What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-02-27 compared with 2024-02-28 · 163 added, 266 removed, 919 unchanged (32% of the section changed)

28 unchanged sentences

As of December 31, 2024, our remediation measures are ongoing and include the following:

• 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;

• performing additional training to ensure a clear understanding of risk assessment, controls and monitoring activities related to financial processes and IT general controls related to financial reporting;

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

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• 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;

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 effectively designed and operational for a sufficient period of time, tested, and management concludes that these controls are operating effectively.

We believe the measures described above will remediate the control deficiencies for the specific areas we have identified and strengthen our internal control over financial reporting.

We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures.

As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify, or in appropriate circumstances not complete, certain of the remediation measures described above.

These material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, 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.

Our ability to maintain qualified and adequate resources to support our business and our projected growth will be a critical component of our internal control environment.

Actions Taken During 2024

The following remediation efforts were completed during the year ended December 31, 2024:

• We have added a Manager of Stock Administration to our human resources function to oversee our equity awards and stock-based compensation;

• We have designed and implemented new stock administration controls and enhanced existing stock administration controls to specifically address the accuracy and completeness of awards granted to certain employees or other service providers;

• We have enhanced controls related to cash management to achieve complete, accurate and timely financial accounting, reporting and disclosures;

• We have designed and implemented new controls for related party transactions and enhanced controls to achieve complete, accurate and timely identification of related party transactions, reporting and disclosures;

• We have designed and implemented new controls for lease accounting and enhanced controls to achieve complete, accurate and timely financial accounting, reporting and disclosures;

• We have enhanced controls related to the impairment and amortization of intangible assets and goodwill to achieve complete, accurate and timely financial accounting, reporting and disclosures;

• We have enhanced financial statement close and reporting controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures including controls over account reconciliations and review of journal entries.

Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the changes to our internal control over financial reporting described in "Actions Taken During 2024" above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Disclosure Controls and Procedures

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.

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.

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.

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).

During our fiscal quarter ended December 31, 2024, 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.

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Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

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Stockholders Agreement, dated as of June 9, 2021, by and among the Company and each of the other persons from time to time party thereto

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.

20 unchanged sentences

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

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

Separation and Release of Claims Agreement, dated as of June 30, 2024, between LifeStance Health Group, Inc.

and Danish Qureshi

Credit Agreement, dated as of December 19, 2024, among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., and Capital One, National Association

LifeStance Health Group, Inc.

Insider Trading Policy

List of subsidiaries of LifeStance Health Group, Inc.

41 unchanged sentences

Jeffrey Crisan

/s/ Teresa DeLuca

February 27, 2025

Teresa DeLuca

/s/ William Miller

15 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

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

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”).

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 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.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2024, 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 related to the Company not (i) designing and maintaining 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) maintaining formal accounting policies and procedures, and not designing and maintaining 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) designing and maintaining 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.

1 unchanged sentence

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 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 Opinions

13 unchanged sentences

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;

39 unchanged sentences

Other accrued expenses

Current portion of contingent consideration

Contingent consideration

Operating lease liabilities, current

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OTHER EXPENSE

Gain (loss) on remeasurement of contingent consideration

Gain (loss) on remeasurement of contingent

consideration

Transaction costs

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INCOME TAX BENEFIT

Accretion of Redeemable Class A units

NET LOSS AVAILABLE TO COMMON

STOCKHOLDERS/MEMBERS

NET LOSS PER SHARE, BASIC AND DILUTED

Weighted-average shares used to compute basic and diluted

net loss per share

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

Unrealized (losses) gains on cash flow hedge, net

COMPREHENSIVE LOSS

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Balances at December 31, 2021

Adoption of ASU 2016-13

Issuance of common stock upon

vesting of restricted stock units

Other comprehensive loss

Surrender of common stock

Other comprehensive income

Stock-based compensation expense

Balances at December 31, 2022

Accumulated Other Comprehensive

Total Stockholders'

