SECURITIES AND EXCHANGE COMMISSION
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
20202023
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
________________ to
________________MOTION ACQUISITION CORP.
Commission File Number 001-39618
DocGo Inc.
(Exact
Namename of Registrant as
Specifiedspecified in
its Charter)
| | | | | | | | |
| Delaware | | 001-39618 | | 85-2515483 |
(State or Other Jurisdictionother jurisdiction of
incorporation or organization) | | (Commission File Number) | | (IRSI.R.S. Employer
Identification No.) |
| | |
35 West 35th Street, Floor 6 New York, New York | | 10001 |
(Address of Incorporation)principal executive offices) | | | | Identification No.)(Zip Code) |
c/o Graubard Miller
The Chrysler Business
405 Lexington Avenue
New York, New York 10174
(Address of Principal Executive Offices) (Zip Code)
(212) 818-8800
(
Registrant’s
Telephone Number, Including Area Code)Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
telephone number, including area code: (844) 443-6246
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which
registered |
Units, each consisting of oneCommon Stock, par value $0.0001 per share of Class A common stock and one-third of one redeemable warrant | | DCGO | | MOTNU | The Nasdaq Stock Market LLC |
| | | | |
Class A common stock, par value $0.0001 per share | | MOTN | | The Nasdaq Stock Market LLC |
| | | | |
Redeemable warrants, exercisable for shares of Class A common stock at an exercise price of $11.50 per share | | MOTNW | | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐o No ☒x Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐o No ☒x Indicate by check mark whether the registrantRegistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐o Indicate by check mark whether the registrantRegistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit such files). Yes ☒x No ☐o Indicate by check mark whether the
registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☐x | Accelerated filer | ☐o |
| Non-accelerated filer | ☒o | Smaller reporting company | ☒o |
| Emerging growth company | ☒o | | |
If an emerging growth company, indicate by check mark if the registrantRegistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o Indicate by check mark whether the registrantRegistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐x If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐AsYES
o NO x The aggregate market value of March 29, 2021, 11,500,000the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2023, based on the closing price of the shares of Class Athe Registrant’s common stock (“Common Stock”) on The Nasdaq Stock Market as of such date, was $860,817,702. Shares of Common Stock par value $0.0001 per share,held by each executive officer and 2,875,000director and by each person who is known to own 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of
Class B Common Stock
par value $0.0001 per share, were outstanding.Documents Incorporatedoutstanding as of February 26, 2024 was 104,171,369.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for its 2024 Annual Meeting of Stockholders are incorporated by
Reference: None.Motion Acquisition Corp.
reference into Part III of this Annual Report on Form 10-K forwhere indicated. The Registrant expects to file such proxy statement with the Year EndedSecurities and Exchange Commission within 120 days of the Registrant’s fiscal year ended December 31, 2020
2023.
Table of Contents
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K
(“Annual(this “Annual Report”)
that are not purely historical are forward-looking statements. Ourincludes forward-looking statements
include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regardingwithin the
future. In addition, any statements that refer to projections, forecasts or other characterizationsmeaning of
future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Annual Report may include, for example, statements about: our ability to complete our initial business combination with Ambulnz, Inc. (dba DocGo), or any other initial business combination; our expectations around the performanceSection 27A of the
prospective target business or businesses; our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; our poolSecurities Act of
prospective target businesses;1933, as amended (the “Securities Act”), and Section 21E of the
ability of our officers and directors to generate a number of potential acquisition opportunities; our public securities’ potential liquidity and trading; the lack of a market for our securities; the use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance; the Trust Account not being subject to claims of third parties; and our financial performance.The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this Annual Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
PART I
References in this Annual Report to “we,” “us” or the “Company” refer to Motion Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refers to Motion Acquisition LLC, a Delaware limited liability company.
Item 1. Business
Overview
We are a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We were incorporated on August 11, 2020 as a Delaware corporation. We consummated an initial public offering (“Initial Public Offering”) on October 19, 2020. Based on our business activities, the Company is a “shell company” as defined under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”) because, regarding, among other things, the plans, strategies, outcomes and prospects, both business and financial, of DocGo Inc. and its consolidated subsidiaries (“DocGo,” the “Company,” “we,” “us” and “our”). These statements are based on the beliefs and assumptions of our management. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions, outcomes, results or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties and assumptions, many of which are beyond our control, and which may cause our actual results or outcomes, or the timing of our results or outcomes, to differ materially from those contained in our forward-looking statements. In particular, you should understand that the factors set forth below under “Risk Factors Summary” and those discussed under Part I, Item 1A, “Risk Factors” and elsewhere in this Annual Report could affect our future results and prospects and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this Annual Report. Accordingly, you should not place undue reliance on such forward-looking statements. All statements other than statements of historical fact are forward-looking. Forward-looking statements include, but are not limited to, statements concerning our possible or assumed future actions; business strategies, plans and goals; future events; future revenues or performance; financing needs; business trends; results of operations; objectives and intentions with respect to future operations, services and products, including our geographic expansion; our margin normalization initiative; new and existing contracts and backlog; M&A activity; workforce growth; leadership transitions; cash position; share repurchase program; expected impacts of macroeconomic factors, including inflationary pressures, general economic slowdown or a recession, rising interest rates, foreign exchange rate volatility, changes in monetary pressure, financial institution instability or the prospect of a shutdown of the U.S. federal government; potential changes in federal, state or local government policies regarding immigration and asylum seekers; expected impacts of geopolitical instability, including the conflict in Ukraine, conflict in Israel and surrounding areas and rising tensions between mainland China and Taiwan; our competitive position and opportunities, including our ability to realize the benefits from our operating model; our ability to improve gross margins; cost-containment measures; legislative and regulatory actions; the impact of legal proceedings and compliance risk; the impact on our business and reputation in the event of information technology system failures, network disruptions, cybersecurity incidents or losses or unauthorized access to, or release of, confidential information; the ability of the Company to comply with laws and regulations regarding data privacy and protection; and others. In some cases, these statements may be preceded by, be followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “might,” “will,” “should,” “could,” “can,” “would,” “design,” “potential,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends” or the negative of these terms or similar expressions.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report, and, while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have
no operationsconducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and
assets consisting almost entirely of cash.investors are cautioned not to unduly rely on these statements.
The
Company’s management team is led by James Travers, our Executive Chairman, and Michael Burdiek, our Chief Executive Officer. The Company’s sponsor is Motion Acquisition LLC (the “Sponsor”).Initial Public Offering
On October 19, 2020 we consummated a $115,000,000 Initial Public Offering, consisting of 11,500,000 units at a price of $10.00 per unit (“Unit”). Each Unit consists of one shareforward-looking statements made in this Annual Report are based on events or circumstances as of the Company’s Class date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as and to the extent required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
Risk Factors Summary
Risks Related to DocGo’s Business Strategy
•DocGo’s failure to successfully implement its business strategy could adversely affect its business.
•DocGo relies on its contractual relationships with healthcare provider partners and other strategic partners.
•DocGo incurs significant up-front costs in its client relationships and any inability to maintain and grow these client relationships could adversely affect its business.
Risks Related to DocGo’s Business and Industry
•DocGo faces a high level of competition in its industry and its revenues could be adversely affected if it loses some or all of its business under existing contracts.
•Negative media coverage could damage DocGo’s reputation and harm its ability to bid for and win government and other contracts.
•DocGo’s reliance on government contracts and a small number of large customers could adversely affect its business.
•DocGo’s participation in partnerships based value-based reimbursement models may have a material adverse effect on its business.
•A future pandemic or health crisis may have a material impact on DocGo’s business.
Risks Related to DocGo’s Limited Operating History
•DocGo has a limited operating history and a history of losses and expects its operating expenses to increase significantly in the future.
•DocGo may not be able to effectively manage its growth.
Risks Related to Information Technology
•DocGo relies on data center providers, Internet infrastructure, bandwidth providers, third-party hardware and software, other third parties and its own systems, some of which contain open-source software, to provide services to its clients.
•DocGo’s proprietary software may not operate properly, or DocGo may not be able to implement its solution for clients or resolve technical issues in a timely manner.
•Security breaches, loss of data and other disruptions or cybersecurity incidents could compromise sensitive business, customer or patient information or prevent DocGo from accessing critical information and expose it to liability.
Risks Related to DocGo’s Operations
•DocGo’s success depends on its key management personnel as well as its ability to successfully recruit, train and retain qualified healthcare professionals, and its labor costs are significant.
•DocGo’s inability to collect on its receivables or unfavorable payor mix could adversely affect its business.
•DocGo may not accurately assess the costs it will incur under new revenue opportunities.
•DocGo may not be able to successfully develop new offerings and technologies, or its marketing efforts may not be effective.
•DocGo is required to make capital expenditures in order to remain competitive.
•DocGo’s international operations subject it to additional risks that could adversely affect its business.
•DocGo could be adversely affected by natural disasters, other catastrophic events and cybersecurity incidents.
•Rising inflation may negatively impact DocGo’s business and financial results.
Risks Related to DocGo’s Intellectual Property
•DocGo’s failure to protect or enforce its intellectual property rights, including from claims of infringement, could adversely affect its business.
Risks Related to DocGo’s Legal and Regulatory Environment
•DocGo could be subject to lawsuits for which it does not have sufficient reserves.
•DocGo is subject to a variety of federal, state and local laws and regulatory regimes.
•Changes in tax laws, unanticipated tax liabilities, or changes in accounting rules, assumptions or judgements could adversely affect DocGo, including its effective tax rate, ability to utilize its net operating loss carryforwards and certain other tax attributes.
•DocGo’s internal control over financial reporting may not be effective.
•DocGo conducts business in a heavily regulated industry, and any failure to comply with these laws and government regulations, including laws governing the transmission, security and privacy of health information, or any changes to these laws, could negatively affect DocGo.
•DocGo must be properly enrolled in governmental healthcare programs to receive reimbursement, and reductions in Medicare reimbursement rates or state and federal efforts to reduce Medicaid spending could have an adverse effect on DocGo.
•DocGo has been and could become the subject of federal, state and municipal investigations, audits and compliance reviews, and its business practices may be found to constitute illegal fee-splitting or corporate practice of medicine.
Risks Related to DocGo’s Indebtedness
•DocGo’s future indebtedness could reduce the funds that would otherwise be available for other corporate purposes, and it may still be able to incur substantially more debt.
•DocGo may be forced to take various actions to satisfy its obligations under its current and future indebtedness, and the terms of its current and future indebtedness may restrict its operations.
Risk Relating to the Ownership of DocGo Common Stock
•The Nasdaq Capital Market (“Nasdaq”) may delist DocGo’s securities from trading on its exchange.
•The market price and trading volume of Common Stock may be volatile, and the value of Common Stock has declined and may continue to decline, and you may not receive any return on your investment in Common Stock.
•Provisions in DocGo’s organizational documents could delay or prevent a change of control or limit stockholders’ ability to obtain a favorable judicial forum for disputes with DocGo or its directors, officers, employees or stockholders.
PART I
Item 1. Business.
Our Company
DocGo is redefining healthcare. DocGo is leading the proactive healthcare revolution with an innovative care delivery platform that includes mobile health services, virtual care management and ambulance services. DocGo is helping to reshape the traditional four-wall healthcare system by providing high quality, highly accessible care to patients where and when they need it.
DocGo’s proprietary technology platform, dedicated network of certified health professionals and robust fleet of medical response vehicles provide services in 30 states and the United Kingdom. DocGo’s vertically integrated approach helps elevate the quality of patient care and drive business efficiencies for facilities, hospital networks and health insurance providers. We often provide our services in collaboration with leading healthcare organizations via long-term relationships that are intended to drive meaningful revenue, help provide efficient and effective capital allocation and create low-risk opportunities for significant growth.
Our mission is to provide high quality, highly accessible healthcare for all, empowering the delivery of medical transportation and mobile healthcare outside the traditional “brick-and-mortar” facilities, with more accessible, affordable and efficient patient-centered care. Since 2015, through nearly 8 million patient interactions, we have created a care delivery model that helps provide better care outside of the physical walls of the healthcare system.
