What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-01 compared with 2022-03-25 · 313 added, 267 removed, 825 unchanged (41% of the section changed)

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Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of December 31, 2021.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.

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.

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022.

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 evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which can be found under Part IV of this Annual Report on Form 10-K.

Changes to our Internal Controls over Financial Reporting

There were no changes made to the Company’s internal control over financial reporting during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control

There were no changes made to the Company’s internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitation on the Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.

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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 its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Moreover, projections of any

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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.

We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

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Moreover, 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.

We intend to continue to monitor and

upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

OTHER INFORMATION

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The information required by this item will be set forth in the Proxy Statement and is incorporated into this Annual Report on Form 10-K by reference.

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Exhibits, Financial Statement Schedules.

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The exhibits listed in the following “Exhibit Index” are filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K

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Number Description Form Exhibit File No.

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S-1 3.1 333-255086 04/07/2021

3.2+ Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 (File No.

333-255086), filed with the SEC on April 7, 2021)

S-1 3.2 333-255086 04/07/2021

3.2+ Second Amended and Restated Bylaws of Privia Health Group, Inc., adopted and in effect as November 9, 2022

8-K 5.03 221-377709 11/10/2022

4.1+ Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-1 (File No.

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4.2+ Description of Capital Stock

10-K 4.2 227-68304 03/25/2022

2021 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Registration Statement on Form S-1 (File No.

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S-1 10.2 333-255086 04/07/2021

Employment Agreement first amendment between Privia Health Group, Inc.

and Shawn Morris, dated April 23, 2019

10-Q 10.1 221-155713 08/11/2022

Employment Agreement second amendment between Privia Health Group, Inc.

and Shawn Morris, dated April 1, 2020

10-Q 10.2 221-155713 08/11/2022

Employment Agreement third amendment between Privia Health Group, Inc.

and Shawn Morris, dated August 10, 2022

10-Q 10.3 221-155713 08/11/2022

Employment Agreement between Privia Health Group, Inc.

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S-1 10.3 333-255086 04/07/2021

Employment Agreement first amendment between Privia Health Group, Inc.

and Parth Mehrotra, dated April 1, 2020

10-Q 10.4 221-155713 08/11/2022

Annual Merit Increase and Bonus Payment Memo for Parth Mehrotra dated March 12, 2021

10-K 10.4 227-68304 03/25/2022

Employment Agreement second amendment between Privia Health Group, Inc.

and Parth Mehrotra, dated April 16, 2021

10-Q 10.5 221-155713 08/11/2022

Employment Agreement third amendment between Privia Health Group, Inc.

and Parth Mehrotra, dated August 10, 2022

10-Q 10.6 221-155713 08/11/2022

Employment Agreement between Privia Health Group, Inc.

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S-1 10.4+ 333-255086 04/07/2021

Employment Agreement, between Privia Health Group, Inc.

and David Mountcastle dated as of March 21, 2022.

8-K 10.2 001-40365 03/22/2022

Employment Agreement first amendment between Privia Health Group, Inc.

and David Mountcastle, dated August 10, 2022

10-Q 10.7 221-155713 08/11/2022

Employment Agreement first amendment between Privia Health Group, Inc.

and Thomas Bartrum, dated April 1, 2020

10-K 10.6 227-68304 03/25/2022

Employment Agreement second amendment between Privia Health Group, Inc.

and Thomas Bartrum, dated April 16, 2021

10-K 10.7 227-68304 03/25/2022

Employment Agreement third amendment between Privia Health Group, Inc.

and Thomas Bartrum, dated March 24, 2022

10-K 10.8 227-68304 03/25/2022

Employment Agreement fourth amendment between Privia Health Group, Inc.

and Thomas Bartrum, dated August 10, 2022

10-Q 10.8 221-155713 08/11/2022

Employment Agreement, between Privia Health Group, Inc.

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8-K 10.1 001-40365 03/22/2022

Employment Agreement, between Privia Health Group, Inc.

and David Mountcastle dated as of March 21, 2022.

8-K 10.2 001-40365 03/22/2022

10.19+ Form of Shareholder Rights Agreement between Privia Health Group, Inc.

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S-1 10.1 333-255086 04/22/2021

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Amendment No.

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Notice of Modification of Option Agreement

10-K 10.23 227-68304 03/25/2022

21.1 Subsidiaries of the registrant

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+ Previously filed

* The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

* The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

** The financial information contained in these XBRL documents is unaudited.

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FORM 10-K SUMMARY

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Chief Executive Officer

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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

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Jeff Bernstein

/s/ Jeff Butler Director March 25, 2022

/s/ Nancy Cocozza Director March 1, 2023

Nancy Cocozza

/s/ David King Director March 1, 2023

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/s/ Jaewon Ryu Director March 1, 2023

Jaewon Ryu, M.D.

/s/ William M.

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Will Sherrill

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Financial Statements Schedule II—Valuation and Qualifying Accounts

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Report of Independent Registered Public Accounting Firm

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

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 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.

We also have audited the Company's internal control over financial reporting as of December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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 Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

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.

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.

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.

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.

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.

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 matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Fee for Service Patient Care Accounts Receivable

As described in Notes 1 and 2 to the consolidated financial statements, substantially all of the Company’s accounts receivable relate to providing healthcare services to patients whose costs are primarily paid by federal and state governmental authorities or commercial insurance companies.

The fee for service patient care (FFS patient care) receivable makes up a significant portion of the Company’s consolidated net account receivable balance of $189.6 million as of December 31, 2022.

FFS patient care revenue is primarily generated from third-party payers with which management has established contractual billing arrangements and is reported net of provisions for contractual allowances from third-party payers and patients.

Management reports accounts receivable at an amount equal to the consideration the Company expects to receive in exchange for providing healthcare services to patients, which is estimated using historical reimbursement rates and an analysis of past experience to estimate potential adjustments.

The principal considerations for our determination that performing procedures relating to the valuation of FFS patient care accounts receivable is a critical audit matter are (i) the significant judgment by management in developing the estimated value of FFS patient care accounts receivable and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to adjustments based on historical reimbursement rates and analysis of past experience.

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 testing the effectiveness of controls relating to the valuation of FFS patient care accounts receivable, including controls over management’s valuation method, assumptions and data used to develop the estimated value of FFS patient care accounts receivable.

These procedures included, among others, (i) evaluating management’s process for developing the estimated value of FFS patient care accounts receivable, (ii) evaluating the appropriateness of management’s historical reimbursement rates and analysis of past experience to estimate potential adjustments, (iii) testing the completeness and accuracy of the underlying billing and reimbursement data used by management to estimate potential adjustments, and (iv) evaluating the historical accuracy of management’s process for developing the estimate of the value FFS patient care accounts receivable by (a) testing, on a sample basis, the accuracy of revenue transactions and cash collections from the historical billing and reimbursement data used in management’s analysis and (b) comparing actual cash collections to the previously recorded FFS patient care accounts receivable balance as of the prior quarter balance sheet date.

Provider Liability for Unpaid Medical Claims Under At-Risk Capitation Arrangements

As described in Note 7 to the consolidated financial statements, the Company’s provider liability for unpaid medical claims under at-risk capitation arrangements was $28.6 million as of December 31, 2022.

Provider liability estimates are developed using actuarial models commonly used by health insurance actuaries that include a number of factors and assumptions including medical service utilization trends, changes in membership, observed medical cost trends, historical claim payment patterns and other factors.

Each period, management re-examines previously established provider liability estimates based on actual claim submissions and other changes in facts and circumstances.

As more complete claims information becomes available, management adjusts its estimates and recognizes those changes in estimates in the period in which the change is identified.

The estimated liability for unpaid medical claims is included in provider liability on the consolidated balance sheet.

The principal considerations for our determination that performing procedures relating to the provider liability for unpaid medical claims liability under at-risk capitation arrangements is a critical audit matter are (i) the significant judgment by management when developing the estimate of provider liability for unpaid medical claims under at-risk capitation arrangements, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to changes in membership and observed medical cost trends, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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 testing the effectiveness of controls relating to management’s valuation of the provider liability for unpaid medical claims under at-risk capitation arrangements.

These procedures also included, among others, (i) testing the completeness and accuracy of the underlying data used by management and (ii) the involvement of professionals with specialized skill and knowledge to assist in (a) testing management’s process for developing the estimate of the unpaid medical claims liability, (b) evaluating the appropriateness of management’s actuarial methodologies, and (c) evaluating the reasonableness of management’s significant assumptions related to changes in membership and observed medical cost trends.

