unspecified monetary damages.

The process of resolving these matters is inherently uncertain and may develop over an extended period of time;

therefore, at this time, the ultimate resolution cannot be predicted.

The Company has not recorded any material accruals for loss contingencies and in management's opinion no material range of loss is estimable for this matter as of December 31, 2023 .

NOTE 14 NET LOSS PER SHARE

Prior to the IPO, as discussed in Note 1, the partnership interests of LifeStance TopCo included Redeemable Class A, Class A common and Class B units.

Prior to the IPO, the partnership interests of LifeStance TopCo included Redeemable Class A, Class A common and Class B units.

The Class B Units were intended to be "profits interests" for U.S.

4 unchanged sentences

Vested Class B Profits Interests Units outstanding prior to the equity exchange were considered compensatory arrangements that were settled with shares of common stock at the time of the exchange and have been included as outstanding shares subsequent to that date.

The following table presents the calculation of basic and diluted net loss per share (“EPS”) for the Company’s common shares (on an as-converted basis):

December 31, 2022

December 31, 2021

December 31, 2020

Net loss available to common stockholders'/members'

The following table presents the calculation of basic and diluted net loss per share (“EPS”) for the Company’s common shares (on an as-converted basis):

Year Ended December 31,

Net loss available to common stockholders'

Weighted-average shares used to compute basic and

2 unchanged sentences

The Company has issued potentially dilutive instruments in the form of RSAs, RSUs and stock options.

The Company did not include any of these instruments in its calculation of diluted loss per share (on an as-converted basis) for the years ended December 31, 2022 and 2021 (Successor) and for the period from April 13, 2020 to December 31, 2020 (Successor) because to include them would be anti-dilutive due to the Company’s net loss during the period.

See Note 14 for the issued, vested and unvested RSAs, RSUs and stock options.

The Company did not include any of these instruments in its calculation of diluted loss per share (on an as-converted basis) for the years ended December 31, 2023, 2022 and 2021 because to include them would be anti-dilutive due to the Company’s net loss during the period.

See Note 11 for the

issued, vested and unvested RSAs, RSUs and stock options.

The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share:

December 31, 2022

As of December 31,

Stock options

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-K

Item 9A. Controls and Procedures