Balances at December 31, 2021

Adoption of ASU 2016-13

Issuance of common stock upon

vesting of restricted stock units

Surrender of common stock

Other comprehensive income

Other comprehensive loss

Stock-based compensation expense

Balances at December 31, 2023

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

LIFESTANCE HEALTH GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE UNITS AND STOCKHOLDERS'/MEMBERS’ EQUITY

(In thousands)

Class A Redeemable Units

Class A-1 Common Units

Class A-2 Common Units

Class B Common Units

Total Stockholders'/

Balances at December 31, 2020

Issuance of common units

Accretion of Redeemable

Class A Units

Issuance of common units for

acquisitions of businesses

Vesting of Class B Profits

Conversion of Redeemable

Class A Units into common

stock upon closing of initial

public offering

Conversion of common units

into common stock upon

closing of initial public

Conversion of vested Class B

Profits Interests to common

stock upon closing of initial

public offering

Conversion of unvested Class

B Profits Interests to restricted

stock upon closing of initial

public offering

Issuance of common stock

upon closing of initial public

offering, net

Endowment of shares to the

LifeStance Health

Issuance of common stock upon

vesting of restricted stock

Stock and unit-based

compensation expense

vesting of restricted stock units

Other comprehensive loss

Stock-based compensation expense

Balances at December 31, 2024

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CASH FLOWS FROM OPERATING ACTIVITIES

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

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

Depreciation and amortization

Non-cash operating lease costs

Stock and unit-based compensation

Stock-based compensation

Deferred income taxes

2 unchanged sentences

(Gain) loss on remeasurement of contingent consideration

Endowment of shares to LifeStance Health Foundation

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

5 unchanged sentences

Other accrued expenses

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

3 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from initial public offering, net of underwriters

discounts and commissions and deferred offering costs

Issuance of common units to new investors

Proceeds from long-term debt, net of discount

4 unchanged sentences

Taxes related to net share settlement of equity awards

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

Net cash (used in) provided by financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents - Beginning of period

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Surrender of common stock

Issuance of common units for acquisitions of businesses

Taxes related to net share settlement of equity awards included in

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

1 unchanged sentence

NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS

(In thousands, except per share/unit amounts)

(In thousands, except per share amounts)

NOTE 1 NATURE OF THE BUSINESS

Description of Business

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.

2 unchanged sentences

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 and the financial statements for the periods prior to the IPO have been adjusted to combine the previously separate entities for presentation purposes.

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” 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.

LifeStance Health Group, Inc.

("LifeStance Health Group") operates as a provider of outpatient mental health services, spanning psychiatric evaluations and treatment, psychological and neuropsychological testing, and individual, family and group therapy.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Changes in estimates are made when circumstances warrant.

Significant estimates and assumptions by management may affect total revenue impacted by variable consideration and discounts, price concessions, allowance for credit losses, the carrying value of long-lived assets (including goodwill and intangible assets), acquisition accounting, the calculation of a contingent liability in connection with an acquisition, the provision for income taxes and related deferred tax accounts, certain accrued liabilities, payor settlements, contingencies, litigation and related legal accruals and the value attributed to employee stock and unit-based awards.

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.

The Company has a single operating and reportable segment – mental health services.

The Company’s chief operating decision maker is its Chief Executive Officer, who reviews consolidated financial information for purposes of making operating decisions, assessing financial performance, and allocating resources.

As the Company operates as one operating segment, all required segment financial information is found in the accompanying consolidated financial statements.

For the periods presented, all of the Company’s long-lived assets were located in the United States, and all revenues from providing counseling sessions to patients were earned in the United States.

The accounting policies for segment reporting are the same as for the Company as a whole.

The chief operating decision maker assesses performance for the mental health services segment and decides how to allocate resources based on net loss, which is reported on the accompanying consolidated statements of operations and comprehensive loss as net loss.

Net loss is used to monitor budget versus actual results for assessment of segment performance.

The chief operating decision maker considers budget-to-actual variances on a monthly basis when making decisions about allocating resources and assessing the performance of the segment.