/s/ PricewaterhouseCoopers LLP

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March 1, 2023

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

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We have served as the Company’s auditor since 2020, which includes periods before the Company became subject to SEC reporting requirements.

Privia Health Group, Inc.

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Accounts payable and accrued expenses $ 52,837 $ 45,985

Physician and practice liability 140,708 106,811

Provider liability 208,424 140,708

Current portion of note payable — 875

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

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Privia Health Group, Inc.

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Operating expenses:

Physician and practice expense 727,827 629,487 622,632

Provider expense 1,051,040 727,827 629,487

Cost of platform 170,838 174,731 105,006

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Operating (loss) income ( 19,122 ) ( 217,436 ) 25,380

Interest expense 1,070 1,917 6,910

(Loss) income before (benefit from) provision for income taxes ( 218,506 ) 23,463 9,152

(Benefit from) provision for income taxes ( 27,857 ) ( 7,441 ) 1,207

Interest (income) expense, net ( 542 ) 1,070 1,917

(Loss) income before benefit from income taxes ( 18,580 ) ( 218,506 ) 23,463

Benefit from income taxes ( 6,516 ) ( 27,857 ) ( 7,441 )

Net (loss) income ( 12,064 ) ( 190,649 ) 30,904

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

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Privia Health Group, Inc.

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Non-controlling Interest Total Stockholders’ Equity

Balance at Balance at January 1, 2019 95,931,549 $ 959 $ 146,904 $ ( 59,366 ) $ 88,497 $ ( 2,457 ) $ 86,040

Capital contribution — — 13,264 — 13,264 — 13,264

Share-based compensation expense — — 207 — 207 — 207

Net income (loss) — — — 8,244 8,244 ( 299 ) 7,945

Balance at December 31, 2019 95,931,549 959 160,375 ( 51,122 ) 110,212 ( 2,756 ) 107,456

Balance at January 1, 2020 95,931,549 $ 959 $ 160,375 $ ( 51,122 ) $ 110,212 $ ( 2,756 ) $ 107,456

Capital contribution — — 4,700 — 4,700 — 4,700

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Share-based compensation expense — — 484 — 484 — 484

Net income (loss) — — 31,244 31,244 ( 340 ) 30,904

Net income — — — 31,244 31,244 ( 340 ) 30,904

Balance at December 31, 2020 95,985,817 960 165,666 ( 19,878 ) 146,748 ( 3,096 ) 143,652

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Issuance of common stock upon exercise of stock options and vesting of restricted stock units 2,126,924 21 3,808 — 3,829 — 3,829

Stock-based compensation expense — — 253,531 — 253,531 — 253,531

Contributed non-controlling interest — — — — — 28,824 28,824

Net loss — — — ( 188,230 ) ( 188,230 ) ( 2,419 ) ( 190,649 )

Balance at Balance at December 31, 2021 107,837,741 1,078 633,902 ( 208,108 ) 426,872 23,309 450,181

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

6,853,067 70 13,378 — 13,448 — 13,448

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

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Privia Health Group, Inc.

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Net (loss) income $ ( 12,064 ) $ ( 190,649 ) $ 30,904

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation 1,220 1,152 1,188

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Accounts payable and accrued expenses 6,852 1,262 9,706

Physician and practice liability 33,897 24,542 15,571

Provider liability 67,716 33,897 24,542

Operating lease liabilities ( 2,433 ) 13,936 —

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Net cash provided by operating activities 47,196 55,058 38,891

Cash from investing activities

Cash flows from investing activities

Purchases of property and equipment ( 104 ) ( 547 ) ( 380 )

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Payments of underwriting fees, net of discounts and offering costs — ( 12,691 ) —

Note payable to affiliate — — ( 15,250 )

Proceeds from non-controlling interest 125 — —

Repayment of note payable ( 33,250 ) ( 875 ) ( 875 )

Proceeds from note payable — — 35,000

Proceeds from exercised stock options 13,448 3,829 108

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Line of credit payments — — ( 10,000 )

Net cash provided by (used in) financing activities 213,661 ( 767 ) ( 10,868 )

Net cash (used in) provided by financing activities ( 19,677 ) 213,661 ( 767 )

Net increase in cash and cash equivalents 27,415 235,944 37,744

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

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Privia Health Group, Inc.

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Privia Health Group, Inc.

(“we”, “our” the “Company” “Privia”), became the sole shareholder of PH Group Holdings Corp.

(the “Company” “Privia”), became the sole shareholder of PH Group Holdings Corp.

(“PH Holdings”) (formerly Brighton Health Services Holding Corporation) effective August 11, 2016.

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The Company uses the same operational and financial model in each market.

As of December 31, 2021, Privia operates in eight markets:

As of December 31, 2022, Privia operates in ten markets:

1) the Mid-Atlantic Region (states of Virginia, Maryland and the District of Columbia);

2) the state of Georgia;

3) the Gulf Coast Region (Houston, Texas);

3) Gulf Coast Region (Houston, Texas);

4) North Texas (Dallas/Fort Worth, Texas);

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6) Central Florida;

7) the state of Tennessee and 8) the state of California.

7) Tennessee 8) California, 9) Montana and 10) North Carolina.

Medical groups are formed in each market with the primary purpose to operate as a physician group practice with healthcare services being furnished through physician members (“Privia Physicians”) and non-physician clinicians (together, “Privia Providers”) supervised by Privia Physicians.

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The Company majority owns Owned Medical Groups in those markets where medical group ownership is allowed with Privia Physicians owning, in the aggregate, the minority interest in the medical group.

In other markets where state regulations do not allow the Company to own the medical group, our “Non-Owned Medical Groups” are either (a) 100 % owned by the Privia Physicians or (b) majority owned, indirectly through a professional entity (“Nominee PC”), by a licensed physician holding a Privia leadership position (such physician leader, a “Nominee Physician” and each such Non-Owned Medical Group owned in this manner, a “Friendly Medical Group”).

In other markets where state regulations do not allow the Company to own the medical group, the Companies “Non-Owned Medical Groups” are either (a) 100 % owned by the Privia Physicians or (b) majority owned, indirectly through a professional entity (“Nominee PC”), by a licensed physician holding a Privia leadership position (such physician leader, a “Nominee Physician” and each such Non-Owned Medical Group owned in this manner, a “Friendly Medical Group”).

Currently, the Company has Friendly Medical Groups only in the Tennessee and West Texas.

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2) VBC revenue consisting of:

a) care management fees (“PMPM”) and b) shared savings both of which are primarily earned through Company-owned Accountable Care Organizations (“ACOs”) in each market;

a) Capitated revenue, b) shared savings and c) care management fees (“PMPM”) all of which are primarily earned through Company-owned Accountable Care Organizations (“ACOs”) in each market ;

and 3) Other revenue which is earned from services provided to patients of both Owned and Non-Owned Medical Groups and CARES Act funds received.

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The consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its subsidiaries.

Amounts shown on the consolidated statements of operations within the operating expense categories of physician and practice expense, cost of platform, selling and marketing, and general and administrative are recorded exclusive of depreciation and amortization.

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Amounts shown on the consolidated statements of operations within the operating expense categories of provider expense, cost of platform, selling and marketing, and general and administrative are recorded exclusive of depreciation and amortization.

All significant intercompany transactions are eliminated in consolidation.

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The Company, however, does meet the criteria for consolidation of the Nominee PCs and the Friendly Medical Groups based on the discussion above.

During the fourth quarter of 2021, the Company launched Privia Medical Group West Texas, PLLC, formerly known as Abilene Diagnostic Clinic, PLLC (“WTX Friendly Medical Group”).

WTX Friendly Medical Group is a physician-owned Medical Group, with PMG West Texas Holdings, PLLC (“WTX Nominee PC”), a Texas professional limited liability company entirely owned by a licensed physician with a leadership role in the Company, owning majority membership interests and having governance and control rights via the governing documents of WTX Friendly Medical Group.

The Company has a contractual relationship with WTX Nominee PC through a Restriction Agreement.

The VIE analysis was performed, and the Company determined that the relationship between Company, WTX Nominee PC and WTX Friendly Medical Group does represent a VIE and as such is consolidated as they do meet the criteria in ASC 810.

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Similarly, during the fourth quarter of 2021, the Company established a second Friendly Medical Group in the State of Tennessee - Privia Medical Group Tennessee, PLLC (“TN Friendly Medical Group”).