We began by developing a state-of-the-art, intuitive platform designed to drive greater efficiency and improved access to patient care. Our innovative technology can change the way healthcare facilities manage patient transportation and eliminate many of the common stock, $0.0001 par value (the “Class A common stock”obstacles faced when scheduling service, ultimately freeing medical professionals to focus more time and their valuable resources on what they do best — providing patient care. Additionally, in certain markets, our mobile health in-person care model facilitates medical treatment directly to patients in the comfort of their homes, workplaces and other non-traditional locations. Working under the guidance of prescribing physicians, our network of more than 700 medical clinicians as of December 31, 2023 (which includes Company employees, personnel from a variety of subcontracted labor agencies and some independent contractors) provides a wide range of tests, procedures, care gap closures and interventions that previously required a visit to a traditional healthcare setting. Such clinicians include, among others, licensed practical nurses (“LPNs”), registered nurses (“RNs”) and one-thirdAdvanced Practice Providers (“APPs”) assisted by additional support staff.
Our Segments
DocGo has three reporting segments: Mobile Health Services, Transportation Services and Corporate.
Mobile Health Services
The traditional healthcare model requires patients to interact with many levels of healthcare providers — including receptionists, nurses, lab technicians and physicians — for even the most routine tests, procedures and interventions. We recognized that a “Public Warrant”). Each whole Public Warrant entitlesnumber of these services could easily be performed by LPNs, RNs, APPs and other clinicians under the holderguidance of higher licensed practitioners, but in the comfort of a patient’s home or workplace. Our patient-centered approach helps limit the need for individuals to purchase one shareseek routine treatment in more expensive and environmentally exposed, less comfortable settings such as emergency departments and urgent care clinics. In addition to providing greater convenience to patients, our Mobile HealthServices help reduce unnecessary burdens on healthcare systems by freeing up their finite, in-person resources to address more urgent and critical patient needs. DocGo’s clinical Mobile Health Services, which we expanded into the home and workplace in 2020, facilitate medical care via a turnkey suite of Class A common stock atintegrated, technology-enabled solutions. Through DocGo On-Demand and additional Mobile Health Services programs, we provide care for a pricediverse group of $11.50 per share. Simultaneouslycustomers, including municipalities, hospitals and health systems, insurers, physician practices, businesses and employers. Additionally, our expanded population health offerings provide holistic health, social and shelter coordination services to underserved communities.
Our solutions encompass on-site evaluation, diagnostics, triage and treatment, including the services detailed in the following table:
We place an emphasis on early intervention, preventive care and chronic disease management. DocGo can address over 30 gaps in care for health plans, especially Medicare and Medicaid plans focused on HEDIS Star Ratings. Our work with the closinghealth plans on patient engagement and gap closure programs is growing, with programs in several states. As of the Initial Public Offering,date of this Annual Report, we consummatedhave active programs with Elevance Health, HealthFirst, EmblemHealth and others. These programs allow us to address gaps in care for Medicare and Medicaid populations and help manage multiple chronic diseases. Our priority and strategic focus is to grow and launch new programs and new geographies with our existing health plan partners who collectively cover approximately 80 million lives.
Our virtual care management programs monitor patients remotely and intervene before minor issues become major health crises. Our remote monitoring team currently works with more than 50,000 patients living with chronic
conditions – and we intend to launch specialized virtual care programs with nephrology and additional specialty practice groups, including endocrinology and pulmonology.
Proactive healthcare not only improves patient health outcomes but can also significantly reduce overall cost burdens on the system. Based on Accountable Care Organization data from the Centers for Medicaid & Medicare Services (“CMS”), we estimate that our services have saved more than $167 million in 2023 by preventing unnecessary emergency department visits. We also intend to enter into additional partnerships with health plans that use value-based reimbursement models that involve risk-sharing. These payment models are specifically designed to improve patient health outcomes while reducing overall costs, as reimbursement is tied to quality of care and effectively managing total cost of care.
As patients seek more efficient, more convenient healthcare options, we believe our virtual care-enabling solutions are poised for significant growth by delivering a $3,800,000combination of in-person and virtual patient care previously inaccessible outside of the more traditional healthcare settings. The power of our model is the modality of care, specifically its scalability and lowered cost basis. We aim to combine the efficiency of telehealth by virtually pairing a specialized Physician Assistant (“PA”) with an LPN on-site in the patient’s home to be the PA’s eyes, ears, hands and feet.
We partner with leading national health systems, insurance carriers, private placement (the “Private Placement”)organizations and employers, state and local governments and managed care organizations to provide our Mobile Health Services, including NYC Health + Hospitals, New York City Department of Housing Preservation and Development, Dollar General and Martin Luther King Jr. Memorial Hospital in Los Angeles, CA. In recent years, our government contract work has represented a substantial portion of our overall revenue, representing approximately 73%, 64% and 65% of revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and maintaining and continuing to grow this revenue stream is an aggregate of 2,533,333 warrants (“Private Placement Warrants”) at a price of $1.50 per warrant. The Private Placement Warrants are identical to the Public Warrants sold asimportant part of our growth strategy. For the Units infiscal year ended December 31, 2023, we generated approximately 71% of our revenues from the Initial Public Offering except that, so long as they are heldsolutions provided by our Sponsor or its permitted transferees, (i) they are not redeemable by us, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completionMobile Health Services segment.
The success of our
initial business combinationcare delivery model is reflected in our Net Promoter Score (“NPS”), which is one of the most widely accepted standards of customer experience metrics. Scores are measured from a range of -100 to +100 with scores over 30 commonly viewed as good and
(iii) they may be exercised byover 50 considered excellent. Our Mobile Health Services NPS score for the
holders onyear ended December 31, 2023 was 81, which is a
cashless basis.Priortestament to our customers’ strong perception regarding the Initial Public Offering, in August 2020, we issued an aggregate of 3,737,500 sharesvalue of our Class B common stock, par value $0.0001 per shareservices.
Transportation Services
DocGo’s digitally-enabled medical transportation solutions are offered under the Ambulnz brand. We help provide reliable, efficient access to local clinical services, including primary and specialty care, dialysis treatments for chronic care management and transfers between clinical settings. Every vehicle in our fleet is equipped with our proprietary technology platform, which is integrated with some of the nation’s largest electronic medical record (“Founder Shares”EMR”) for an aggregate purchase pricesystems.
This integration with EMR systems is designed to provide seamless transfer of $25,000,electronic patient information and discharge data to our Sponsor.healthcare provider customers, which helps improve order speed and accuracy and eliminate a myriad of manual processes. In October 2020,addition, our Sponsor contributed backShareLinkTM technology is designed to provide our capital an aggregatehealthcare partners and patients with real-time vehicle locations and accurate estimated time of 431,250 Founder Shares. Additionally, an aggregatearrivals and helps deliver valuable peace of 431,250 Founder Shares were forfeited in November 2020 because the underwriter did not exercise its over-allotment option.mind. Consequently, our healthcare facility customers are better able to order, track and manage transportation requests and patient movement, thereby enhancing utilization of resources and cost. As of December 31, 2020,2023, we had 580 vehicles in service throughout the Sponsor owned 2,875,000 Founder Shares based on its proportional interestUnited States and another 294 in the Company.UponUnited Kingdom. For the closingfiscal year ended December 31, 2023, we generated approximately 29% of our revenues from our Transportation Services segment.
Corporate
Our Corporate segment primarily represents shared services and personnel that support both the Initial Public OfferingTransportation Services and Private Placement, $115,000,000 from the net proceeds of the sale of the Units in the Initial Public OfferingMobile Health Services segments. It contains operating expenses such as information technology costs, certain insurance costs and the Private Placement (including $4,025,000compensation costs of deferred underwriting commissions) was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). The Company’s amendedsenior and restated certificate of incorporation provides that, other than the withdrawal of interest to pay tax obligations, none of the funds held in the Trust Account will be released until the earliest of: (i) the completion of the initial business combination; or (ii) the redemption of any shares of Class A common stock included in the Units being sold in the Initial Public Offering (the “Public Shares”) properly submitted in connection with a stockholder vote to amend the Company’s certificate of incorporation to modify the substance or timingexecutive leadership. None of the Company’s obligation to redeem 100%revenues or costs of the Public Shares if the Company does not complete the initial business combination by October 19, 2022 (within 24 months from the closing of the Initial Public Offering); or (iii) the redemption of the Public Shares if the Company is unable to complete the initial business combination by October 19, 2022, subject to applicable law. The proceeds held in the Trust Account can only be invested in permitted United States “government securities”goods sold are reported within the meaning of Section 2(a)(16) ofCorporate segment.
Human Capital Resources
We strive to hire the Investment Company Act of 1940, as amended (the “Investment Company Act”), havingbest talent across our industry, with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.focus on inspiring performance. As of December 31, 2020,2023, we had over 4,100 employees, including healthcare professionals, field management personnel and corporate support staff, as represented in the table below. Healthcare professionals consist of emergency medical technicians (“EMTs”), paramedics, LPNs, RNs, APPs, clinicians and related support staff; field management personnel includes supervisors and
managers; and corporate support staff includes software development, billing, finance, human resources, legal and compliance, sales, marketing and executives.
| | | | | | | | | | | | | | | | | |
| Full-time | | Part-time | | Total |
| Healthcare Professionals | 2,176 | | 1,234 | | 3,410 |
| Field Management Personnel | 469 | | 6 | | 475 |
| Corporate Support Staff | 270 | | 9 | | 279 |
| Total | 2,915 | | 1,249 | | 4,164 |
None of our employees are represented by a balance in cash and investments held in trust of $115,020,078. Aslabor union or subject to any collective bargaining agreement. In addition to the employees above, as of December 31, 2020,2023, the Company engaged the services of approximately 3,456 people, primarily in the healthcare professional area, some through a variety of subcontracted labor agencies and some as independent contractors.
Recruiting
We consider our employees to be our most valuable assets. Our employee experience begins with identifying and attracting people who embody our core values and share our vision to provide high-quality patient care. We are committed to building a company that our employees are proud to be a part of and fostering an environment in which our employees can grow, evolve and discover their existing and untapped potential. We believe our focused approach to recruiting and developing talent allows us to attract strong candidates to continue growing and scaling our business.
Compensation and Benefits
Ongoing evolution in the healthcare system and an aging population mean EMTs, paramedics and nurses are more critical to medical care than ever before, yet EMTs and paramedics remain the lowest paid professionals in the chain of care. Most companies in the industry pay an hourly wage only and offer no funds hadbenefits, often resulting in low employee morale, high turnover and ultimately a less efficient business. We take pride in our high-quality medical professionals and have created an attractive compensation model that demonstrates their vital importance to our business and motivates them to deliver exceptional care.
We offer a pay package that we believe is innovative within our industry. In addition to base hourly wages, DocGo also offers employees bonuses based on certain performance metrics, medical insurance, paid time off and an equity incentive plan for our frontline clinicians with broad-based participation — a program that provides the opportunity to acquire an ownership stake in the Company. This is in line with our belief that all of our employees are partners in the business, and we want everyone to “think like an owner,” with the best long-term interests of the Company and its stockholders as a driver of decision making. We believe that this approach makes us a more attractive employer and supports a strong pipeline of top-tier talent across all levels of the Company.
Employee Engagement
We routinely monitor employee satisfaction and work to maintain an environment where employees can contribute and thrive. DocGo has been withdrawnrecognized for its excellent workplace culture and employee satisfaction. One measure of this are the hundreds of positive reviews our employees have given DocGo on leading recruitment websites. As of the date of this Annual Report, DocGo’s employee rating on Indeed is 4.3 out of 5.0, and our employee rating on Glassdoor is 4.2 out of 5.0 - ratings that are significantly higher than many of our competitors in the healthcare industry. Additionally, DocGo earned a Great Place to WorkTM certification, which is based entirely on feedback from employees, for the Trust Accountsecond year in a row in 2023.
Training
We have created a number of programs to pay taxes. foster the professional development of our employees and help attract top-tier talent. Our staff of Training and Education Coordinators runs a robust, in-person onboarding program to help train employees and keep them up to date in relevant procedures and protocols. We are also an American Heart Association Training Site and offer in-house basic life support (BLS), advanced cardiovascular life support (ACLS) and pediatric advanced life support (PALS) training and certification to our clinicians who require such training. We are also a:
•Private Authorized Training Center of the Airway Management Education Center offering The Difficult Airway Course: EMS and other courses;
•National Association of Emergency Medical Technicians Training Center offering Advanced Medical Life Support, Prehospital Trauma Life Support and other courses;
•National Safety Council Training Center offering the Defensive Driving Course; and
•Licensed Training Provider of the American Red Cross offering the Emergency Medical Responder Course and other courses.