The chief operating decision maker utilizes consolidated expense information regularly provided in the budget-to-actual analysis in order to assist with assessing performance and deciding how to allocate resources, which align with the consolidated expense categories as disclosed on the face of the accompanying consolidated statements of operations and comprehensive loss.

The measure of segment assets is reported on the accompanying consolidated balance sheets as total assets.

The chief operating decision maker does not utilize total assets in the assessment of performance and allocation of resource decisions as the assessment and decisions are not made on the basis of total assets.

Variable Interest Entities

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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.

The Company’s agreements with FPEs generally consist of both a Management Service Agreement, which provides 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 interests 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 agreements.

The Company has the right to receive income as an ongoing management fee, which effectively absorbs all of the residual interests and has also provided financial support through loans to the FPEs.

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.

In addition, the STR agreements provide that the Company has the right to designate an appropriately licensed 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 the equity holder having insufficient capital at risk, and the Company has a variable interest in the FPEs.

The contractual arrangements described above allow the Company to direct the activities that most significantly affect the economic performance of the FPEs.

13 unchanged sentences

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.

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

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.

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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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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.

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

Cash and Cash Equivalents

25 unchanged sentences

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.

25 unchanged sentences

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.

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.

The measurement period provides a reasonable period of time to determine the value of identifiable assets acquired, liabilities assumed, consideration transferred, equity interests, and goodwill.

8 unchanged sentences

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

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 .

There was no impairment of long-lived assets for the year ended December 31, 2024, an immaterial impairment of long-lived assets for the year ended December 31, 2023 , and no impairment of long-lived assets for the year ended December 31, 2022 .

Intangible Assets

24 unchanged sentences

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.

The Company records the acquisition date fair value of these contingent liabilities and measures the fair value on a recurring basis.

The Company records the acquisition date

fair value of these contingent liabilities and measures the fair value on a recurring basis.

The Company estimates the fair value of the contingent consideration liability based on the likelihood and timing of the contingent earn-out payments.

1 unchanged sentence

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

Stock and Unit-Based Compensation

Stock-Based Compensation

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 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.

5 unchanged sentences

At the end of each reporting period, the Company reevaluates the probability that the performance conditions will be achieved.

The service-based awards are recognized on a straight line basis over the requisite service period, which is generally two to four years.

The service-based awards are recognized on a straight line basis over the requisite service period, which is generally one to four years.

The market-based vesting conditions for awards granted in connection with the Company's IPO provided for the holder to vest one-third of their awards within six months of the IPO, one-third of their awards on the first anniversary of the IPO, one-sixth of their awards eighteen months from the completion of the IPO and the remaining one-sixth of their awards two years from the completion of the IPO.

36 unchanged sentences

Diluted net loss per share is computed by giving effect to all potential shares of common shares, including potential dilutive common shares assuming the dilutive effect of common share equivalents, to the extent dilutive.

Basic and diluted net loss per unit was the same for each period presented as the inclusion of all potential shares of common shares outstanding would have been anti-dilutive.

Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common shares outstanding would have been anti-dilutive.

Retirement Plan

17 unchanged sentences

The Company does not have any individual customer that exceeded 10% of the Company’s patient accounts receivable balance at December 31, 2024 and 2023.

Two payors individually exceeded 10% of the

Company’s patients 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, 2024 and 2023.

These payors comprise 19 % and 15 % of the patient accounts receivable balance, respectively, as of December 31, 2024, and 17 % and 15 % , respectively, as of December 31, 2023 .

Recently Adopted Accounting Pronouncements

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.

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):

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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.

The Company adopted ASU 2023-07 on January 1, 2024 on a retrospective basis for all periods presented.

The adoption of the amendments in ASU 2023-07 impacted the Company's disclosures in the notes to the consolidated financial statements and did not have a material impact on its consolidated balance sheets, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

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

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

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses ("ASU 2024-03").