TN Friendly Medical Group is a physician owned Medical Group, with PMG-TN Physicians, PLLC (“TN Nominee PC”), a Tennessee professional limited liability company entirely owned by a licensed physician with a leadership role in the Company, owning majority of the membership interests therein and having governance and control rights via the governing documents of TN Friendly Medical Group.

Again, the same analysis was performed, and the Company determined that the relationship between Company, TN Nominee PC and TN Friendly Medical Group does represent a VIE and as such is consolidated because they do meet the criteria in ASC 810.

Additionally, during the fourth quarter of 2021, the Company entered the California market through an affiliation with BASS Medical Group, one of the Greater San Francisco Bay Area’s leading healthcare multi-specialty groups with more than 400 providers spanning 42 specialties caring for patients at over 125 locations.

Privia acquired a majority interest in BASS Management Services Organization, LLC, now BASS Privia Management Company of California, LLC (“BPMC”), which is the exclusive provider of management services to BASS Medical Group.

BPMC provides management and other administrative services, as well as various other services to medical practices and others.

The Company performed the same analysis and determined that BPMC does not represent a VIE as it does not meet the criteria in ASC 810 but given that Privia owns 51 % of the voting interest in the entity, the entity is consolidated as a result.

As a result of the PMG West Texas and PMG-TN transactions, the aggregated carrying value of the current assets and liabilities included in the consolidated balance sheets after elimination of intercompany transactions and balances were $ 4.2 million and $ 4.2 million respectively, as of December 31, 2021.

Total revenues and operating expenses were $ 5.8 million and $ 5.8 million, respectively, from the date of acquisition through December 31, 2021.

In February 2022, the Company announced a partnership with Surgery Partners, Inc.

for Privia Health to enter the State of Montana with Great Falls Clinic, a multi-specialty practice with approximately 65 providers spanning 24 specialties.

Privia is the majority owner of Privia Management Company Montana, LLC (“PMC-MT”), which provides performance operations services and technology capabilities to Great Falls Clinic as well as to new providers in Montana who join the Privia Platform.

The Company performed the analysis as noted above and determined that PMC-MT does not represent a VIE as it does not meet the criteria in ASC 810 but given that Privia owns 75 % of the voting interest in the entity, the entity is consolidated as a result.

On November 3, 2022, the Company announced a joint venture and strategic partnership with Novant Health Enterprises, a division of

Novant Health, to launch Privia Medical Group – North Carolina for independent providers throughout North Carolina.

Privia is the majority owner of Privia Management Company North Carolina, LLC (“PMC-NC”), which provides performance operation services and technology capabilities to Great Falls Clinic as well as to new providers in Montana who join the Privia Platform.

performed an analysis as noted above and determined that PMC-NC does not represent a VIE as it does not meet the criteria in ASC 810 but given that Privia owns 51 % of the voting interest in the entity, the entity is consolidated as a result.

The aggregated carrying value of the current VIE assets and liabilities included in the consolidated balance sheets after elimination of intercompany transactions and balances were $ 1.4 million and $ 1.4 million, respectively, as of December 31, 2022 and $ 4.2 million and $ 4.2 million respectively, as of December 31.

Total revenues and operating expenses were $ 34.9 million and $ 34.9 million, respectively, as of December 31, 2022, and $ 5.8 million and $ 5.8 million, respectively, as of December 31, 2021.

Emerging Growth Company Status

We are an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”).

The JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We have irrevocably elected to avail ourselves of this exemption and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Sarbanes-Oxley Act of 2002, Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) hold non-binding advisory votes on executive compensation and obtain shareholder approval of any golden parachute payments not previously approved.

These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Based on the aggregate worldwide market value of the Company shares of common stock held by the Company’s non-affiliate stockholders on June 30, 2022, as of December 31, 2022, the Company has become a“large-accelerated filer” and have lost emerging growth status for the year ended December 31, 2022.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure.

On an on-going basis we evaluate significant estimates and assumptions, including, but not limited to, revenue recognition, stock-based compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes.

On an on-going basis the Company evaluates significant estimates and assumptions, including, but not limited to, revenue recognition, stock-based compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes.

Future events and their effects cannot be predicted with certainty;

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Coronavirus Aid, Relief and Economic Stimulus Act (“CARES Act”)

The current COVID-19 pandemic had an impact on our results of operations, cash flow and financial position for the years ended and as of December 31, 2021 and 2020, as we experienced lower volumes than anticipated and shifts in the mix of services provided after the onset of the pandemic in the United States.

We are closely monitoring the impact of the pandemic on all aspects of our business including impacts to employees, customers, patients, suppliers and vendors.

As the COVID-19 pandemic evolves, disruptions caused by the pandemic and recurring COVID-19 outbreaks, including outbreaks caused by different virus variants, could potentially impact the Company and its future results of operations, cash flows and financial position.

On March 27, 2020, the CARES Act was passed.

It is intended to provide economic relief to individuals and businesses affected by the coronavirus pandemic.

It also contains provisions related to healthcare providers’ operations and the issues caused by the

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coronavirus pandemic.

The following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the year ended December 31, 2021:

• The Company elected to defer its portion of Social Security taxes in 2020, which may be repaid over two years as follows:

50 % by the end of 2021 and 50 % by the end of 2022.

Approximately $ 0.8 million is recorded in accrued expenses on the balance sheet as of December 31, 2021 related to this deferral and the Company intends to remit payment by the end of 2021;

• The Company received $ 0.8 million and $ 13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the years ended December 31, 2021 and 2020, respectively.

It also contains provisions related to healthcare providers’ operations and the issues caused by the coronavirus pandemic.

The following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the year ended December 31, 2022 and 2021:

• The Company elected to defer its portion of Social Security taxes in 2020, which was repaid over two years as follows:

50 % at the end of 2021 and 50 % at the end of 2022;

• The Company received $ 0.8 million and $ 13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the year ended December 31, 2021 and 2020.

The Company did no t receive Provider Relief Fund under the CARES Act during the year ended December 31, 2022.

Cash and Cash Equivalents

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Property and Equipment, Net

Property and equipment consist of furniture and fixtures, leasehold improvements, and computer hardware and software and are stated at cost, less accumulated depreciation and amortization.

Property and equipment consist of furniture and fixtures, leasehold improvements, and computer hardware and software and are stated at cost, with the exception of assets acquired through acquisitions, which are recorded at fair value, less accumulated depreciation and amortization.

Depreciation is recognized on a straight-line method over the assets’ estimated useful lives, which for leasehold improvements are the lesser of the lease terms or the life of the asset, and three to seven years for other property and equipment.

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Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized.

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

Allocation of purchase consideration to identifiable assets and liabilities affects the Company’s amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized.

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.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

During the year ended December 31, 2021, Company completed several acquisitions to strengthen its current market share in existing markets or to

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expand into new markets.

During the year ended December 31, 2021, Company completed several acquisitions to strengthen its current market share in existing markets or to expand into new markets.

The consideration paid for each of the acquisitions was derived through arm’s length negotiations.

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If it is determined in the qualitative assessment that the fair value of a reporting unit is more likely than not below its carrying amount, then the Company will perform a quantitative impairment test.

The quantitative goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.

The quantitative goodwill impairment test is performed by comparing the fair value of a

reporting unit with its carrying amount.

Any excess in the carrying value of a reporting unit’s goodwill over its fair value is recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit.

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These costs are amortized over the term of the applicable indebtedness using the effective interest method.

Amortization is included in interest expense in the accompanying consolidated statements of operations and comprehensive income (loss).

Amortization is included in interest expense in the accompanying consolidated statements of operations.

Revenue Recognition

Beginning January 1, 2019, we adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective approach.

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an

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amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, we perform the following five steps:

The Company derives revenues from the following three sources:

(i) FFS revenue, (ii) VBC revenue and (iii) other revenue from additional services offered by Privia to its Privia Providers or directly to patients or employers.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

Identify the contract(s) with a customer;

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The Company’s FFS-patient care revenue is primarily generated from providing healthcare services to patients.

Providing medical services to patients represents our performance obligation under these third party payer agreements, and accordingly, the transaction price is allocated entirely to that one performance obligation.

We recognize revenue as services are rendered and approved by the Privia Providers, which is typically a single day for each service.

We receive payment for services from third party payers, as well as from patients who have health insurance, but are also financially responsible for some or all of the service in the form of co-pays, coinsurance or deductibles.

Providing medical services to patients represents the Company’s performance obligation under these third party payer agreements, and accordingly, the transaction price is allocated entirely to that one performance obligation.