In Marchaddition, we are able to grant EMS continuing education units in New York, New Jersey, Pennsylvania and Texas and through partnerships with the Commission on Accreditation for Prehospital Continuing Education (CAPCE) and the Kentucky Board of Nursing.
We have also implemented a self-paced online training program for Company policy and procedures training, mandated Occupational Safety and Health Administration (“OSHA”) training courses, clinical skills, customer service, diversity, HIPAA regulations, safety and compliance and annual documentation training. In addition, our drivers are trained in the Coaching the Emergency Vehicle Operator (CEVO) Ambulance course.
We also use a management system for credential tracking and Continuous Quality Improvement to help ensure that our staff maintains all required credentials relevant to their positions with the Company. Through this system, employees and their supervisors are automatically notified at designated times of recertification deadlines. Course completion, assignments and other compliance requirements are tracked in this system as well. Verification monitoring ensures that all employees meet current state requirements. This tool verifies Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services (“HHS”) exclusions at the state and federal levels and performs sanction screening for licensed personnel and 24/7 monitoring of state licenses.
Our comprehensive training programs utilize a full range of resources, including print materials, training modules, webinars, seminars and videos provided by the Centers for Disease Control and Prevention and federal, state and local entities, medical institutions and public health agencies.
In December 2021, we
paid our Delaware franchise tax liability for 2020 of $78,192, funded partially fromlaunched DocGo EMS Academy, a full-service program dedicated to recruiting and training emergency medical services (“EMS”) clinicians. Combining classroom education with practical hands-on learning, the
earnings on the Trust Account investments.
The remaining $3,825,000 held outside of Trust Account was usedprogram is designed to pay underwriting commissions of $2,300,000, repay a loan from our Sponsor of approximately $71,000,help existing healthcare professionals advance their careers and pay offering and formation costs. As of December 31, 2020, we had an unrestricted cash balance of $878,653 to satisfy our working capital needs.
Letter Agreement
In connection with our Initial Public Offering, our Sponsor, each member of our Board and each of our executive officers entered into a letter agreement (the “Letter Agreement”). Pursuant to the Letter Agreement our Sponsor, directors and members of the management team have agreed to (i) waive their redemption rights with respect to their Founder Shares and Public Shares in connectionprovide aspiring entry-level workers with the completion ofopportunity to enter the healthcare industry. DocGo EMS Academy is tailored to EMS workers, from EMTs to paramedics. This comprehensive training program is available in select states and offers free tuition for students who continue their employment with DocGo, which we anticipate could assist us in our initial business combination; (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment to the amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the public shares ifrecruiting efforts.
The Business Combination
On November 5, 2021, the Company
does not complete(then known as Motion Acquisition Corp.) consummated a business combination
by October 19, 2022, orpursuant to
provide for redemption in connection with a business combinationthat certain Agreement and
(iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete a business combination by October 19, 2022, although they will be entitled to redemption or liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete a business combination within the prescribed time frame; (iv) vote any Founder Shares held by them and any Public Shares purchased during or after the IPO (including in open market and privately-negotiated transactions) in favorPlan of
any proposed business combination for which we seek stockholder approval, (v) not to transfer or sell (subject to certain limited exceptions) (1) the Founder Shares until the earlier of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the reported closing price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading-day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property, or (2) the private placement warrants and the Class A common stock underlying such warrants, until 30 days after the completion of our initial business combination.Proposed Business Combination
OnMerger dated March 8, 2021 our board of directors unanimously approved an agreement and plan of merger (the “Merger Agreement”) dated March 8, 2021, by and among the Company, Motion Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub”), and Ambulnz, Inc. (dba DocGo), a Delaware corporation (“DocGo”). If the Merger Agreement is adoptedAmbulnz. The transactions contemplated by our stockholders and the transactions under the Merger Agreement are consummated,referred to herein as the “Business Combination.” In connection with the closing of the Business Combination, the Company changed its name from Motion Acquisition Corp. to DocGo Inc.
Pursuant to the Merger Agreement and as described in the Company’s definitive proxy statement/consent solicitation/prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 14, 2021, Merger Sub
will mergemerged with and into
DocGo (the “Merger”),Ambulnz, with
DocGo beingAmbulnz continuing as the surviving
entitycorporation. As a result of the
Merger and becomingBusiness Combination, Ambulnz became a wholly-owned subsidiary of the Company,
(the “Proposed Transaction”). DocGo is a leading providerand each share of
last-mile telehealth and integrated medical mobility services with operations in 26 states in the U.S. and in the United Kingdom.Unless otherwise indicated, the information in this Annual Report assumes we will not consummate the proposed business combination with DocGo, and that we will seek to find an alternative target with which to consummate an initial business combination.
Merger Agreement
Pursuant to the Merger Agreement, upon consummationSeries A preferred stock of the Merger, the outstanding DocGo common stock will be exchanged for a pro rata portion of an aggregate of 83,600,000 shares (“Closing Shares”) of ourAmbulnz, no par value, Class A common stock less the number of Closing Shares reserved for issuance by the Company upon the exerciseAmbulnz, no par value, and Class B common stock of outstanding optionsAmbulnz, no par value, was cancelled and warrants of DocGo which will be assumed by the Company.
As part of the aggregate consideration payable to DocGo pursuant to the Merger Agreement, DocGo’s stockholders will also haveconverted into the right to receive their pro rataa portion of upmerger consideration issuable as Common Stock, pursuant to an aggregatethe terms and conditions set forth in the Merger Agreement.
In connection with the Business Combination, the Company raised $158.0 million, net of
5,000,000 sharestransaction costs of
Class A common stock (“Contingent Shares”) if$20.0 million. This amount was comprised of (i) $43.4 million of cash held in the
following stock price conditions are met: (i) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading daysCompany’s trust account established in
a thirty (30)-trading-day period at any time after the closing date and by the first anniversaryconnection with its initial public offering, net of the
closing date; (ii) 1,250,000 Contingent Shares if the closing priceCompany’s transaction costs and underwriters’ fees of
our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; (iii) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; and (iv) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $21.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date.Pursuant to the Merger Agreement, the Sponsor will enter into an escrow agreement and will deposit an aggregate of 575,000 shares of Class A common stock (“Sponsor Earnout Shares”) into escrow, which shares will either be released to the Sponsor or forfeited if certain stock price conditions are met or not, as follows: (i) with respect to 287,500 Sponsor Earnout Shares, the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date,$9.6 million, and (ii) with respect to the remaining 287,500 Sponsor Earnout Shares, the closing price$114.6 million of our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date.
Consummation of the Proposed Transaction is subject to customary conditions of the respective parties, including the approval of the Merger Agreement, the Proposed Transaction and certain other actions related thereto by our stockholders and DocGo’s stockholders, the availability of at least $175,000,000 in cash from the Trust Account and from the proceedssale of the PIPE (discussed below), after giving effect to redemptions, if any, by the Company’s public stockholders and other permitted disbursements, and DocGo having obtained certain regulatory approvals of the New York Department of Health with respect to the Proposed Transaction.
PIPE Private Placement
Concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements with certain qualified institutional buyers and institutional accredited investors (collectively, the “Investors”), pursuant to which the Company will, substantially concurrently with, and contingent upon, the consummation of the Merger, issue an aggregate of 12,500,000 shares of the Company’s Class A common stockCommon Stock to the Investorscertain investors at a price of $10.00 per share
in a private placement that closed concurrently with the Business Combination (the “PIPE Financing”), net of $10.4 million in transaction costs incurred in connection with the PIPE Financing. These transaction costs consisted of banking, legal and other professional fees, which were recorded as a reduction to additional paid-in capital.
Competition
The U.S. healthcare industry is highly competitive, and we compete with a broad and diverse set of companies spanning both of our business segments. The competitive landscape is highly fragmented for aggregate gross proceedsboth technology-enabled mobile healthcare solutions and medical transportation services, ranging in each case from small, locally owned and operated providers to large national organizations. While we do not believe that any single competitor offers our vertically integrated suite of Mobile Health Services and Transportation Services, numerous companies offer components of mobile health and/or transportation services that compete with our solutions.
Competition in the mobile health industry is primarily based on scale; ease of use, convenience and accessibility; brand recognition; breadth, depth and efficacy of telehealth and mobile health services; technology; clinical quality; customer support; cost; reputation; and customer satisfaction and value. Major competitors (in each case relative to only some of our products or services) include much larger, national or regional telehealth or in-home healthcare service providers such as DispatchHealth, Modivcare, Addus HomeCare, Option Care Health, Teladoc, Amwell, Signify Health (acquired by CVS in March 2023), MedArrive, Biofourmis and One Medical (acquired by Amazon in February 2023). We also believe there are several smaller, private organizations providing in-home or on-site care utilizing different, higher cost healthcare providers. Non-traditional providers and others such as payors may enter the space and/or develop innovative technologies or business activities that could disrupt the industry. Competition could also increase from large technology companies, such as Apple, Amazon, Facebook, Verizon or Microsoft, who may develop their own telehealth or mobile health solutions or acquire existing industry participants, such as Amazon’s acquisition of One Medical in February 2023, as well as from large retailers like Walmart, CVS and others. Despite the significant growth of telehealth services in recent years, we believe the market is still in its infancy and new competitors with similar and novel models will enter the market as it matures.
Success in the medical transportation industry is based primarily on the ability to improve customer service, such as on-time performance and efficient call intake; provide comprehensive clinical care; and recruit, train and motivate employees, particularly ambulance crews who have direct contact with patients and healthcare personnel. Pricing, billing and reimbursement expertise are also critical. Competitors within the industry vary considerably in type and identity by market, with our primary competitors being small, locally owned operators as well as local fire departments and other local government providers. Larger private provider competitors include Modivcare, Falck, Global Medical Response, Southwest Ambulance, Paramedics Plus and Acadian Ambulance.
Intellectual Property
We own and use trademarks and service marks on or in connection with our services, including both unregistered common law marks and registered trademarks. We have registered “Ambulnz” and our corporate logo in the United States and the United Kingdom. We have registered the “DocGo” word mark and design in the United States, United Kingdom and EU. We are also the registered holder of a variety of domain names that include “Ambulnz,” “DocGo” and similar variations.
Our proprietary platform, mobile application and associated software code and firmware are protected as trade secrets and our confidential information, as appropriate. We also license the use of certain technology and other intellectual property rights owned and controlled by others. We believe that our intellectual property is a valuable asset to our business that affords us a competitive advantage in the markets in which we operate. We maintain our intellectual property and confidential business information in a number of ways. For instance, we have a policy requiring companies we work with to execute confidentiality agreements upon commencement of a business relationship with us where appropriate. Our agreements with customers who are privy to confidential or proprietary information also include confidentiality and non-disclosure provisions.
In addition, we require our employees, independent contractors and consultants to execute confidentiality and proprietary agreements in connection with their employment or engagement with us and to assign to us inventions conceived during the term of their employment or engagement while using our property or which relate to our business.
Upon discovery of potential infringement of our intellectual property, we assess and, when necessary, take action to protect our rights as appropriate.
Regulation
Our operations are subject to comprehensive United States federal, state and local rules and regulations and comparable multiple levels of international regulation in the jurisdictions in which we do business. The laws and regulations governing our business and interpretations of those laws and regulations continue to expand, are subject to frequent change and may become more restrictive. Our ability to operate profitably will depend in part upon our ability, and that of our healthcare provider partners, to maintain all necessary licenses and to operate in compliance with applicable laws and regulations. We therefore devote significant resources to monitoring developments in healthcare regulation. As the applicable laws and regulations change, we may be required to make conforming modifications in our business processes from time to time. In many jurisdictions where we operate, neither our current nor our anticipated business model, in particular with respect to our Mobile Health Services, has been the subject of judicial or administrative interpretation. We cannot be assured that a review of our business by courts or regulatory authorities will not result in determinations that could limit or otherwise adversely affect our operations or that the healthcare regulatory environment will not change in a way that restricts our operations.