ASU 2024-03 requires disclosure of additional information about specific expense categories in the notes to the financial statements.

ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those fiscal years.

Early adoption is permitted and should be applied either prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all periods presented in the financial statements.

The Company is in the process of evaluating the impact of the adoption of ASU 2024-03 on the Company's consolidated financial statements and disclosures.

NOTE 3 TOTAL REVENUE

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% of Total Revenue

Total patient service revenue

Nonpatient service revenue

Total patient service

Nonpatient service

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

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NOTE 4 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

Property and equipment, net consists of the following:

Leasehold improvements

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NOTE 5 LEASES

Leases - ASC 842

The Company leases its office facilities and office equipment which are accounted for as operating leases.

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.

Some leases contain clauses for renewal at the Company's option with renewal terms that generally extend the lease term from one to seven years.

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

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Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities

Cash paid for amounts included in the measurement of

lease liabilities

Operating cash flows from operating leases

Noncash lease activity

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

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, 2024 are as follows:

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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

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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

Prior to the adoption of ASC 842 as of January 1, 2022, the Company accounted for its operating lease arrangements under ASC 840 with no right-of-use assets or lease liabilities being reflected on the consolidated balance sheets.

Total rent expense amounted to as follows in the consolidated statements of operations and comprehensive loss:

December 31, 2021

Related-party rent expense

Third-party rent expense

Total lease cost

NOTE 6 GOODWILL AND INTANGIBLE ASSETS

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Balance as of December 31, 2023

Business acquisitions (Note 7)

Measurement period adjustments

Business acquisitions

Balance as of December 31, 2024

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NOTE 7 BUSINESS COMBINATIONS

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

During the year ended December 31, 2023, the Company completed the acquisitions of 3 outpatient mental health practices.

There were no completed acquisitions during the year ended December 31, 2024.

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

The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the respective acquisition dates.

Total consideration transferred for these acquisitions consisted of the following:

Year Ended December 31,

December 31, 2023

Cash consideration

Cash consideration to be paid

Contingent consideration, at initial fair value

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 businesses have been included in the Company’s consolidated financial statements beginning as of their acquisition dates.

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

Fair Values of Assets Acquired and Liabilities Assumed

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

Year Ended December 31,

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

Allocation of Purchase Price

December 31, 2023

Patient accounts receivable

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The following table summarizes the fair values of acquired intangible assets as of the dates of acquisition:

Year Ended December 31,

December 31, 2023

Regional trade names (1)

Non-competition agreements (2)

(1) Useful lives for trade names are 5 years .

(2) Useful lives for non-competition agreements are 3 to 5 years .

(1) Useful lives for regional trade names are 5 years .

(2) Useful lives for non-competition agreements are 5 years .

Contingent Consideration

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The following table summarizes the maximum contingent consideration based on the acquisition agreements:

Year Ended December 31,

Contingent consideration

December 31, 2023

Maximum contingent consideration based on acquisition agreements

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All goodwill is deductible for tax purposes.

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 .

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 post-IPO.

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

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Patient credits payable

Accrual for goods received, not invoiced

Accrual for goods/services received, not invoiced

Accrued professional fees

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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, 2023 and 2022.

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.

Valuation Technique

Range of Significant Assumptions

December 31, 2023

Probability-weighted analysis

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Discount rate

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.

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

Hedging Activities

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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.

For the years ended December 31, 2024, 2023 and 2022, the Company included immaterial gains on the hedged instrument (variable-rate borrowings) in the same line item (interest expense, net) as the offsetting gain on the related interest rate swap in the consolidated statements of operations and comprehensive loss.

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

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Interest rate swap

Prepaid expenses and other current assets

Interest rate swap

Other noncurrent assets

The amount of estimated cash flow hedge unrealized gains and losses that are expected to be reclassified into earnings in the next twelve months is not material.

The amount of estimated cash flow hedge unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not material.