The Company recognize revenue as services are rendered and approved by the Privia Providers, which is typically a single day for each service.

The Company receives payment for services from third party payers, as well as from patients who have health insurance, but are also financially responsible for some or all of the service in the form of co-pays, coinsurance or deductibles.

Patients who do not have health insurance are required to pay for their services in full.

FFS-patient care revenue is reported net of provisions for contractual allowances from third-party payers and patients.

We have certain agreements with third-party payers that provide for reimbursement at amounts different from our standard billing rates.

The Company has certain agreements with third-party payers that provide for reimbursement at amounts different from the Company’s standard billing rates.

The differences between the estimated reimbursement rates and the standard billing rates are accounted for as contractual adjustments, which are deducted from gross revenue to arrive at FFS-patient care revenue.

We determine our estimate of implicit price concessions based on our historical collection experience with classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups rather than individually.

The Company determines the Company’s

estimate of implicit price concessions based on the Company’s historical collection experience with classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups rather than individually.

The financial statement effects of using this practical expedient are not materially different from an individual contract approach.

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For the years ended December 31, 2022, 2021 and 2020, changes in the Company’s estimates of implicit price concessions, contractual adjustments, and expected payments for performance obligations satisfied in prior periods were not significant.

With respect to our treatment of revenue from Owned Medical Groups, it is necessary to assess whether we are the principal or the agent with respect to FFS-patient care revenue in light of the fact that healthcare services are furnished by Privia Providers rather than employees of the Owned Medical Groups.

With respect to the Company’s treatment of revenue from Owned Medical Groups, it is necessary to assess whether the Company is the principal or the agent with respect to FFS-patient care revenue in light of the fact that healthcare services are furnished by Privia Providers rather than employees of the Owned Medical Groups.

ASC 606-10-55-37A indicates that an entity is a principal if it obtains control of a right to a service to be performed by another party, which gives the entity the ability to direct that party to perform the services to the customer on the entity’s behalf.

The Owned Medical Groups, which are each majority-owned and controlled by us, own the contractual relationships with the patients and the third party payers and they direct Privia Providers to perform healthcare services on the Company’s behalf.

Although we are prohibited by law from interfering in the physician-patient relationship or making clinical care decisions, our Owned Medical Groups are responsible for the fulfillment of healthcare services to patients.

Further, we employ Chief Medical Officers and Medical Directors who provide clinical oversight and direction over the clinical affairs of the Owned Medical Groups.

In addition, the Owned Medical Group provides the care coordination activities, patient outreach and education activities, and sets quality standards for our Privia Providers.

We also verify that Privia Providers have the proper qualifications (e.g., correct licenses, certificates, etc.) for our Owned Medical Groups, for ourselves and as a delegate on behalf of certain third-party payers.

Although the Company is prohibited by law from interfering in the physician-patient relationship or making clinical care decisions, the Company Owned Medical Groups are responsible for the fulfillment of healthcare services to patients.

Further, the Company employs Chief Medical Officers and Medical Directors who provide clinical oversight and direction over the clinical affairs of the Owned Medical Groups.

In addition, the Owned Medical Group provides the care coordination activities, patient outreach and education activities, and sets quality standards for the Company’s Privia Providers.

The Company also verifies that Privia Providers have the proper qualifications (e.g., correct licenses, certificates, etc.) for the Company Owned Medical Groups, for the Company and as a delegate on behalf of certain third-party payers.

In addition to oversight of health care services, the Owned Medical Group is also the party primarily responsible for providing the services to patients and maintains discretion in establishing pricing for all services through agreements with patients and their insurance payers.

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In assessing who is the principal in providing the patient care services, the Company considered who controls the provision of patient care services.

As a result of our oversight of Owned Medical Groups (including setting the expectations for the Owned Medical Group’s patients and the commercial payers’ expectations of the Owned Medical Groups) and the contractual relationships with patients and their third-party payers, we are the principal in these relationships.

As a result of the Company’s oversight of Owned Medical Groups (including setting the expectations for the Owned Medical Group’s patients and the commercial payers’ expectations of the Owned Medical Groups) and the contractual relationships with patients and their third-party payers, the Company is the principal in these relationships.

FFS-administrative services

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The Company’s MSAs with the Non-Owned Medical Groups range from 5 – 20 years in duration and outline the terms and conditions of the administration and management services to be provided, which includes revenue cycle management services such as billings and collections, as well as other services, including, but not limited to, payer contracting, information technology services and accounting and treasury services.

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In certain MSAs, the Company is paid administrative fees equal to the cost of supplying certain services as outlined in the MSAs, and if applicable, a margin is added to the cost of certain services.

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Administrative fees are reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for the provision of administration and management services to the Non-Owned Medical Groups.

In addition, certain of our MSAs include rebates to the customers in the event that certain conditions occur.

In addition, certain of the Company’s MSAs include rebates to the customers in the event that certain conditions occur.

The Company estimates the transaction price using the most likely amount methodology and amounts are included in the net transaction price to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved.

The Company reduces the amount of FFS – administrative services revenue by the amount of any rebates earned by its customers.

No rebates have been earned for years ended December 31, 2021, 2020 and 2019.

The Company’s VBC business consists of its clinically integrated network and ACOs which bring together independent physician practices within our medical groups to focus on sharing data, improving care coordination, and collaborating on initiatives to improve outcomes and lower healthcare spending.

Rebates $ 2.8 million have been recorded as of December 31, 2022.

No rebates were recorded for years ended December 31, 2021 and 2020.

The Company’s VBC business consists of its clinically integrated network and ACOs which bring together independent physician practices within the Company medical groups to focus on sharing data, improving care coordination, and collaborating on initiatives to improve outcomes and lower healthcare spending.

The Company has contracts with the U.S.

federal government and large payer organizations that are multi-year in nature typically ranging from three to five years and is paid as follows:

(1) Care management fees on a per member per month basis and (2) on a shared savings basis.

Care management

Under the PMPM basis, the Company is paid a PMPM rate for each covered individual who is attributed by the payer to the Company (“attributed members”).

The Company records revenue in the month for which the PMPM rate applies and the member was attributed.

The PMPM rate is based on a predetermined monthly contractual rate for each attributed member regardless of the volume of care coordination services provided under the contracts with the payers.

The PMPM rate varies based on payer and product.

Revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for the provision of care coordination services to its population of attributed members.

The Company’s contracts with payers have a single performance obligation that consists of a series of services for the provision of care coordination services for the population of attributed members for the duration of the contract.

The transaction price for the contracts is entirely variable, as it is primarily based on a PMPM rate on monthly attributed membership, which can fluctuate during the life of the contract.

The majority of the Company’s net PMPM transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series and is recognized as revenue in the month in which attributed members are entitled to care coordination services.

(1) Capitated revenue (2) on a shared savings basis and (3) Care management fees on a per member per month basis.

Capitated Revenue

Capitated revenue consists of capitation fees earned under contracts with various Medicare Advantage payers (“Payers”) in at-risk capitation arrangements.

The Company is entitled to monthly fees to provide a defined range of healthcare services for Medicare Advantage health plan members (“attributed beneficiaries” or “attributed lives”) attributed to the Company’s contracted physicians (typically primary care).

Monthly fees are determined as a percentage of the premium payers receive from the Centers for Medicare & Medicaid Services (“CMS”) for these attributed beneficiaries.

In at-risk arrangements, the Company generally accepts financial risk for beneficiaries attributed to its contracted physicians and, therefore, is responsible for the cost of contracted healthcare services required by those beneficiaries in accordance with the terms of each agreement.

Fees are recorded gross in revenue because the Company is acting as a principal in coordinating and controlling the range of services provided (other than clinical decisions) under its Capitated revenue contracts with payers.

Capitated revenue contracts with payers are generally multi-year arrangements and have a single monthly stand ready performance obligation, as defined by ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), to provide all aspects of necessary medical care to members for the contracted period.

The Company recognizes revenue in the month in which the eligible beneficiary is entitled to receive healthcare benefits during the contract term.

The transaction price for the Company’s capitation contracts is a fixed percentage of premium per attributed life with periodic adjustment, as the monthly fees to which the Company are entitled are subject to periodic adjustments under CMS’s risk adjustment payment methodology.

CMS deploys a risk adjustment model that determines premiums paid to all payers according to each attributed life’s health status and certain demographic factors.

Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from various settings.

The Company and healthcare providers collect and submit diagnosis data to payers (and ultimately to CMS) to be utilized in the determination of risk adjustments and such data is used by the Company to estimate any adjustments to the Capitated revenue earned that may increase or decrease revenue in subsequent periods pursuant to contractual terms.