False Claims Act
The federal False Claims Act is a means of policing false bills or false requests for payment in the healthcare delivery system. Among other things, the federal False Claims Act authorizes the imposition of up to three times the government’s damages and significant per claim civil penalties on any “person” (including an individual, organization or company) who, among other acts:
•knowingly presents or causes to be presented to the Companyfederal government a false or fraudulent claim for payment or approval;
•knowingly makes, uses or causes to be made or used a false record or statement material to a false or fraudulent claim;
•knowingly makes, uses or causes to be made or used a false record or statement material to an obligation to pay the government;
•knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the federal government; or
•conspires to commit the above acts.
In addition, amendments to the federal False Claims Act and Social Security Act impose severe penalties for the knowing and improper retention of $125,000,000overpayments collected from government payors. Under these provisions, within 60 days of identifying and quantifying an overpayment, a provider is required to notify the Centers for Medicare and Medicaid Services (“CMS”) or the Medicare Administrative Contractor of the overpayment and the reason for it and return the overpayment. An overpayment impermissibly retained could subject a party to liability under the federal False Claims Act, exclusion from government healthcare programs, including Medicare and Medicaid, and penalties under the federal Civil Monetary Penalties Law discussed below.
The federal False Claims Act provides for penalties that range from $5,500 to $11,000 (adjusted for inflation) for each false claim, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim. On February 12, 2024, the U.S. Department of Justice issued a final rule announcing adjustments to federal False Claims Act penalties, under which the per claim range increases to a range from $13,946 to $27,894 per claim, so long as the underlying conduct occurred after November 2, 2015.
The federal government has used the statute to prosecute a wide variety of alleged false claims and fraud allegedly perpetrated against Medicare and state healthcare programs, including but not limited to coding errors, billing for services not rendered, the submission of false cost or other reports, billing for services at a higher payment rate than appropriate, billing under a comprehensive code as well as under one or more component codes included in the comprehensive code,
billing for care that is not considered medically necessary and false reporting of risk-adjusted diagnostic codes to Medicare Advantage (“MA”) (or Part C) plans. The Affordable Care Act of 2010 (the
“PIPE”“Affordable Care Act”)
., as currently structured, provides that claims tainted by a violation of the federal Anti-Kickback Statute are false for purposes of the federal False Claims Act. Some courts have held that filing claims or failing to refund amounts collected in violation of the Stark Law can form the basis for liability under the federal False Claims Act. In addition to the provisions of the federal False Claims Act, which provide for civil enforcement through “qui tam” whistleblower lawsuits, the federal government can also use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims for payment to the federal government.
Federal Fraud and Abuse Laws
The Companyfederal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations and related rules (collectively, “HIPAA”), established several separate criminal penalties for making false or fraudulent claims to insurance companies and other non-governmental payors of healthcare services. Under HIPAA, these two additional federal crimes are: “Healthcare Fraud” and “False Statements Relating to Healthcare Matters.” The Healthcare Fraud statute prohibits knowingly and recklessly executing a scheme or artifice to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The False Statements Relating to Healthcare Matters statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact by any trick, scheme or device or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment. This statute could be used by the government to assert criminal liability if a healthcare provider knowingly fails to refund an overpayment. These provisions are intended to punish some of the same conduct in the submission of claims to private payors as the federal False Claims Act covers in connection with governmental health programs.
In addition, the Civil Monetary Penalties Law imposes civil administrative sanctions for, among other violations, inappropriate billing of services to federally funded healthcare programs and employing or contracting with individuals or entities who are excluded from participation in federally funded healthcare programs. Moreover, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties of up to $20,000 for each wrongful act. Moreover, in certain cases, providers who routinely waive co-payments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the federal Anti-Kickback Statute and federal False Claims Act, either of which can impose additional penalties associated with the wrongful act. One of the statutory exceptions to the prohibition is non-routine, unadvertised waivers of co-payments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts. The OIG emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient. Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of co-payments and deductibles offered to patients covered by commercial payors may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.
State Fraud and Abuse Laws
Various states in which we operate have also adopted similar fraud and abuse laws as the federal laws and statutes described above. The scope of these laws and the interpretations thereof vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Some state fraud and abuse laws apply to items or services reimbursed by any payor, including patients and commercial insurers, not just those reimbursed by a federally funded healthcare program. A determination of liability under such state fraud and abuse laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions.
Health Information Privacy and Security Laws
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personally identifiable information (“PII”), including health information. In particular, HIPAA establishes privacy and security standards that limit the use and disclosure of protected health information (“PHI”) and require the implementation of administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of individually
identifiable health information in electronic form. HIPAA’s requirements apply to “covered entities” and their independent contractors, agents and other “business associates” that create, receive, maintain or transmit PHI in connection with providing services to covered entities. Although we are a covered entity under HIPAA, we are also a business associate of other covered entities when we are working on behalf of our healthcare provider partners.
Violations of HIPAA may result in civil and criminal penalties. For the lowest penalty tier, the civil penalties range from $137 to $68,928 per violation, with a cap of approximately $2.1 million per year for violations of the same standard during the same calendar year. However, a single breach incident can result in violations of multiple standards. We must also comply with HIPAA’s breach notification rule. Under the breach notification rule, covered entities must notify affected individuals without unreasonable delay in the case of a breach of unsecured PHI, which may compromise the privacy, security or integrity of the PHI. In addition, notification must be provided to HHS and the local media in cases where a breach affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis. The regulations also require business associates of covered entities to notify the covered entity of breaches by the business associate.
State attorneys general also have the right to prosecute HIPAA violations committed against residents of their states. While HIPAA does not create a private right of action that would allow individuals to sue in civil court for a HIPAA violation, its standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA-covered entities and their business associates for compliance. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the fine paid by the violator under the Civil Monetary Penalties Law. In light of recent enforcement activity and statements from HHS, we expect increased federal and state HIPAA privacy and security enforcement efforts.
HIPAA also requires HHS to adopt national standards establishing electronic transaction standards that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically.
Many states in which we operate and in which our customers reside also have laws that protect the privacy and security of sensitive and personal information, including health information. These laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, the laws of the State of California, in which we operate, are more restrictive than HIPAA. Where state laws are more protective than HIPAA, we must comply with the state laws we are subject to, in addition to HIPAA. In certain cases, it may be necessary to modify our systems or planned operations to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has agreedbeen misused. In addition, state laws are changing rapidly, and there is discussion of a new federal privacy law or federal breach notification law, to which we may be subject.
In recent years, there have been a number of well-publicized data breaches involving the improper use and disclosure of PII and PHI. Many states have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals and state officials. In addition, under HIPAA and pursuant to the related contracts that we enter into with our healthcare provider partners and other third parties, we must report breaches of unsecured PHI to our contractual partners following discovery of the breach. Notification must also be made in certain circumstances to affected individuals, federal authorities and others.
In addition to HIPAA, state health information privacy and state health information privacy laws, we may be subject to other state and federal privacy laws, including laws that prohibit unfair privacy and security practices and deceptive statements about privacy and security and laws that place specific requirements on certain types of activities, such as data security and texting.
Anti-Kickback Statute
The federal Anti-Kickback Statute is a broadly worded prohibition on the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person covered by Medicare, Medicaid or other governmental programs, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental programs or (iii) the purchasing, leasing or ordering or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other governmental programs. Certain federal courts have held that the Anti-Kickback Statute can be violated if “one
purpose” of a payment is to induce referrals. In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation, making it easier for the government to prove that a defendant had the requisite state of mind or “scienter” required for a violation. Moreover, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Violations of the Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmental programs as well as civil and criminal penalties, including fines of $120,816 per violation, plus up to three times the amount of the unlawful remuneration, and imprisonment of up to ten years. Civil penalties for such conduct can further be assessed under the federal False Claims Act. In addition to a few statutory exceptions, the OIG has published safe harbor regulations that outline categories of activities that are deemed protected from prosecution under the Anti-Kickback Statute provided all applicable criteria are met. The failure of a financial relationship to meet all of the applicable safe harbor criteria does not necessarily mean that the particular arrangement violates the Anti-Kickback Statute. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities, such as the OIG.
Federal Stark Law
Section 1877 of the Social Security Act, also known as the physician self-referral law and commonly referred to as the Stark Law, prohibits a physician who has a financial relationship, or who has an immediate family member who has a financial relationship, with entities providing certain designated health services from referring Medicare patients to such entities for the furnishing of designated health services, unless an exception applies. Although uncertainty exists, federal agencies and at least one court have taken the position that the Stark Law also applies to Medicaid. Designated health services are defined to include, among others, clinical laboratory services, physical therapy services, occupational therapy services, radiology services including ultrasound services, durable medical equipment and supplies, parenteral and enteral nutrients, equipment and supplies, home health services, outpatient prescription drugs, inpatient and outpatient hospital services and outpatient speech-language pathology services. The types of financial arrangements between a physician and an entity providing designated health services that trigger the self-referral prohibitions of the Stark Law are broad and include direct and indirect ownership and investment interests and compensation arrangements. The Stark Law prohibits any entity providing designated health services that has received a prohibited referral from presenting, or causing to be presented, a claim or billing for the services arising out of the prohibited referral. Similarly, the Stark Law prohibits an entity from “furnishing” a designated health service to another entity in which it has a financial relationship when that entity bills for the service. The Stark Law also prohibits self-referrals within an organization by its own physicians, although broad exceptions exist. The prohibition applies regardless of the reasons for the financial relationship and the referral. Unlike the federal Anti-Kickback Statute discussed above, the Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required.
If the Stark Law is implicated, the financial relationship must fully satisfy a Stark Law exception. If an exception is not satisfied, then the parties to the arrangement could be subject to sanctions, including denial of payment for claims for services provided in violation of the statute, mandatory refunds of amounts collected for such services, civil penalties of up to $29,899 for each violation and twice the dollar value of each such service as well as possible exclusion from future participation in the federally funded healthcare programs, including Medicare and Medicaid. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $199,338 for each applicable arrangement or scheme. Amounts collected on claims related to prohibited referrals must be reported and refunded generally within 60 days after the date on which the overpayment was identified. In addition, the government and some courts have taken the position that claims presented in violation of the various statutes, including the Stark Law, and failure to return overpayments in a timely manner can form the basis for liability under the federal False Claims Act discussed above based on the contention that a provider impliedly certifies compliance with all applicable laws, regulations and other rules when submitting claims for reimbursement.
U.S. Corporate Practice of Medicine; Fee Splitting
The laws and regulations relating to our operations vary from state to state and many states prohibit general business corporations, such as us, from practicing medicine, controlling physicians’ medical decisions or engaging in some practices such as splitting professional fees with physicians. We contract with healthcare providers, physicians or physician-owned professional associations and professional corporations as part of our business. An important aspect of our strategy is to form contractual relationships with different third-party providers pursuant to which we provide them or their patients with medical transportation and/or mobile health services and they pay us for those services out of the fees they collect from patients and third-party payors. In certain instances, we also share a portion of our revenues with our partners. These contractual relationships are subject to various state laws that prohibit fee splitting or the practice of
medicine by lay entities or persons and are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. In addition, various state laws also generally prohibit the sharing of professional services income with nonprofessional or business interests. Activities other than those directly related to the delivery of healthcare may be considered an element of the practice of medicine in many states. Under the corporate practice of medicine restrictions of certain states, decisions and activities such as scheduling, contracting, setting rates and the hiring and management of non-clinical personnel may implicate the restrictions on the corporate practice of medicine.
State corporate practice of medicine and fee-splitting laws vary from state to state and are not always consistent. In addition, these requirements are subject to broad powers of interpretation and enforcement by state regulators. Regulatory authorities or other parties may assert that, despite these arrangements, we are engaged in the corporate practice of medicine or that our contractual arrangements with affiliated third parties constitute unlawful fee splitting. In this event, failure to comply could lead to adverse judicial or administrative action against us and/or our healthcare provider partners, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of licenses and the need to make changes to the terms of engagement with our provider partners that interfere with our business.
International Regulation
We expect to continue to expand our operations internationally through both organic growth and acquisitions. Our international operations are subject to different, and sometimes more stringent, legal and regulatory requirements, which vary widely by jurisdiction, including anti-corruption laws such as the Foreign Corrupt Practices Act of 1977, as amended, and corresponding foreign laws, including the U.K. Bribery Act 2010; regulation by the U.S. Treasury’s Office of Foreign Assets Control and economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and regulations; corporate governance, privacy, data protection, data mining, data transfer, labor and employment, intellectual property, consumer protection and investment laws and regulations; discriminatory licensing procedures; required localization of records and funds; and limitations on dividends and repatriation of capital.