Fair Value Measured on a Recurring Basis

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Payments of contingent consideration

(Gain) loss on remeasurement

Gain on remeasurement

Ending balance

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NOTE 10 LONG-TERM DEBT

On May 14, 2020, in connection with the TPG Acquisition, the Company entered into the Credit Agreement among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto (the "May 2020 Credit Agreement").

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

The term loans and delayed draw term loans were payable in quarterly principal and interest payments through May 16, 2028 .

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 .

The commitments under the term loan facility and the revolving facility were available to be drawn on May 16, 2022.

The Company borrowed $ 200,000 in term loans on that date, with a maturity date of May 16, 2028 .

The remaining commitments under the delayed draw term loan facility are scheduled to terminate on the second anniversary of May 16, 2022.

Once drawn upon, the delayed draw term loan facility has a maturity date of May 16, 2028.

The loans under the term loan facility and the delayed draw term loan facility bear interest at a rate per annum equal to (x) adjusted term Secured Overnight Financing Rate ("SOFR") (which adjusted term SOFR is subject to a minimum of 0.75 %) plus an applicable margin of 4.50 % or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50 % above the federal funds effective rate and (iii) one-month adjusted term SOFR (which adjusted term SOFR is subject to a minimum of 0.75 %) plus 1.00 %) plus an applicable margin of 3.50 %.

On December 19, 2024, the Company entered into a credit agreement (the “2024 Credit Agreement”) among LifeStance Health Holdings, Inc., Lynnwood Intermediate Holdings, Inc., Capital One, National Association, and each lender party thereto.

The 2024 Credit Agreement established commitments in respect of a senior secured term loan facility of $ 290,000 and a senior secured revolving loan facility of up to $ 100,000 .

The Company borrowed $ 290,000 in term loans, payable in quarterly principal and interest payments, with a maturity date of December 19, 2029 .

The loans under the term loan facility bear interest at a rate per annum equal to (x) term SOFR (which term SOFR is subject to a minimum of 0.00 %) plus an applicable margin of 3.00 % subject to stepdowns based on leverage-based metrics or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50 % above the federal funds effective rate and (iii) one-month term SOFR (which term SOFR is subject to a minimum of 0.00 %) plus 1.00 %) plus an applicable margin of 2.00 % subject to stepdowns based on leverage-based metrics.

The term loans are collateralized by substantially all of the assets of the Company.

The revolving loan has interest only payments until the maturity date of May 16, 2027 .

The proceeds from the 2022 Credit Agreement term loans were used to repay in full and extinguish the May 2020 Credit Agreement.

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 during the year ended December 31, 2022.

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 revolving loan has interest only payments until the maturity date of December 19, 2029 .

The proceeds from the 2024 Credit Agreement term loans were used to repay in full and extinguish the 2022 Credit Agreement.

In relation to the 2022 Credit Agreement, the Company recognized an extinguishment of debt charge within interest expense of $ 5,032 consisting of the write-off of unamortized debt issue costs associated with the extinguished term loans.

The 2024 Credit Agreement requires the Company to maintain compliance with certain restrictive financial covenants related to earnings, leverage ratios, and other financial metrics.

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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:

Interest expense, net consists of the following:

Year Ended December 31,

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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.

The fair value of long-term debt is based on the present value of future payments discounted by the market interest rates 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.

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Revolving Loan

Under the May 2020 Credit Agreement, the Company had a revolving loan from Capital One in the amount of $ 20,000 .

Under the 2022 Credit Agreement, the Company has a revolving loan commitment from Capital One in the amount of $ 50,000 .

Any borrowing on the revolving loan under the 2022 Credit Agreement is due in full on May 16, 2027 .

The revolving loan bears interest at a rate per annum equal to (x) adjusted term SOFR plus an applicable margin of 3.25 % or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50 % above the federal funds effective rate and (iii) one-month adjusted term SOFR plus 1.00 %) plus an applicable margin of 2.25 %.

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

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.

Under the 2022 Credit Agreement, the Company had a revolving loan commitment from Capital One in the amount of $ 50,000 .