Such adjustments are estimated using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

Capitated revenue fees are also subject to adjustment for incentives or penalties based on the achievement of certain quality metrics defined in the Company’s contracts with payers.

The Company recognizes incentive revenue as earned using the most likely amount methodology and only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

Neither the Company nor any of its affiliates are a registered insurance company as state law in the states in which the Company operate do not require such registration for risk bearing providers.

Shared Savings

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Revenue is recorded during the period when the services were provided during a pre-set twelve-month annual measurement period.

Care management

Under the per member per month (“PMPM”) basis, the Company is paid a PMPM rate for each covered individual who is attributed by the payer to the Company (“attributed members”).

The Company records revenue in the month for which the PMPM rate applies and the member was attributed.

The PMPM rate is based on a predetermined monthly contractual rate for each attributed member regardless of the volume of care coordination services provided under the contracts with the payers.

The PMPM rate varies based on payer and product.

The Company’s contracts with payers have a single

performance obligation that consists of a series of services for the provision of care coordination services for the population of attributed members for the duration of the contract.

The transaction price for the contracts is entirely variable, as it is primarily based on a PMPM rate on monthly attributed membership, which can fluctuate during the life of the contract.

Other Revenue

The remainder of our revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as concierge services, virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.

CARES Act funds received have been recorded within other revenue on the statement of operation through December 31, 2020.

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The remainder of the Company’s revenue is derived from leveraging the Company’s existing base of providers and patients to deliver value-oriented services such as concierge services, virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.

CARES Act funds received have been recorded within other revenue on the statement of operation for the years ended December 31, 2021 and 2020.

The Company received $ 0.8 million and $ 13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the year ended December 31, 2021 and 2020.

The Company did no t receive Provider Relief Fund under the CARES Act during the year ended December 31, 2022.

Fair Value of Financial Instruments

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Non-Controlling Interest

The non-controlling interest represents the equity interest of the non-controlling equity holders in results of operations of Complete MD Solutions LLC, Privia Management Services Organization (“PMSO”) and our Owned Medical Groups.

The consolidated financial statements include all assets, liabilities, revenues, and expenses of less-than-100%-owned affiliates where the Company has a controlling financial interest.

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ASC 740 requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination.

If the tax position meets the more likely than not recognition threshold, the tax effect is recognized at the largest amount of the benefit that has greater than a fifty percent likelihood of being realized upon ultimate settlement.

ASC 740 also provides guidance for classification, interest and penalties, accounting in interim periods, disclosure, and transition.

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As of December 31, 2022, the periods subject to examination by the Company’s major jurisdictions (federal and various states) are generally for the years December 31, 2019 through December 31, 2022.

Physician and Practice Liability

The Company has certain amounts payable to its physicians and their related physician practices that represent physician salaries and other required distributions pursuant to the service agreements which have not yet been paid.

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Provider Liability

Provider Liability, previously referred to as “Physician and Practice liability”, represents costs payable to physicians, hospitals and other ancillary providers, including both Privia physicians, their related practices, and providers the Company has contracted with through payer partners.

Those costs include amounts that have not yet been paid for physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries for which the Company is financially responsible under at-risk capitated revenue arrangements whether paid directly by the Company or indirectly by payers with whom the Company has contracted .

The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , as of January 1, 2021 using the modified retrospective transition approach for leases which existed on that date.

The Company elected the package of practical expedients that permitted the Company not to reassess the Company’s prior conclusions about lease identification, lease classification and initial direct costs.

The Company did not elect the use-of-hindsight practical expedient.

The adoption of the standard resulted in the recognition of operating right-of-use assets of approximately $ 6.0 million and operating lease liabilities of approximately $ 11.3 million.

Beginning January 1, 2021, the Company accounts for its leases in accordance with ASU 2016-2, Leases (Topic 842).

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Upon lease commencement, which is defined as the date on which a lessor makes the underlying asset available to the Company for use, the Company classifies the lease as either an operating or finance lease.

The Company’s leases primarily consist of operating leases for office space in certain states in which we operate.

The Company’s leases primarily consist of operating leases for office space in certain states in which the Company operates.

The Company also has operating leases for equipment, which are not significant.

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When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option in the same manner as all other leases.

Physician and Practice Expense

Physician payments are set payments made to physicians associated with Owned Medical Groups.

These payments are set and adjusted as necessary, pursuant to Owned Medical Groups’ Board of Directors’ approved guidelines with variances specifically approved by the Owned Medical Groups’ Board of Directors.

Practice related payments are used to cover an Affiliated Practice’s staff salary and benefits, medical supplies, rent and other occupancy costs, insurance and office supplies.

Affiliated Practices are not owned by the Company and the Company bears no responsibility for any losses incurred by Affiliated Practices.

Affiliated Practices are paid a variable amount based on collections and the services provided.

Provider Expense

Provider expense, previously referred to as “Physician and Practice expense”, are amounts accrued or payments made to physicians, hospitals and other service providers, including Privia physicians, their related physician practices, and providers the Company has contracted with through payer partners.

Those costs include physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries under at-risk Capitated revenue arrangements for which the Company is financially responsible whether paid directly by the Company or indirectly by payers with whom the Company has contracted.

Provider expenses are recognized in the period in which services are provided.

Cost of Platform

Cost of platform represents the direct costs the Company incurs to provide services to our Privia Physicians and their practices.

It includes third-party electronic medical records and practice management software expenses, employee-related expenses, including salaries and employee benefits costs, stock-based compensation, as well as consulting expenses, travel-related expenses and technology related expenses for the team.

Cost of platform represents the direct costs the Company incurs to provide services to Privia Physicians and their practices.

It includes third-party electronic medical records and practice management software expenses, employee-related expenses, including salaries and

employee benefits costs, stock-based compensation, as well as consulting expenses, travel-related expenses and technology related expenses for the team.

Cost of platform excludes depreciation and amortization expense.

Third-party electronic medical records and practice management software expenses are paid on a percentage of revenue basis, while employee-related expenses are variable based on the number of employees used to service our implemented physicians.

Sales and Marketing

Sales and marketing expenses consist of employee-related expenses, including salaries, stock-based compensation, commissions, and employee benefits costs, for all of the Company’s employees, engaged in marketing, sales, community outreach, and sales support.

These employee-related expenses capture all costs for both our field-based and corporate sales and marketing teams.

Sales and marketing expenses also include central and community-based advertising to generate greater awareness, engagement, and retention among our current and prospective patients as well as the infrastructure required to support all of our marketing efforts.

These employee-related expenses capture all costs for both the Company’s field-based and corporate sales and marketing teams.

Sales and marketing expenses also include central and community-based advertising to generate greater awareness, engagement, and retention among the Company’s current and prospective patients as well as the infrastructure required to support all of the Company’s marketing efforts.

General and Administrative

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In addition, general and administrative expenses include all corporate technology and occupancy costs.

Advertising Costs

Advertising costs for the Company are expensed as incurred.

Advertising expense was approximately $ 1.2 million, $ 0.8 million, $ 1.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Stock-Based Compensation

The Company accounts for share-based compensation in accordance with the expense recognition provisions of ASC 718, Compensation–Stock Compensation (“ASC 718”), which requires the issuer to recognize compensation expense for all share-based payments made to employees based on the fair value of the share-based payment at the date of grant.

Up until April 2021,the estimated

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fair value of share-based payments granted to the Company’s employees was determined using the Monte-Carlo option pricing model, which requires inputs based on certain subjective assumptions, including expected term of the option, expected stock price volatility, the risk free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield (See Note 10 “Stockholders’ Equity”).

Up until April 2021,the estimated fair value of share-based payments granted to the Company’s employees was determined using the Monte-Carlo option pricing model, which requires inputs based on certain subjective assumptions, including expected term of the option, expected stock price volatility, the risk free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield (See Note 11 “Stockholders’ Equity”).

The share-based payments granted or modified prior to April 2021 to employees of the Company do not have quoted market prices, and changes in subjective input assumptions can materially affect the fair value estimate.

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For additional details refer to Note 11 “Stockholder Equity.”

Net Income (Loss) per Share Attributable to Common Stockholders

Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Net (Loss) Income per Share Attributable to Common Stockholders

Basic net (loss) income per share attributable to common stockholders is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

The treasury stock method is used to consider the effect of the potentially dilutive stock options.

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Recently Adopted Accounting Pronouncements

Prior comparative periods were not adjusted and continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases.