Other Regulations
Our operations are subject to various state hazardous waste and non-hazardous medical waste disposal laws. These laws do not classify as hazardous most of the waste produced from healthcare services. OSHA regulations require employers to provide workers who are occupationally subject to blood or other potentially infectious materials with prescribed protections. These regulatory requirements apply to all healthcare facilities, including primary care centers, and require employers to make a determination as to which employees may be exposed to blood or other potentially infectious materials and to have in effect a written exposure control plan. In addition, employers are required to provide or deploy hepatitis B vaccinations, personal protective equipment and other safety devices, infection control training, post-exposure evaluation and follow-up, waste disposal techniques and procedures and work practice controls. Employers are also required to comply with various record-keeping requirements.
Some of our operations may be subject to compliance with certain provisions of the federal Fair Debt Collection Practices Act and comparable statutes in many states. Under the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts. Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the Fair Debt Collection Practices Act. Many of the states in which we operate have comparable state statutes as well.
See the section of this Annual Report titled “Risk Factors — Risks Related to DocGo’s Legal and Regulatory Environment.”
Available Information
We file or furnish electronically with the SEC our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports. We make copies of these reports and amendments thereto available on our website at www.DocGo.com, under “Investors,” free of charge as soon as reasonably practicable butafter filing or furnishing these reports with the SEC.
Item 1A. Risk Factors.
Risks Related to DocGo’s Business Strategy
DocGo’s failure to successfully implement its business strategy could adversely affect its business.
DocGo’s future financial performance and success is dependent in no event later than 30 calendar days followinglarge part upon its ability to implement its business strategy successfully. DocGo’s business strategy includes several initiatives, including developing contractual relationships with new healthcare provider partners and expanding its business with existing partners; capitalizing on organic growth opportunities such as growing complementary and integrated service offerings, particularly with respect to its mobile health solutions; pursuing selective acquisitions to expand its geographic presence, among other things; and enhancing operational efficiencies and productivity. DocGo may not be able to implement its business strategy successfully or achieve the closing dateanticipated benefits of its business plan, which could adversely affect its long-term growth, profitability and ability to service its debt obligations. Even if DocGo is able to implement some or all of the Merger,initiatives of its business plan, one or more initiatives may not be successful or if successful, may not achieve the anticipated goals, results or outcomes, and DocGo’s operating results may not improve to the extent it shall fileanticipates, or at all, or it could be adversely affected.
Implementation of DocGo’s business strategy could also be negatively impacted by a registration statementnumber of factors beyond its control, including increased competition; government regulation; general macroeconomic conditions, including an inflationary environment; rising interest rates and recessionary fears; the geopolitical environment, including the war in Ukraine, conflict in Israel and surrounding areas and rising tensions in the Taiwan Strait; pandemic or endemics; and increased operating costs, including costs of labor or other expenses. In particular, DocGo’s future success is contingent on its ability to both penetrate new markets and further penetrate existing markets, which is subject to a number of uncertainties, including DocGo’s ability to obtain necessary licenses in new markets, establish and grow new customer relationships and attract and retain skilled personnel. Expanding service offerings such as DocGo’s mobile health solutions also carries unique risks, including lack of market acceptance or the potential inability to realize an appropriate return, if any, on the capital invested. Government regulations in both DocGo’s domestic and international markets could also delay or prevent expansion or the introduction of new service offerings or require changes to some of DocGo’s current service offerings, which could negatively impact the success of DocGo’s strategies and financial results. In addition, to the extent DocGo has misjudged the nature or extent of industry trends or its competition, it may have difficulty in identifying new provider partners, achieving any geographic expansion, introducing new service offerings or achieving DocGo’s other strategic objectives. As such, due to these and other known and unknown risks, DocGo cannot assure you that its business strategy will be successful, and any failure to effectively implement its business strategy and otherwise grow the business could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo relies on its contractual relationships with its healthcare provider partners and other strategic partners.
DocGo significantly relies on its contractual relationships with its healthcare provider partners and other strategic partners and alliances to generate revenues, expand into new markets and further penetrate existing markets. In recent years, DocGo has entered into strategic business relationships with, among others, healthcare providers and hospital systems to take advantage of commercial opportunities across its operations, particularly in its Transportation Services segment. The structure of DocGo’s relationships with its healthcare provider partners is a novel model in DocGo’s industry and because there is little precedent for this approach, there can be no assurances that it will be operationally or financially successful in the long term.
DocGo’s contractual relationships with its healthcare provider partners and its reliance on revenues generated pursuant to these arrangements carry commercial and other risks and uncertainties that are different from those underlying DocGo’s other revenue streams, including the opportunity cost of not pursuing other ventures independently or with other partners. For example, strategic partners may have business or economic interests that are inconsistent with those of DocGo and may take actions contrary to DocGo’s interests. While DocGo typically manages the day-to-day operations, DocGo’s partners have certain consent rights, including certain decisions such as the annual budget and the hiring and firing of key management personnel for the venture, and they may not agree with decisions that DocGo believes are appropriate or are otherwise in the venture’s or its best interests. This structure can also lead to disputes with partners, which could require DocGo’s management to commit additional time and resources to resolve any disagreements or, in some instances, may lead to arbitration or litigation. Contractual relationships like these typically carry termination rights and one or more of DocGo’s partners may choose to exit the relationship prematurely and, in certain arrangements, the partner may have the option to sell its interest in the venture to DocGo or acquire DocGo’s stake at a predetermined price, even if the venture is beneficial to DocGo and in DocGo’s interest to continue the venture. If one of DocGo’s ventures or any of its strategic
partners is subject to a regulatory investigation or legal dispute or is otherwise the subject of any negative publicity, DocGo may be associated with the Securitiesmatter and Exchange Commission (the “SEC”) coveringbe similarly harmed, regardless of whether the resale byspecific partnership or DocGo itself had any connection to the Investorsunderlying matters. In addition, DocGo may, in certain circumstances, be liable for the actions of its partners. Contractual relationships such as these can also raise fraud and abuse issues. For example, the OIG has taken the position that certain contractual relationships between a party that makes referrals and a party that receives referrals for a specific type of service may violate the federal Anti-Kickback Statute if not appropriately structured. Any of the Class A common stock issuedforegoing risks or other risks related to themDocGo’s reliance on its strategic partners and other relationships could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo incurs significant up-front costs in its client relationships and any inability to maintain and grow these client relationships over time or to recover these costs could adversely affect its business.
DocGo’s business strategy depends heavily on achieving economies of scale because its initial up-front investment is costly and the associated revenue is recognized on a ratable basis. DocGo devotes significant resources to establish relationships with its clients and implement its solutions. DocGo typically incurs higher variable costs for labor and medical and other supplies in the PIPEinitial stages of a project, as the focus at that stage is on ensuring that the projects are staffed and usestocked properly, even at the risk of temporarily overstaffing the project until revenue achieves the anticipated scale. These risks are heightened when the client is a large enterprise, such as DocGo’s healthcare provider or government partners. See “—Risks Related to DocGo’s Business and Industry—DocGo’s reliance on government contracts could adversely affect its best effortsbusiness” below.Accordingly, DocGo’s results of operations depend, in substantial part, on its ability to havemaintain and grow its relationships with customers over time, allowing DocGo to build economies of scale and recoup up-front costs. Additionally, as DocGo’s business grows, its client acquisition costs could outpace its build-up of recurring revenue, and DocGo may be unable to successfully manage its total operating costs to achieve profitability, or if achieved, to maintain profitability. If DocGo fails to achieve appropriate economies of scale or if it fails to manage or anticipate demand, its business, financial condition and results of operations could be materially adversely affected.
The growth of DocGo’s business depends, in part, on its ability to execute on its acquisition strategy.
A significant portion of DocGo’s historical growth has occurred through acquisitions, such registration statement declared effective as promptly as practicable thereafter, butits acquisition of Government Medical Services, LLC, Ryan Brothers Ambulance Fort Atkinson, LLC, Exceptional Medical Transportation, LLC and Community Ambulance Service Ltd in no event later than the earlier of 60 calendar days after filing (or 90 calendar days2022 and Cardiac RMS, LLC in 2023, and DocGo may continue to grow through acquisitions in the eventfuture. DocGo’s growth strategy is primarily focused on geographic expansion, often as part of growing its relationship with an existing healthcare provider partner, and acquisitions may help DocGo obtain the SEC issues written comments)infrastructure, licenses or other resources necessary to enter new markets in the future. DocGo evaluates, and expects to continue to evaluate, a variety of possible acquisition opportunities as they arise.
DocGo cannot predict the timing of any contemplated transactions, and there can be no assurances that DocGo will identify suitable acquisition opportunities in the geographies into which it expects to grow or, if it does, that any transaction can be consummated on terms acceptable to it, if at all. DocGo also competes for acquisitions with other potential acquirers, some of which may have greater financial or operational resources than DocGo. A significant change in DocGo’s business; macroeconomic factors, including inflationary pressures, rising interest rates and recessionary fears; unexpected decreases in cash flows; tightening of the capital markets; or any restrictions imposed by DocGo’s debt obligations may limit its ability to obtain the necessary capital for acquisitions or otherwise impede its ability to complete an acquisition. Certain proposed acquisitions or dispositions may also trigger regulatory review by governmental agencies, including the U.S. Department of Justice and the U.S. Federal Trade Commission, under their respective regulatory authority. Any delay, prohibition or modification required by regulatory authorities for competitive purposes or otherwise could adversely affect the terms of a proposed acquisition or could require DocGo to modify or abandon an otherwise attractive acquisition opportunity. The failure to identify suitable transaction partners and to consummate transactions on acceptable terms, or at all, could adversely affect DocGo’s business, financial condition and results of operations.
DocGo’s acquisition strategy exposes it to significant risks and additional costs.
Acquisitions involve risks that the businesses acquired will not perform as expected or provide sufficient infrastructure and other resources necessary to operate in a given geography, and DocGo’s judgments regarding the values, strengths and weaknesses and profitability of acquired businesses may prove to be wrong. DocGo may be held liable for certain unforeseen pre-acquisition liabilities of an acquired business, including, among others, tax liabilities, environmental liabilities, liabilities for regulatory violations and liabilities for employment practices, and these liabilities could be significant. In addition, an acquisition could result in the impairment of client relationships and other acquired assets, such
as goodwill. DocGo may also incur costs and experience inefficiencies to the extent an acquisition expands the services, markets or geographies in which it operates. Acquisitions may require that DocGo incur additional debt to finance the transaction, which could be substantial and limit its operating flexibility or, alternatively, acquisitions may require that DocGo issue shares of its Common Stock as consideration, which could dilute share ownership. Acquisitions can also involve post-transaction disputes regarding a number of matters, including a purchase price or working capital adjustment, earn-out or other contingent payments, environmental liabilities or other obligations. DocGo’s recent growth and its acquisition strategy have placed, and may continue to place, significant demands on management’s time, which may divert their attention from DocGo’s day-to-day business operations and may lead to significant due diligence and other expenses regardless of whether DocGo pursues or consummates any potential acquisition. DocGo also may not be able to manage its growth resulting from acquisitions due to the number, diversity and geographic disparity of the businesses it may acquire or for other reasons. These and other risks related to acquisitions could adversely affect DocGo’s business, financial condition and results of operations.
Any inability to successfully integrate acquisitions or realize their anticipated benefits could adversely affect DocGo’s business.
Acquisitions require that DocGo integrate separate companies that have historically operated independently or as part of another, larger organization, and that have different systems, processes and cultures. DocGo may not be able to successfully integrate any business it has acquired or may acquire, or may not be able to do so in a timely, efficient or cost-effective manner. Risks related to the successful integration of an acquired business include:
•diverting the attention of DocGo’s management and that of the acquired business;
•merging or linking different accounting and financial reporting systems and systems of internal controls and, in some instances, implementing new controls and procedures;
•merging computer, technology and other information networks and systems, including enterprise resource planning systems and billing systems;
•assimilating personnel, human resources, billing and collections and other administrative departments and potentially contrasting corporate cultures;
•disrupting relationships with or losses of key clients and suppliers of DocGo’s business or the 10thacquired business;
•interfering with, or loss of momentum in, DocGo’s ongoing business day afteror that of the acquired company;
•failure to retain DocGo’s key personnel or that of the acquired company; and
•delays or cost-overruns in the integration process.