Under the 2024 Credit Agreement, the Company has a revolving loan commitment in the amount of $ 100,000 .

Any borrowing on the revolving loan under the 2024 Credit Agreement is due in full on December 19, 2029 .

The revolving loan bears interest at a rate per annum equal to (x) term SOFR (which term SOFR is subject to a minimum of 0.00 %) plus an applicable margin of 3.00 % subject to stepdowns based on leverage-based metrics or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.50 % above the federal funds effective rate and (iii) one-month term SOFR (which term SOFR is subject to a minimum of 0.00 %) plus 1.00 %) plus an applicable margin of 2.00 % subject to stepdowns based on leverage-based metrics.

The unused revolving loan incurs a quarterly undrawn commitment fee of 0.45 % per annum subject to stepdowns based on leverage-based metrics.

There are no amounts outstanding on the revolving loan as of December 31, 2024 and 2023 .

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

NOTE 11 STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

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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 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.

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The expected service period of the time- and market-based vesting condition options is based on projected exercise dates resulting from the Monte Carlo simulation for each award tranche.

Stock and Unit-Based Compensation Expense

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:

Stock-Based Compensation Expense

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

Year Ended December 31,

Stock and unit-based compensation expense

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.

Stock-based compensation expense

As of December 31, 2024, the Company had $ 111,957 in unrecognized compensation expense related to all non-vested RSUs and stock options that will be recognized over the weighted-average remaining service period of 1.2 years.

2021 Employee Stock Purchase Plan

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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

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

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As of December 31, 2024 and 2023 , 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.

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.

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 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 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 .

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.

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 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

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Charitable contributions

Operating lease liability

Operating lease liabilities

Gross deferred tax assets

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Deferred tax liabilities

Property and equipment

Intangible assets

Right-of-use assets

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State income taxes, net of federal benefit

Stock and unit-based compensation

Stock-based compensation

IRC Section 162M limitation

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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, 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 completed an analysis of Section 382 ownership changes in its stock through April 12, 2024 and concluded that the Company has experienced ownership changes that will result in limitations in its ability to use certain of its net operating loss carryforwards.

The Company may experience ownership changes in the future as a result of future transactions in its stock.

If it is determined that the Company undergoes one or more ownership changes in the future, then the Company’s ability to utilize its federal and state net operating loss carryforwards or other tax attributes may be limited or eliminated.

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.

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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 .

The Company had no amounts accrued for interest and penalties related to tax contingencies for the years ended December 31, 2024 and 2023 .

NOTE 13 COMMITMENTS AND CONTINGENCIES

Professional Liability Insurance

The medical malpractice insurance coverage is subject to a $ 3,000 per claim limit and an annual aggregate limit of $ 8,000 per clinician.

The Company's medical malpractice insurance coverage is subject to a $ 3,000 per claim limit and an annual aggregate shared limit of $ 8,000 .

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, 2023 and 2022.

The Company is not aware of any unasserted claims, unreported incidents, or claims outstanding that are expected to exceed malpractice insurance coverage limits as of December 31, 2024 and 2023.

Healthcare Industry

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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.

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, 2023.

Liabilities related to loss contingencies are recognized when the Company believes it is probable a liability has occurred and the amount can be reasonably estimated by management.

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

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NOTE 14 NET LOSS PER SHARE

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.

federal income tax purposes.

Prior to the IPO, each of the holders of partnership interests in LifeStance TopCo contributed its partnership interest 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, with no changes in relative equity holder rights, rank or value before or after this exchange.

As a result, the LifeStance TopCo equity exchange of common units was considered equivalent to a stock split and requires retrospective treatment for net loss per share purposes.

All share and per share information has been retroactively adjusted to reflect the equity exchange for all periods presented.

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):

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

Year Ended December 31,

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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, 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:

The Company did not include any of these instruments in its calculation of diluted loss per share for the years ended December 31, 2024, 2023 and 2022 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 each period end, from the computation of diluted net loss per share:

As of December 31,

1 unchanged sentence

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