The Company did not elect the use-of-hindsight practical expedient.

The adoption of the standard resulted in the recognition of operating right-of-use assets of approximately $ 6.0 million and operating lease liabilities of approximately $ 11.3 million.

Refer to Note 5 “Leases” for additional details.

The difference between the operating lease right-of-use assets and operating lease liabilities resulted from the reclassification of deferred rent.

Adoption of the standard did not have a material impact on the consolidated statements of operations or cash flows for the year ended December 31, 2021.

The Company did not recognize a cumulative-effect adjustment to retained earnings upon adoption.

On January 1, 2021, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“CECL”) , which replaces the incurred loss approach for recognizing credit losses on financial instruments with an expected loss approach.

The expected loss approach is subject to management judgments using assessments of incurred credit losses, assessments of current conditions, and forecasts using reasonable and supportable assumptions.

The Company adopted the standard using a modified retrospective approach which resulted in no adjustments to the allowance for credit losses and no cumulative-effect adjustment to retained earnings.

The Company regularly reviews the adequacy of the allowance for 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 for industry groups, and future market and economic conditions.

As of December 31, 2021, the allowance for credit losses was not material.

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

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

ASU 2019-12 eliminates certain exceptions related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

The Company completed our evaluation, and note no material impact as a result of the adoption as of December 31, 2021.

Recently Issued Accounting Pronouncements Pending Adoption

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The ASU provides temporary relief from some of the existing rules governing contract modifications when the modification is related to the replacement of the London Interbank Offered Rate (“LIBOR”) or other reference rates discontinued as a result of reference rate reform.

The ASU specifically provides optional practical expedients for contract modification accounting related to contracts subject to ASC 310, Receivables, ASC 470, Debt, ASC 842, Leases, and ASC 815, Derivatives and Hedging.

The ASU also establishes a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and certain elective hedge accounting expedients.

For eligible contract modifications, the principle generally allows an entity to account for and present modifications as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.

That is, the modified contract is accounted for as a continuation of the existing

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The standard was effective upon issuance on March 12, 2020, and the optional practical expedients can generally be applied to contract modifications made and hedging relationships entered into on or before December 31, 2022.

Borrowings under the Company’s Credit Facilities bear interest based on LIBOR or an alternate rate.

Provisions currently provide the Company with the ability to replace LIBOR with a different reference rate in the event that LIBOR ceases to exist.

Revenue Recognition

The following table presents our revenues disaggregated by source:

The following table presents the Company’s revenues disaggregated by source:

For the Years Ended December 31,

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FFS-administrative services 94,929 68,805 58,278

Capitated revenue 218,463 — —

Shared savings 132,615 83,016 66,414

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Fee-for-service (“FFS”) patient care is primarily generated from third-party payers with which the Company has established contractual billing arrangements.

The following table presents the approximate percentages by source of net revenue received for healthcare services we provided for the periods indicated:

The following table presents the approximate percentages by source of net revenue received for healthcare services the Company provided for the periods indicated:

For the Years Ended December 31,

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FFS-administrative services revenue is earned through the Company’s MSA with Non-Owned Medical Groups primarily based on a fixed percentage of net collections on patient care generated by those medical groups.

Value Based Care (“VBC”) revenue is generated through per member per month Care management fee (“PMPM”) payments, from payers to provide care coordination services to patients and through shared savings contracts with large commercial payer organizations and the U.S.

VBC revenue is primarily earned through contracts for Capitated revenue, Shared savings and Care management fees.

Capitated revenue is generated through what is typically known as an “at-risk contract.” At-risk capitation refers to a model in which the Company receives a fixed monthly payment from the third-party payer in exchange for providing healthcare services to attributed beneficiaries.

The Company is responsible for providing or paying for the cost of healthcare services required by those attributed beneficiaries for a set of services.

At-risk Capitated revenue is recorded at the total amount gross in revenues because the Company is acting as a principal in arranging for, providing, and controlling the managed healthcare services provided to the attributed lives.

Shared savings revenue and Care management fees are generated through contracts with large commercial payer organizations and the U.S.

Federal Government.

Contract Asset and Liabilities

The Company has the following contract assets and unearned revenue:

Contract Asset

The Company has the following contract assets:

(Dollars in Thousands) December 31, 2022 December 31, 2021

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Accounts receivable $ 189,604 $ 117,402

Unearned revenue $ 404 $ 2,759

Remaining Performance Obligations

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a).

Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize revenue.

The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to continue receiving services at our facilities.

The Company does not disclose the value of the remaining performance obligations at the end of the reporting period or when the Company expects to recognize revenue.

The Company has minimal unsatisfied performance obligations at the end of the reporting period as the Company’s patients typically are under no obligation to continue receiving services at the Company’s facilities.

Business Combinations

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Unaudited proforma consolidated financial information for the acquisitions in 2021 have not been included as the results are immaterial individually and in the aggregate.

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On October 1, 2021, the Company launched WTX Friendly Medical Group, a physician-owned Medical Group, with WTX Nominee PC, an entity entirely owned by Physician Nominee, owning majority membership interests and having governance and control rights via the governing documents of WTX Friendly Medical Group.

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The Company acquired a 51 % interest in BPMC.

The purchase price for the 2021 acquisitions has been preliminarily allocated as follows:

The purchase price for the 2021 acquisitions were allocated as follows:

(Dollars in thousands) Total Acquisitions for the Year Ended December 31, 2021

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Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date.

For some of the acquisitions in 2021, the Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed.

Thus, the final allocation of the purchase price may differ from the preliminary estimates used at December 31, 2021 based on additional information obtained and completion of the valuation of the identifiable intangible assets.

Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill.

The Company does not expect the adjustments to be material.

There were no acquisitions during the year ended December 31, 2022.

Goodwill and Intangible Assets, Net

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During the fourth quarter of 2021, Privia entered into two new markets resulting in the recording of goodwill.

We launched PMG West Texas (“WTX Friendly Medical Group”).

Additionally, during the fourth quarter of 2021, we entered the California market through the acquisition of BASS Privia Management Company of California, LLC (“BPMC”), the exclusive provider of management services to BASS Medical Group, Privia acquired 51 % ownership in BPMC, which provides management and other administrative services to BASS Medical Group.

During the year ended December 31, 2021 the company recognized goodwill with a value of $ 9.3

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million in connection with the WTX Friendly Medical Group and BPMC acquisitions, which represented the excess of the purchase price over the fair value of the net assets acquired.

Goodwill balances at December 31, 2021 and 2020 was as follows:

(Dollars in thousands)

Balance as of December 31, 2020 $ 118,663

Goodwill recorded for WTX Friendly Medical Group and BPMC acquisitions

Balance as of December 31, 2021 $ 127,938

The Company launched PMG West Texas (“WTX Friendly Medical Group”).

Additionally, during the fourth quarter of 2021, the Company entered the

California market through the acquisition of BASS Privia Management Company of California, LLC (“BPMC”), the exclusive provider of management services to BASS Medical Group, Privia acquired 51 % ownership in BPMC, which provides management and other administrative services to BASS Medical Group.

During the year ended December 31, 2022 the Company recorded a measurement period adjustment to goodwill of $ 1.0 million in connection with these acquisitions.

Goodwill of $ 8.3 million (net of the $ 1.0 million measurement period adjustment), which represented the excess of the purchase price over the fair value of the net assets acquired, was recognized in connection with the acquisitions during the year end December 31, 2021.

A summary of the Company’s intangible assets is as follows:

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The remaining weighted average life of all amortizable intangible assets is approximately 18 years at December 31, 2022.

Amortization expense for intangible assets was approximately $ 1.3 million for the year ended December 31, 2021 and $ 0.6 million for the years ended December 31, 2020 and 2019, respectively.

Amortization expense for intangible assets was approximately $ 3.4 million for the year ended December 31, 2022, $ 1.3 million for the year ended December 31, 2021 and $ 0.6 million for the year ended December 31, 2020, respectively.

Estimated amortization expense for the Company’s intangible assets for the following five years is as follows:

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Total $ 57,387

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The Company leases office space under various operating lease agreements.

The initial terms of these leases range from 2 to 9 years and generally provide for periodic rent increases and renewal options.

The difference between the operating lease right-of-use assets and operating lease liabilities resulted from the reclassification of deferred rent and lease incentives, previously included in other-non-current liabilities, of $ 5.3 million to operating right-of-use assets.