DocGo’s inability to manage its growth through acquisitions, including its inability to manage the integration process, and to realize the anticipated benefits of an acquisition could have a material adverse effect on its business, financial condition and results of operations.
Risks Related to DocGo’s Business and Industry
The high level of competition in DocGo’s industry could adversely affect its business.
The medical transportation industry is highly competitive. In its Transportation Services segment, DocGo competes with governmental entities, including cities and fire districts, hospitals, local and volunteer private providers and other regional and local private companies. The industry also includes several large national and regional providers such as Falck, Global Medical Response, SeniorCare EMS, Priority Ambulance, PatientCare EMS Solutions and Acadian Ambulance. Key competitive factors in the medical transportation services industry include the ability to improve customer service, such as on-time performance and efficient call intake; to provide comprehensive clinical care; and to recruit, train and motivate employees, particularly ambulance crews who have direct contact with patients and healthcare personnel. Pricing, billing and reimbursement expertise are also very important.
While the mobile health/telehealth market is in an early stage of development, it is also competitive and DocGo expects it to become increasingly competitive in the future, which could make it difficult for DocGo to succeed. Major competitors (in each case relative to only some of DocGo’s products or services) include much larger, national or regional telehealth or in-home healthcare service providers such as DispatchHealth, Modivcare, Addus HomeCare, Option Care Health, Teladoc, Amwell, Signify Health (acquired by CVS in March 2023), MedArrive, Biofourmis and One Medical (acquired by Amazon in February 2023). DocGo also believes there are several smaller, private organizations providing in-home or on-site care utilizing different, higher cost healthcare providers. Non-traditional providers and others such as large health systems or payors, some of which may be DocGo customers or partners, may enter the space using consumer-grade video conferencing platforms such as Zoom and Twilio or develop innovative technologies or business activities that could be disruptive to the industry. Competition could also increase from large technology companies such as Apple, Amazon, Facebook, Verizon or Microsoft, who may develop their own telehealth or mobile health solutions or acquire existing industry participants, such as Amazon’s acquisition of One Medical in February 2023, as well as from large retailers like Walmart, CVS and others. Competition in the mobile health and telehealth industry is primarily based on scale; ease of use, convenience and accessibility; brand recognition; breadth, depth and efficacy of telehealth and mobile health services; technology; clinical quality; customer support; cost; reputation; and customer satisfaction and value.
DocGo may not be successful in maintaining or growing its competitive position in one or more of its existing markets or in those into which it may expand. Some of DocGo’s competitors may have access to greater financial or other resources than it does, which may afford them greater power, efficiency, financial flexibility, geographical reach or capital resources for growth. In addition, some of DocGo’s competitors are vertically integrated and can leverage this structure to their advantage. DocGo may fail to identify optimal service or geographic markets, focus its attention on suboptimal service or geographic markets or fail to execute an appropriate business model in certain service or geographic markets. DocGo’s competitors may develop new services or technologies that are superior to DocGo’s, develop more efficient or effective methods of providing services or adapt more quickly, efficiently or effectively than DocGo to new technologies and opportunities. DocGo’s competitors may be positioned to provide better services or influence customer requirements, or more quickly respond to changing customer requirements, and thereby establish stronger customer relationships. DocGo’s competitors may offer their services at lower prices because, among other things, they may possess the ability to provide similar services more efficiently, as part of a bundle with other services or generally at a lower cost. These pricing pressures could require DocGo to lower its prices to at or below its costs, requiring DocGo to sacrifice margins or incur losses. Alternatively, DocGo may choose to forgo entering certain markets or exit other markets, which could limit its growth and competitive reach. Any failure by DocGo to compete or to generally maintain and improve its competitive position could adversely affect its business, financial condition and results of operations.
Negative media coverage could damage DocGo's reputation and harm its ability to bid for and win government and other contracts.
DocGo’s reputation has been, and could in the future be, adversely affected by unfavorable publicity regarding, for example, the Company,
is notified thatits products or services, its management team and board of directors, its government contracts and its financial performance, regardless of whether such claims are accurate. For example, DocGo has been the
registration statement will not be subject
of media coverage regarding certain of its contracts with New York City. Any such negative publicity could have an adverse effect on DocGo’s relationships with its customers, and accordingly, harm its ability to
review or further review.DocGo Support Agreements
Concurrently with the execution of the Merger Agreement, the Companybid for and holders of DocGo’s capital stock who hold at least a majority of DocGo’s Class A common stock and Series A preferred stock, voting together as a single class on an as-converted basis, and holders of at least a majority of the then-outstanding shares of DocGo’s Series A preferred stock, voting as a separate class, entered into agreements (“Support Agreements”) pursuant to which they agreed to (i) appear at a stockholder meeting called by DocGo for the purpose of approving the Mergerwin government and other transactions contemplated by the Merger Agreement, for the purpose of establishing a quorum, (ii) execute a written consent in favor of the Merger, the adoption of the Merger Agreement, and waive certain preemptive rights as set forth in the Company’s charter documents, and (iii) not transfer, assign, or sell such covered shares, except to certain permitted transferees, prior to the consummation of the Merger.
Sponsor Waiver Agreement
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor and DocGo entered into an agreement providing for the Sponsor’s waiver of the anti-dilution and conversion price adjustments set forth in the Company’s Amended and Restated Certificate of Incorporation.contracts. As a result, DocGo’s business, financial condition and results of such waiver,operations may be adversely affected.
DocGo’s revenues could be adversely affected if it loses some or all outstanding Class B common stockof its business under existing contracts.
A significant portion of DocGo’s revenue growth has historically resulted from increases in the business and related fees it collects under existing contracts and the addition of new contracts. DocGo’s contracts with healthcare providers and other customers generally have terms of one to three years (in some cases automatically renewing), and some of its contracts are terminable by either of the
Company will convert onparties upon notice of as little as 30 days. Even if DocGo has an existing contract with a
one-to-one basis intohealthcare provider, the
Company’s Class A common stock concurrentlycontract does not create any exclusive relationship, and even if DocGo is given preferred status, the customer often still conducts business with
the closing of the Merger Agreement.Registration Rights Agreement
The Merger Agreement provides that, concurrently with the closing of the Merger, the Company will amend and restate its existing registration rights agreement (as amended and restated, the “A&R Registration Rights Agreement”), pursuant to which the Company will agree to register for resale under the Securities Act of 1933, as amended (“Securities Act”), after the lapse or expiration of any transfer restrictions, lock-up, or escrow provisions which may apply, the shares of the Company’s common stock held by persons who are or will be affiliates of the Company after the completion of the Merger (including shares of the Company’s common stock issuable upon conversion or exercise of warrants or other convertible securities of the Company).
Completing Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to consummate our initial business combination using cash held in the Trust Account, the proceeds from one or more private financings,of DocGo’s competitors. For example, execution under DocGo’s medical transportation services contracts requires that an ambulance or other necessary fleet vehicle be available and our equity aswithin a certain proximity at the consideration. We maytime of need and, if one is not available, the customer can and will seek to complete our initial business combination with a company or business that may be financially unstable or in its early stagesalternative options. Furthermore, certain of development or growth, which would subject us to the numerous risks inherent in such companiesDocGo’s contracts will expire during each fiscal period, and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the Trust Account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may consummate our initial business combination using the proceeds of such offering rather than using the amounts held in the Trust Account. In addition, we intend to target businesses with enterprise values that are greater than we could acquire with the net proceeds of our Initial Public Offering and the Private Placement, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy any redemptions by public stockholders, weDocGo may be required to seek additional financingrenewal of these contracts through a formal bidding process. Even if DocGo is successful in renewing the contract, the contract may contain terms that are not as favorable to complete such proposed initialDocGo as its current contracts. There can be no assurances that DocGo will successfully retain its existing contracts and any loss of contracts or reduction in services provided thereunder or under any renewal could have a material adverse effect on DocGo’s business, combination. Subjectfinancial condition and results of operations.
DocGo’s reliance on government contracts could adversely affect its business.
In recent years, DocGo’s government contract work has represented a substantial portion of its overall revenue, representing approximately 73%, 64% and 65% of DocGo’s revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and maintaining and continuing to compliancegrow this revenues stream is an important part of DocGo’s growth strategy. However, government contract work is subject to significant risks and uncertainties. For example, only eligible parties can bid on and service most government contracts, which requires DocGo to comply with applicable securities laws, we would expectvarious statutes, rules, regulations and other governmental policies, including those related to complete such financingwages, benefits, overtime, working conditions, equal employment opportunity, affirmative action and drug testing. If DocGo fails to comply with any of these requirements, it may be suspended or barred from government work or subject to various administrative sanctions and civil and criminal penalties and fines. Government contract work subjects DocGo to government audits, investigations and proceedings, which could also lead to DocGo being barred from government work or subjected to fines if it is determined that a statute, rule, regulation, policy or contractual provision has been violated. Audits can also lead to adjustments to the amount of contract costs DocGo believes are reimbursable or to the ultimate amount DocGo may be paid under the agreement. Responding to audits can be costly, time-consuming and a significant distraction to management as well.
In addition, government contracts typically include strict provisions relating to service level agreements (“SLAs”), involving specific operating performance metrics with which the provider must comply. Failure to comply with these SLAs could result in DocGo receiving reduced revenues from these contracts, DocGo being removed from the project in favor of another provider or DocGo’s programs ceasing entirely.
Additionally, governments are typically under no obligation to maintain funding at any specific level, and funds for government programs can be eliminated with little or no notice. Given the currently uncertain general economic outlook, whereby a recession could lead to a reduction in a government’s tax revenues, as well as potential changes in the controlling political party in these municipalities, who might be less favorably inclined toward government spending on healthcare and other social services, particularly as these services are provided to recent migrants, the long-term outlook for funding for certain government programs is uncertain. As a result, contracts with government agencies may only
simultaneously with the completion of our initial business combination. In the case of an initial business combinationbe partially funded
with assets other than the Trust Account assets, our proxy materials or
tender offer documents disclosing the initial business combination would disclose the termsmay be terminated, and DocGo may not realize all of the
financingpotential revenue from those contracts. Government contracts typically can be paused or canceled entirely at any time, in whole or in part, at the government’s convenience or the government can default with little or no prior notice. Under these circumstances, the contractor typically receives payment only for the lesser of the work completed or the amount authorized under the contract, but not the anticipated revenue and
only if required by law, we would seek stockholder approval of such financing. There is no limitation on our ability to raise funds throughprofit that could have been earned had the
issuance of equitycontract been completed. A temporary stoppage or
equity-linked securitiesdelay or
through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop agreements. Neither our Sponsor nor any of our officers, directors or stockholders are required to provide any financing to us in connection with or after our initial business combination.
Selectionthe complete cancellation of a target business and structuringproject can create inefficiencies, such as leaving portions of our initial business combination
Nasdaq rules require that we must complete oneDocGo’s fleet idle for a significant period of time, cause DocGo to lose some or more business combinations having an aggregate fair market valueall of at least 80% of the value of the assets heldits investment in the Trust Account (excluding the deferred underwriting commissionproject or result in financial and taxes payable on the interest earned on the Trust Account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as a discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination (including with the assistance of financial advisors), we will obtain an opinion from an independent investment banking firm or another independent entityother damages that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors willDocGo may not be able to make an independent determinationrecover from the government. The timing of project awards, including expansions of existing projects, is also unpredictable and can involve complex and lengthy negotiations and competitive bidding processes.
Federal, state and local governments may also from time to time adopt, implement or modify certain policies or directives that may adversely affect DocGo’s business. For example, governments may in the fair market valuefuture review their use of our initial business combination, itfor-profit service providers such as DocGo and may be unablecancel or decide not to do so if it is less familiarrenew existing contracts or experiencedopt not to enter new contracts with such providers. Changes in government policy or the business ofpolitical landscape relating to immigration or population health programs may also result in a particular target or if there is a significant amount of uncertainty asdecrease in DocGo’s government contract work and related revenues.
Other risks associated with government contracting include more extended collection cycles, due in part to the value of a target’s assetssometimes prolonged contract registration process, and heightened or prospects. We do not intendunlimited indemnification obligations. Any failure to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifyingmaintain and selectinggrow DocGo’s government contract revenues for one or more prospective target businesses, although weof these or any other reasons could adversely affect DocGo’s business, financial condition and results of operations.
A significant portion of DocGo’s recent revenue growth is derived from a small number of large customers.
A significant portion of DocGo’s revenues and income growth in 2023 was derived from a from a limited number of customers. For the year ended December 31, 2023, one customer accounted for approximately 40% of total revenues, while another customer accounted for approximately 21% of total revenues. DocGo’s largest customer is a public benefit corporation, operating and provisioning services on behalf of a variety of municipal agencies. DocGo’s services for this customer are provided under several different contracts, spanning a variety of projects. These contracts are not guaranteed and are terminable at will by the customer, in some cases in as little as 15 days’ notice. However, termination of any one of those particular contracts does not necessarily indicate a greater likelihood of termination of any of the customer’s other
contracts, as these contracts are awarded on a per project basis, with each project running independently of the others. DocGo’s second largest customer is a municipal agency, and therefore contracts with this customer are subject to the risks described above in the risk factor titled “—DocGo’s reliance on government contracts could adversely affect its business.” DocGo cannot assure you that these customers or other large customers will continue to do business with DocGo on terms or at rates currently in effect, if at all, or will not
be permittedelect to
effectuate our initialdo business
combination with
another blank check company or a similar company with nominal operations.In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the targetDocGo’s competitors or otherwise acquireperform their own services themselves. The loss of one of DocGo’s top customers, if not offset by revenues from new or other existing customers, could have a controlling interestmaterial adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s participation in the target sufficient for it notpartnerships based value-based reimbursement models may have a material adverse effect on its business, financial condition and results of operations.
Part of DocGo’s strategy is to
be requiredenter into partnerships with health plans based on value-based reimbursement models that involve risk-sharing. These payment models are specifically designed to
registerimprove patient health outcomes while reducing overall costs, as
an investment company under the Investment Company Act. If we own or acquire less than 100%reimbursement is tied to quality of
the equity interests or assetscare and effectively managing total cost of
a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of Nasdaq’s 80% fair market value test.To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business,care. However, there can be no assurance that wesuch models will properly ascertainbe profitable to DocGo. Under these arrangements, DocGo may agree to assume partial or assess all significantfull risk factors.
for monthly deficits in funds established to provide care to patients in exchange for receiving the benefit of any surpluses. If DocGo is unable to accurately predict, price for and manage costs, such partnerships may not be profitable, and DocGo’s results of operations could be materially and adversely affected.
In evaluatingaddition, DocGo intends to enter these partnerships as pilot programs, and there is no assurance that they will continue or be renewed. Further, many states do not have a prospective business target, we expectwell-developed body of law or regulatory guidance for these models. As a result, new and existing laws, regulations or regulatory guidance could subject DocGo to conduct a due diligence review, which may encompass, among other things, meetings with incumbent ownership, management and employees, document reviews, interviewsthe risk of customers and suppliers, inspection of facilities,restructuring or terminating these partnerships, as well as a reviewregulatory enforcement, penalties and sanctions if state or federal government enforcement agencies disagree with DocGo’s interpretation of financialapplicable laws. These and other informationrisks related to DocGo’s participation in partnerships based on value-based reimbursement models may have a material adverse effect on its business, financial condition and results of operations.
DocGo may enter into a large-scale deployment of resources in response to a national emergency as a subcontractor to FEMA or other similar entities, which may adversely affect DocGo’s business.
DocGo does not believe that willa FEMA deployment would adversely affect its ability to service its customers, and DocGo is not contractually obligated to respond to FEMA requests. However, if management elects to participate in response to a national emergency, any significant FEMA deployment would require significant management attention and could reduce DocGo’s ability to pursue other opportunities, including its geographic expansion and growth strategies, which could have an adverse effect on DocGo’s business, financial condition and results of operations.
The COVID-19 pandemic has had, and a future health crisis may have, a material impact on DocGo’s business.
The COVID-19 pandemic and related direct and indirect impacts adversely affected, and a future health crisis may adversely affect, DocGo’s Transportation Services segment. COVID-19 also heightened, and a future health crisis may heighten, various risks related to DocGo’s business.
For example, should there be
made availablea health crisis among DocGo’s employees in one or more of its markets, DocGo may need to
us.The time required to selectsignificantly reduce or cease operations in that market. DocGo’s cost structure may also be adversely impacted by a health crisis. A number of DocGo’s suppliers were negatively impacted by the COVID-19 pandemic, and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process are not currently ascertainable with any degree of certainty. Any costs incurredthere were significant disruptions in its supply chains, particularly with respect to the identificationpersonal protective equipment (“PPE”) that DocGo’s healthcare professionals require to do their jobs. Shortages in the availability of PPE have limited, and evaluationin the future may limit, DocGo’s ability to meet demand and provide its services to customers in a timely manner. Limitations on the availability or increases in the price of PPE have and negotiation with,could in the future continue to adversely affect DocGo’s business and results of operations.
A health crisis may adversely affect many industries as well as the economies and financial markets of many countries, including the United States, potentially causing a prospective targetsignificant deceleration of economic activity. Such a slowdown could reduce production, decrease demand for a broad variety of goods and services, diminish trade levels and lead to widespread corporate downsizing, causing a sharp increase in unemployment. A health crisis may also disrupt and cause extreme volatility in the global capital markets, which may increase the cost of capital. The long-term impact of a health crisis, such as COVID-19, on the U.S. and world economies is uncertain.
The degree to which a health crisis impacts DocGo’s business
withoperations, strategy, financial condition and results of operations depends on future developments, which
our initial business combination isare highly uncertain, continuously evolving and unpredictable, including, but not
ultimately completed will result in our incurring losses and will reduce the funds we can use to complete an alternative business combination.Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of our initial business combination at a per-share price, payable in cash, equallimited to, the aggregate amount thenseverity of any new outbreaks, resurgences and variants, actions taken to contain resurgences or variants or to address their impact, and other effects. Such impacts could have a material adverse impact on deposit in the Trust Account as of twoDocGo’s business, days priorstrategy and financial condition.
Risks Related to
the consummation of the initial business combination including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding Public Shares, subject to the limitations described herein. The per-share amount we will distribute to investors who properly tender their shares for redemption will not be reduced by the deferred underwriting commission we will pay to the underwriter. Our Sponsor, officers and directors have entered into the Letter Agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and any Public Shares held by them in connection with the completion of our initial business combination.DocGo’s Limited Operating History
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirements. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our Company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq’s shareholder approval rules. We currently intend to hold a stockholder meeting to approve the Proposed Transaction.
The requirement that we provide our public stockholders with the opportunity to redeem their Public Shares by one of the two methods listed above is contained in provisions of our amended and restated certificate of incorporation and apply whether or not we maintain our registration under the Exchange Act or our listing on Nasdaq. Such provisions may be amended if approved by holders of 65% of our common stock entitled to vote thereon.
If we provide our public stockholders with the opportunity to redeem their Public Shares in connection with a stockholder meeting, as we plan to do in connection with the Proposed Transaction, we will:
| ● | conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
| ● | file proxy materials with the SEC. |
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will:
| ● | conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and |
| ● | file tender offer documents with the SEC prior to completing our initial business combination, which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. |
Submission of our Initial Business Combination to a Stockholder Vote
If we seek stockholder approval, as we currently intend to do for the Proposed Transaction, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the Company representing a majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote at such meeting. Our Sponsor will count towards this quorum and, pursuant to the Letter Agreement, our Sponsor, officers and directors have agreed to vote their Founder Shares and any Public Shares purchased during or after our Initial Public Offering (including in open market and privately-negotiated transactions) in favor of our initial business combination. As a result, in addition to our Sponsor’s Founder Shares, we would need only 4,312,501, or 37.5%, of the 11,500,000 Public Shares sold in our Initial Public Offering to be voted in favor of an initial business combination in order to have our initial business combination approved. These quorum and voting thresholds, and the voting agreement of our Sponsor,DocGo’s limited operating history may make it more likely that we will consummate our initialdifficult to evaluate its business, combination. Each public stockholderwhich may elect to redeem its Public Shares irrespective of whether they vote for or against the initial business combination, or at all, or whether they werebe unsuccessful.
DocGo has a
stockholder on the record date for the stockholder meeting held to approve the initial business combination.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination, as we currently intend to do in connection with the Proposed Transaction, and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate oflimited operating history. As such, stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our Initial Public Offering, which we refer to as the “Excess Shares.” We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem more than 15% of the shares sold in our Initial Public Offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we will not restrict our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we have until October 19, 2022 (24 months from the closing of our Initial Public Offering) to complete our initial business combination. If we are unable to complete our initial business combination within such period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 24-month time period.
Competition
In identifying, evaluating and selecting a target business for our business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businessesthere is limited by our available financial resources. This inherent limitation gives othersinformation on which to base an advantage in pursuing the acquisitionevaluation of a target business. Furthermore, our obligationits business and prospects. DocGo’s operations are subject to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
In recent years, and especially since the fourth quarter of 2020, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial business combination.
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively.
Facilities
Our executive offices are located at c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 and our telephone number is (212) 818-8800. Our office space, to the extent it is needed, is being provided to us for no charge by Graubard Miller, our counsel. We consider our current office space, combined with the other office space otherwise available to our executive officers and directors, adequate for our current operations.
Employees
We currently have four officers. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process we are in. We do not intend to have any full time employees prior to the completion of our initial business combination.
Available Information
We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events in a Current Report on Form 8-K. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov.
Risk Factors Summary
An investment in our securities involves a high degree of risk and uncertainties. You should consider carefully all of the risks described below, togetherinherent in the establishment of a recently formed business, including adding management personnel, managing general expenditures and managing the timing of payments to vendors and cash receipts from customers, and its success may be limited by unexpected expenses, difficulties, inefficiencies, complications and delays, including the need for additional financing, challenges with the successful commercialization of its services and its geographic expansion, market and customer acceptance of its services and technologies, unexpected issues with federal or state regulatory authorities, competition from larger operations, uncertain intellectual property protection, fluctuations in expenses and dependence on corporate partners and collaborators. Any failure to successfully address these and other information containedrisks and uncertainties commonly associated with early-stage companies could seriously harm DocGo’s business and prospects, and it may not succeed given the challenges it faces in the markets in which it operates or may choose to expand into in the future. Additionally, DocGo’s strategy of providing healthcare transportation services with significant reliance on a mobile platform is novel, the mobile health and telehealth industry is nascent and still evolving, and there are no well-established companies offering the “last-mile” mobile health solutions that DocGo offers, all of which carry their own unique risks, including market and consumer acceptance and adoption. Any evaluation of DocGo’s business and its prospects must be considered in light of these factors and the other risks and uncertainties frequently encountered by companies in this Annual Report, before makingearly stage of development. No assurance can be given that DocGo will be able to successfully navigate these issues or implement any of its growth strategies in a decisiontimely or effective manner, which could negatively impact DocGo’s business, financial condition and results of operations.
Much of DocGo’s revenue, employee and operations growth has occurred during recent years, which has been partially driven by significant COVID-related impacts. The Company estimates that COVID testing related revenue for 2021 was approximately $110 million and $75 million in 2022. However, as the COVID-19 pandemic has reached endemic levels and the public health emergency declaration has ended, demand for COVID-related products has subsided, DocGo’s COVID testing-related revenues have declined, and in 2023 such revenues represented an insignificant proportion of the Company’s overall revenues. DocGo’s future growth will be driven by its ability to continue to replace these COVID-testing-related revenues with other revenue streams. DocGo’s ability to forecast its future operating results is limited and subject to a number of uncertainties, including its ability to predict revenue and expense levels and plan for and model future growth.
DocGo has a history of losses, expects its operating expenses to increase significantly in the foreseeable future and may not achieve or sustain profitability.
Prior to the Business Combination, Ambulnz recorded a net loss each fiscal year from its inception in 2015 to 2021, including a net loss of $14.8 million for the fiscal year ended December 31, 2020. As of December 31, 2023, DocGo had an accumulated deficit of approximately $21.4 million. While DocGo has historically been able to generate revenues and believes its business strategy provides for predictable revenue streams in future periods, its revenues may not increase in future periods, and it may resume incurring net losses for some time as it continues to grow. Even if DocGo generates net income in a given year, there remains the likelihood that it could incur net losses in any given quarter, given the fluctuating nature of revenues and expenses, particularly given the significant costs that are incurred during the beginning stages of new projects, coupled with marketing and personnel costs incurred for developing potential new business lines. It is difficult for DocGo to predict its future results of operations, and it expects its operating expenses to increase significantly over the next several years as it continues to expand its operations and infrastructure, acquire additional vehicles, hire additional personnel, make and integrate future acquisitions and invest in our securities.technology and research and development. If DocGo fails to increase its revenue to offset the increases in its operating expenses, DocGo may not achieve or sustain profitability in the future.