The components of lease expense were as follows (in thousands):

(Dollars in Thousands) For the Year Ended December 31, 2021

The components of lease expense were as follows:

(Dollars in Thousands) For the Year Ended December 31, 2022 For the Year Ended December 31, 2021

Operating lease cost $ 2,669 $ 2,116

Cash paid for amounts included in the measurement of lease liabilities - operating leases $ 2,971 $ 2,316

Weighted-average remaining lease term - operating leases 5.1 Years

Weighted-average remaining lease term - operating leases 4.4 Years 5.1 Years

Weighted-average discount rate - operating leases 3.0 % 3.5 %

New ROU assets recognized in exchange for new lease liabilities $ 147 $ —

The aggregate future lease payments for operating leases in the years subsequent to December 31, 2022 are as follows:

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Property and equipment, net $ 3,386 $ 4,502

Provider Liability

Provider liability, previously referred to as “Physician and Practice liability”, represents costs payable to physicians, hospitals and other ancillary providers, including both Privia physicians, their related physician practices, and providers the Company has contracted with through payer partners.

Those costs include amounts that have not yet been paid for physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries for which the Company is financially responsible under at-risk Capitated revenue arrangements whether paid directly by the Company or indirectly by payers with whom the Company has contracted.

Provider expenses are recognized in the period in which services are provided and include estimates of claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported.

Provider liability estimates are developed using actuarial methods commonly used by health insurance actuaries that include a number of factors and assumptions including medical service utilization trends, changes in membership, observed medical cost trends, historical claim payment patterns and other factors.

Each period, the Company re-examines previously established provider liability estimates based on actual claim submissions and other changes in facts and circumstances.

As more complete claims information becomes available, the Company adjusts its estimates and recognizes those changes in estimates in the period in which the change is identified.

The difference between the estimated liability and the actual settlements of claims is recognized in the period in which the claims are settled.

The Company’s physician and practice liability balance represents management’s best estimate of its liability for unpaid Provider expenses as of December 31, 2022.

The Company uses judgment to determine the appropriate assumptions for developing the required estimates.

The Company’s liabilities for unpaid medical claims under at-risk capitation arrangements, which are included in Provider liability in the Company’s consolidated balance sheets, were as follows:

(Dollars in Thousands)

Balance at December 31, 2021

Incurred health care costs:

Current year 218,199

Prior years —

Total claim incurred 218,199

Current year ( 189,582 )

Total claims paid ( 189,582 )

Adjustments to other claims-related liabilities —

Balance at December 31, 2022

Account Payable and Accrued Expenses

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Total accounts payable and accrued expenses $ 52,837 $ 45,985

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The Company’s Credit Facilities consists of the following:

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On November 15, 2019, the Company entered into a Credit Agreement (the “Original Credit Agreement”) by and among Privia Health, LLC, as the borrower, PH Group Holdings Corp., as a guarantor, certain subsidiaries of Privia Health, LLC, as guarantors, Silicon Valley Bank, as administrative agent and collateral agent (the “Administrative Agent”), and the several lenders from time to time party thereto.

The Original Credit Agreement provided for up to $ 35.0 million in term loans (the “Term Loan Facility”) that mature on November 15, 2024 with interest payable monthly at the lesser of LIBOR plus 2.0 % or ABR plus 1.0 % payable monthly ( 3.0 % at December 31, 2021), plus up to an additional $ 10.0 million of financing (which was increased to $ 15.0 million in connection with the first amendment) in the form of a revolving loan (the “Revolving Loan Facility” and together with the Term Loan Facility, the “Credit Facilities”).

The Original Credit Agreement provided for up to $ 35.0 million in term loans (the “Term Loan Facility”) that mature on November 15, 2024 with interest payable monthly at the lesser of LIBOR plus 2.0 % or Alternate Base Rate (“ABR”) plus 1.0 % payable monthly, plus up to an additional $ 10.0 million of financing (which was increased to $ 15.0 million in connection with the first amendment) in the form of a revolving loan (the “Revolving Loan Facility” and together with the Term Loan Facility, the “Credit Facilities”).

The Revolving Loan Facility also includes a letter of credit sub-facility in the aggregate availability amount of $ 2.0 million and a swingline sub-facility in the aggregate availability amount of $ 2.0 million.

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As amended, borrowings under the Credit Agreement bear interest at a rate equal to (i) in the case of eurodollar loans, LIBOR plus an applicable margin, subject to a 0.5 % floor, and (ii) in the case of ABR loans, an ABR rate plus an applicable margin, subject to a floor of 1.5 %.

In addition, the Amendment, among other things, (i) changed the Term Loan Facility amortization schedule to 0.625 % of the original principal amount of term loans for the fiscal quarters ending September 30, 2021 through and including June 30, 2024 and 1.25 % of the original principal amount of term loans for the fiscal quarters ending thereafter and (ii) added a 1.0 % prepayment premium for any term loans prepaid within six months of the effective date of the Third Amendment.

amount of term loans for the fiscal quarters ending thereafter and (ii) added a 1.0 % prepayment premium for any term loans prepaid within six months of the effective date of the Third Amendment.

The Third Amendment converted the financial covenants in the Original Credit Agreement to “springing” financial covenants, so that at any time the Company’s cash is less than 125 % of the outstanding borrowings under the Credit Facilities, or at least $ 15.0 million of borrowings are outstanding under the Revolving Loan, the Company will be required to maintain (i) a consolidated fixed charge coverage ratio of not less than 1.25 to 1.0, and (ii) a consolidated leverage ratio of no more than 3.0 to 1.0.

As of December 31, 2021, the Company had $ 33.3 million in principal amount of indebtedness outstanding under the Term Loan Facility.

As of December 31, 2021, “springing” financial covenants were not applicable.

During March 2020, the Company borrowed $ 10.0 million under the Revolving Loan Facility, which bore interest at the lesser of LIBOR + 2.5 % or ABR + 1.5 % payable monthly.

These borrowings were repaid in 2020 with $ 5.0 million repaid in July 2020 and $ 5.0 million repaid in September 2020.

On August 30, 2021, the Company increased its capacity under the Revolving Loan Facility from $ 15.0 million to $ 65.0 million.

On June 24, 2022, the Company voluntarily prepaid the outstanding indebtedness under the Term Loan Facility.

The Company’s prepayment to the lenders was approximately $ 33.1 million, including accrued interest.

The Company did not incur any prepayment penalties in connection with the repayment of the term loan, which had a scheduled maturity of August 27, 2026.

The prepayment was made with cash on hand.

Pursuant to this repayment, the Company accelerated recognition of $ 0.6 million of expense related to the remaining unamortized debt issuance costs.

Including this accelerated expense, amortization expense of approximately $ 0.7 million, $ 0.2 million and $ 0.1 million was recorded for the years ended December 31, 2022, 2021 and 2020, respectively.

The Revolving Loan Facility remains in place and available to the Company.

As of December 31, 2022 and 2021 there were no amounts outstanding under the Revolving Loan Facility.

Interest expense relating to the Credit Facilities was approximately $ 0.5 million, $ 1.1 million and $ 1.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Debt issuance costs relating to the Credit Facilities of approximately $ 0.7 million have been capitalized and are being amortized over the life of the Credit Facilities using the effective interest method.

Amortization expense of approximately $ 0.2 million, $ 0.1 million and $ 0.3 million was recorded for the years ended December 31, 2021, 2020 and 2019, respectively.

Substantially all of the Company’s real and personal property serve as collateral under the above debt arrangements.

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Annual aggregate principal payments applicable to the note payable for years subsequent to December 31, 2021 are as follows:

(Dollars in Thousands)

Total $ 33,250

The (benefit from) provision for income taxes for years ending December 31, 2021, 2020 and 2019 are as follows:

The benefit from income taxes for years ending December 31, 2022, 2021 and 2020 are as follows:

(Dollars in Thousands) 2022 2021 2020

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Total deferred ( 7,025 ) ( 28,202 ) ( 7,804 )

Total (benefit from) provision for incomes taxes $ ( 27,857 ) $ ( 7,441 ) $ 1,207

Total benefit from incomes taxes $ ( 6,516 ) $ ( 27,857 ) $ ( 7,441 )

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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As of December 31, 2022, the Company has generated federal and state net operating loss carryforwards of approximately $ 103.0 million and $ 77.2 million (post-apportioned state NOL) respectively, that begin to expire in 2034.

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The following is a reconciliation of income tax computed at the U.S.

federal statutory income tax rate to the (benefit from) provision for income taxes:

federal statutory income tax rate to the benefit from income taxes:

Amount Percent

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( 538 ) 10 ( 56 ) 2.9 — ( 0.2 )

Non-controlling interest 722 488 ( 58 ) ( 3.9 ) ( 0.2 ) ( 0.2 )

149 332 30 ( 0.8 ) ( 0.2 ) 0.1

(Benefit from) provision for income taxes

Benefit from income taxes

$ ( 6,516 ) $ ( 27,857 ) $ ( 7,441 ) 35.1 % 12.8 % ( 31.6 ) %

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Stock Option Plan of the vesting conditions of certain outstanding stock option grants to certain employees and consultants.

The modification accelerated by one year any time vested options that were not previously 100% vested and modified the vesting condition of the performance based options to vest 60 % at IPO, 20 % 12 months after IPO and 20 % 18 months after the IPO.

The modification accelerated by one year any time vested options that were not previously 100% vested and modified the vesting condition

of the performance based options to vest 60 % at IPO, 20 % 12 months after IPO and 20 % 18 months after the IPO.

The modification also accelerated the CEO’s time based options by an additional four months such that 100 % of his time based options are vested.

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The Plan provides for the granting of stock options at a price equal to at least 100 % of the fair market value of the Company’s common stock as of the date of grant.

The Plan also provides for the granting of Stock Appreciation Rights, Restricted

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Stock, Restricted Stock Units (“RSUs”), Performance Awards and other cash-based or other stock-based awards, all which must be granted at not less than the fair market value of the Company’s common stock as of the date of grant.

The Plan also provides for the granting of Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSUs”), Performance Awards and other cash-based or other stock-based awards, all which must be granted at not less than the fair market value of the Company’s common stock as of the date of grant.

Participants in the Plan may include employees, consultants, other service providers and non-employee directors.

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As of the IPO, the Company has reserved 1,027,858 shares of common stock for issuance under the 2021 ESPP.

As of December 31, 2021, no shares of been issued under this plan.

As of December 31, 2022 and 2021, no shares of been issued under this plan.

Stock option activity

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Below outlines the assumptions used in the Black-Scholes modeling and calculation of the option fair value.

• Volatility - We determine volatility based on the historical stock volatilities of a group of publicly listed guideline companies over a period equal to the expected terms of the options, as we do not have sufficient trading history to determine the volatility of our common stock.

• Fair value of common stock - Prior to our IPO in April 2021, we estimated the fair value of our common stock using various valuation methodologies, including valuation analyses performed by third-party valuation firms.

After the IPO, we used the publicly quoted price as the fair value of our common stock.

• Risk-free interest rate - We base the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S.

• Volatility - The Company determines volatility based on the historical stock volatilities of a group of publicly listed guideline companies over a period equal to the expected terms of the options, as the Company does not have sufficient trading history to determine the volatility of the Company’s common stock.

• Fair value of common stock - Prior to the IPO in April 2021, the Company estimated the fair value of the Company’s common stock using various valuation methodologies, including valuation analyses performed by third-party valuation firms.

After the IPO, the Company used the publicly quoted price as the fair value of the Company’s common stock.

• Risk-free interest rate - The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S.

Treasury zero-coupon issues with an equivalent expected term of the options for each option group.

• Expected term - The expected term represents the period that our stock-based awards are expected to be outstanding.

• Expected term - The expected term represents the period that the Company’s stock-based awards are expected to be outstanding.

The expected term assumption is based on the simplified method in which the expected term is equal to the average of the stock-based award’s weighted-average vesting period and its contractual term.

We expect to continue using the simplified method until sufficient information about historical behavior is available.

• Dividend yield - We have not declared or paid any cash dividend and do not currently plan to pay a cash dividend in the foreseeable future.

Consequently, we used an expected dividend yield of zero.

The post-IPO grant date fair value was based on the assumptions of risk free rate of 1.24 %, volatility of 40.16 %, and 6.5 years expected term.

The Company expects to continue using the simplified method until sufficient information about historical behavior is available.

• Dividend yield - The Company has not declared or paid any cash dividend and do not currently plan to pay a cash dividend in the foreseeable future.

Consequently, the Company used an expected dividend yield of zero.

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

For the Years Ended December 31,

Expected term in years 6.25 years 6.50 Years

Expected stock price volatility 44.0 % 40.2 %

Risk-Free interest rate 2.4 % 1.2 %

Expected dividend yield — % — %

The following table summarizes stock option activity under the PH Parent Option Plan and Plan:

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Forfeited ( 202,772 ) 10.87

Outstanding at December 31, 2021 19,916,202 $ 5.90 9.36 $ 398,117

Granted 93,793 26.35

Exercised ( 6,675,810 ) 2.01

Forfeited ( 157,464 ) 19.42

Balance at December 31, 2022 13,176,721 $ 7.86 9.02 197,695

Exercisable at December 31, 2022 9,480,903 $ 2.06 9.29 195,924

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The following table summarizes the RSU activity under the 2021 Plan:

Number of Shares Grant Date Fair Value

Outstanding at January 1, 2021 — $ —

Granted 1,199,315 23.19

Vested ( 195,652 ) 23.00

Forfeited ( 18,762 ) 23.00

Unvested and outstanding at December 31, 2021 984,901 $ 23.23

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Total stock-based compensation expense was approximately $ 67.4 million, $ 253.5 million and $ 0.5 million for the years ended December 31, 2022 2021, 2020 respectively.

A tax benefit of approximately $ 7.1 million for the year ended December 31, 2021 and $ 0.0 million for the years ended December 2020 and 2019, respectively, was included in the Company’s net operating loss carry-forward that could potentially reduce future tax liabilities.

At December 31, 2021, there was approximately $ 93.2 million of unrecognized stock-based compensation expense related to unvested options and RSUs, net of forfeitures, that is expected to be recognized over a weighted-average period of 1.0 year.

A tax benefit of approximately $ 11.2 million and $ 7.1 million for the years ended December 31, 2022 and 2021, respectively, was included in the Company’s net operating loss carry-forward that could potentially reduce future tax liabilities.

At December 31, 2022, there was approximately $ 67.1 million of unrecognized stock-based compensation expense related to unvested options and RSUs, net of forfeitures, that is expected to be recognized over a weighted-average period of 1.3 years.

As of December 31, 2022, the total intrinsic value of options exercised and the total fair value of shares vested for the 2022 period was approximately $ 204.0 million and $ 108.7 million, respectively.

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Related-Party Transactions

On October 31, 2020, $ 4.0 million of related party receivables was used to repay $ 4.0 million of the Notes payable to related parties, leaving $ 4.7 million of Notes payable to related parties.

The Company paid interest of $ 0.2 million through October 31, 2020.

In addition, on December 22, 2020, the remaining $ 4.7 million of Notes payable to related parties were converted to a capital contribution, leaving no remaining Notes payable to related parties outstanding as of December 31, 2020.

On November 3, 2022, the Company announced a joint venture and strategic partnership with Novant Health Enterprises, a division of Novant Health, to launch Privia Medical Group – North Carolina for independent providers throughout North Carolina.

A member of our board of directors is a member of the board of trustees of Novant Health.

No revenue or expense was recognized related to Novant Health for the year ended December 31, 2022.

Commitments and Contingencies

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Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable.

While our cash and cash equivalents are managed by reputable financial institutions, the Company’s cash balances with the individual institutions may at times exceed the federally insured limits.

While the Company’s cash and cash equivalents are managed by reputable financial institutions, the Company’s cash balances with the individual institutions may at times exceed the federally insured limits.

At December 31, 2022, substantially all of the Company’s cash and cash equivalents were held at two financial institutions.

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The Company receives payment for medical services provided to patients by its physicians through contracts with payers.

Six payers within the network accounted for approximately 75 %, 75 % and 74 % for the twelve month periods ended December 31, 2021, 2020, and 2019 respectively.

Six payers within the network accounted for approximately 75 % for each of the twelve month periods ended December 31, 2022, 2021, and 2020, respectively.

The Company evaluates accounts receivable to determine if they will ultimately be collected.

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As of December 31, 2022 and 2021, the Company had six payers within the network that made up approximately 67 % and 68 % of accounts receivable, respectively.

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Net (Loss) Income Per Share

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Schedule II - Valuation and Qualifying Accounts For Each of The Three Years Ended December 31, 2022, 2021, and 2020

The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated March 25, 2022, should be read in conjunction with the consolidated financial statements.

The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 28, 2023, should be read in conjunction with the consolidated financial statements.

Financial Statement Schedules not included in this filing have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

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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