If DocGo is unable to effectively manage its growth, its financial performance and future prospects will be adversely affected.
Since DocGo’s inception, it has experienced rapid growth in the United States and more recently, internationally in the United Kingdom, and it expects to continue to grow in the future. For example, prior to the Business Combination, the revenues of Ambulnz were approximately $30.9 million for the year ended December 31, 2017, and the revenues of DocGo were approximately $624.3 million for the year ended December 31, 2023. In addition, DocGo’s employee base has grown to over 4,000 employees (exclusive of independent contractors and agency employees) as of December 31, 2023. This growth has placed, and may continue to place, significant strain on DocGo’s management, its operational and financial infrastructure and its controls and procedures, which may not be adequate to support this growth or sustain further expansion in the future.
DocGo’s ability to effectively manage its growth has required, and will continue to require, it to expand and improve its operational and financial infrastructure, including its controls and procedures, and to retain, attract, train, motivate and manage employees, including qualified medical professionals, operations personnel and financial and accounting staff. Additionally, DocGo has needed to, and will continue to need to, integrate new technologies and acquisitions into its existing business and establish consistent policies across regions and functions. Achieving these goals has required DocGo to commit substantial financial, operational and technical resources, and DocGo expects these demands to persist, and very likely to increase, as it continues to grow in the future.
The expansion and increasing complexity of DocGo’s business has placed significant strain on its operations, personnel and systems and further growth in the future could restrict DocGo’s ability to develop and improve its operational, financial and management controls and enhance its reporting systems and procedures. If DocGo is not able to effectively manage this expansion in its operations and attract, train and retain additional qualified personnel in an efficient manner, DocGo’s operations and services will be adversely affected and its customers may choose one or more of its competitors. Additionally, DocGo’s failure to maintain or upgrade its technology infrastructure effectively to support its growth or otherwise maintain its technological competitive advantage could result in unanticipated system disruptions, slow response times or an unsatisfactory customer experience, any of which could cause DocGo to no longer be in compliance with the minimum service levels required by certain customer contracts. An inability to maintain effective management, financial and reporting systems, controls and procedures could adversely affect DocGo’s ability to provide timely and accurate financial information or result in a misstatement of account balances or disclosures. If DocGo is unable to effectively manage its recent or future growth, its operations, business, financial condition and results of operations could be adversely affected.
Risks Related to Information Technology
DocGo relies on data center providers, Amazon Web Services (“AWS”), Internet infrastructure, bandwidth providers, third-party computer hardware and software, other third parties and DocGo’s own systems for providing services to DocGo’s clients and consumers, and any failure or interruption in the services provided by these third parties or DocGo’s own systems could expose DocGo to disputes, litigation and negatively impact DocGo’s relationships with clients, adversely affecting DocGo’s brand and DocGo’s business. Such disputes and litigation could cause DocGo to incur significant additional legal and other expenses.
DocGo relies on two geographically dispersed data centers, one in the United States and one in the United Kingdom, as well as AWS to serve its clients and consumers. While DocGo has virtual access to its data center servers, DocGo does not control the operation of these facilities or AWS. The owners of DocGo’s data center facilities and AWS have no obligation to renew their agreements with DocGo on commercially reasonable terms, or at all. If DocGo is unable to renew these agreements on commercially reasonable terms, or if there is a change of control of one of DocGo’s data center operators or AWS, DocGo may be required to transfer its servers and other infrastructure to new data center facilities, and DocGo may incur significant costs and possible service interruption in connection with doing so. Problems faced by DocGo’s third-party data center locations or AWS with the telecommunication network providers with whom DocGo or they contract, or with the systems by which DocGo’s telecommunications providers allocate capacity among their clients, including DocGo, could adversely affect the experience of DocGo’s clients and consumers. DocGo’s third-party data center operators or AWS could also decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by DocGo’s third-party data center operators, AWS or any of the followingservice providers with whom they or DocGo contract may have negative effects on DocGo’s business, the nature and extent of which are difficult to predict.
Additionally, if DocGo’s data centers or AWS is unable to meet DocGo’s growing needs for capacity, this could have an adverse effect on DocGo’s business. For example, a rapid expansion of DocGo’s business could affect the service levels at DocGo’s data centers or cause such data centers and systems to fail. Any changes in third-party service levels at DocGo’s data centers or AWS or any disruptions or other performance problems with DocGo’s solution could adversely affect DocGo’s reputation and may damage DocGo’s clients’ and consumers’ stored files or result in lengthy interruptions in DocGo’s services. Interruptions in DocGo’s services may reduce DocGo’s revenue, cause it to issue refunds to clients for prepaid and unused subscriptions, as well as result in penalties related to service level credits and uptime, subject DocGo to potential liability or adversely affect client renewal rates.
In addition, DocGo’s ability to deliver its Internet-based services depends on the development and maintenance of the infrastructure of the Internet by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, bandwidth capacity and security. DocGo’s services are designed to operate without interruption in accordance with DocGo’s service level commitments. However, DocGo has experienced, and may experience in the future, interruptions and delays in services and availability from time to time. In the event of a catastrophic event with respect to one or more of DocGo’s systems, DocGo may experience an extended period of system unavailability, which could negatively impact DocGo’s relationship with clients and customers. To operate without interruption, both DocGo and its service providers must guard against:
•damage from fire, power loss, natural disasters and other force majeure events outside DocGo’s control;
•communications failures;
•software and hardware errors, failures and crashes;
•security breaches, computer viruses, hacking, denial-of-service attacks and similar disruptive problems; and
•other potential interruptions.
DocGo also relies on computer hardware purchased and software licensed from third parties in order to offer its services. These licenses are generally commercially available on varying terms. However, it is possible that this hardware and software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisions of DocGo’s services until equivalent technology is either developed by DocGo or, if available from third parties, is identified, obtained and integrated.
DocGo exercises limited control over third-party vendors, including AWS, which increases DocGo’s vulnerability to problems with technology and information services such vendors provide. Interruptions in DocGo’s network access and services related to third-party technology and information services may reduce DocGo’s revenues, cause DocGo to issue refunds to clients, subject DocGo to potential liability and adversely affect client renewal rates. Although DocGo maintains a security and privacy damages insurance policy, the coverage under DocGo’s policies may not be adequate to compensate DocGo for all losses that may occur ourrelated to the services provided by DocGo’s third-party vendors. In addition, DocGo may not be able to continue to maintain adequate insurance coverage at an acceptable cost, if at all.
DocGo’s ability to rely on these services of third-party vendors, including AWS, could be impaired as a result of the failure of such providers to comply with applicable laws, regulations and contractual covenants, or as a result of events affecting such providers, such as power loss, telecommunication failures, software or hardware errors, computer viruses, cyber incidents and similar disruptive problems, fire, flood and natural disasters. Any such failure or event could adversely affect DocGo’s relationships with its clients and damage its reputation. This could materially and adversely impact DocGo’s business, financial condition and operating resultsresults.
DocGo’s proprietary software may
be materially adversely affected. In that event, the trading pricenot operate properly, which could damage DocGo’s reputation, give rise to claims against DocGo or divert application of
our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to: | ● | We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective. |
| ● | Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, and even if we held a vote, holders of our Founder Shares will participate in such vote, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination. |
| ● | If we seek stockholder approval of our initial business combination, our Sponsor and members of our management team have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote. |
| ● | Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your redemption rights, unless we seek stockholder approval of the initial business combination. |
| ● | The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an initial business combination with a target. |
| ● | The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure. |
| ● | The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock. |
| ● | The requirement that we complete our initial business combination within 24 months after the closing of our Initial Public Offering may give potential target businesses leverage over us in negotiating a business combination and may decrease the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders. |
| ● | Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the coronavirus (COVID-19) pandemic and the status of debt and equity markets. |
| ● | We may not be able to complete our initial business combination within 24 months after the closing of our Initial Public Offering, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless. |
| ● | If we seek stockholder approval of our initial business combination, our sponsors, directors, officers, advisors and their affiliates may elect to purchase Public Shares or warrants, which may influence a vote on a proposed initial business combination and reduce the public “float” of our Class A common stock or Public Warrants. |
| ● | Since our Sponsor, officers and directors will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination. |
| ● | If a stockholder fails to receive notice of our offer to redeem our Public Shares in connection with our initial business combination, or fails to comply with the procedures for submitting or tendering its shares, such shares may not be redeemed. |
| ● | Because of our limitedDocGo’s resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination within the prescribed time period, our public stockholders may receive only approximately $10.00 per public share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless. |
| ● | If the net proceeds of our Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for the 24 months after the closing of our Initial Public Offering, it could limit the amount available to fund our search for a target business or businesses and our ability to complete our initial business combination, and we will depend on loans from our sponsors, their affiliates or members of our management team to fund our search and to complete our initial business combination. |
| ● | You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your Public Shares or warrants, potentially at a loss. |
| ● | You will not be entitled to protections normally afforded to investors of many other blank check companies. |
| ● | If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock. |
| ● | Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. |
If we seek stockholder approval of our initial business combination, which we currently expect to do, the risk factors related to the proposed business combination will be set forth in a Proxy Statement/Prospectus which will be filed with the SEC and distributed to stockholders in advance of the stockholders meeting at which approval is sought.
Item 1A. Risk Factors
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report before making a decision to invest in our securities. Ifpurposes, any of the following events occur, ourwhich could harm DocGo’s business, financial condition and results of operations.
DocGo’s platform provides consumers the ability to, among other things, register for DocGo’s services; complete, view and edit medical history; request a visit (either scheduled or on demand); and conduct a visit (via video or phone). Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. DocGo encounters technical obstacles from time to time, and it is possible that DocGo may discover additional problems that prevent its proprietary applications from operating resultsproperly or in accordance with its contractual obligations to its
customers. If DocGo’s solution does not function reliably or fails to achieve client expectations in terms of performance, clients could assert claims against DocGo or attempt to cancel their contracts with DocGo. This could damage DocGo’s reputation, lead to a loss of revenues and impair its ability to attract or maintain clients.
Moreover, data services are complex and those DocGo offers have in the past contained, and may in the future develop or contain, undetected defects or errors. Material performance problems, defects or errors in DocGo’s existing or new software-based products and services may arise in the future and may result from interface of DocGo’s solution with systems and data that DocGo did not develop and the function of which is outside of DocGo’s control or undetected in its testing. These defects and errors, and any failure by DocGo to identify and address them, could result in loss of revenue or market share, diversion of development resources, harm to DocGo’s reputation and increased service and maintenance costs. Defects or errors may discourage existing or potential clients from purchasing DocGo’s solution. Correction of defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors may be materially adversely affected.substantial and could have a material adverse effect on DocGo’s financial condition and results of operations.
DocGo invested in and implemented upgraded information systems and processes in 2023. While DocGo expects these investments to provide incremental advantages, DocGo cannot assure you that all enhancements will be completed in a timely manner and DocGo’s budget or that such enhancements will be sufficient to meet the expectations of DocGo’s current and prospective customers.
If DocGo cannot implement its solution for clients or resolve any technical issues in a timely manner, DocGo may lose clients and its reputation may be harmed.
DocGo’s clients utilize a variety of data formats, applications and information systems, and DocGo’s solution must support clients’ data formats and integrate with complex enterprise applications and information systems. If DocGo’s enterprise software does not currently support a client’s required data format or appropriately integrate with a client’s applications and information systems, then DocGo must configure its enterprise software to do so, which increases DocGo’s expenses. Additionally, DocGo does not control its clients’ implementation schedules. As a result, if DocGo’s clients do not allocate the internal resources necessary to meet their implementation responsibilities, or if DocGo faces unanticipated implementation difficulties, the implementation may be delayed. If the client implementation process is not executed successfully or if execution is delayed, DocGo could incur significant costs, clients could become dissatisfied and decide not to increase utilization of DocGo’s solution or not to implement DocGo’s solution beyond an initial term of commitment or, in some cases, revenue recognition could be delayed. In that event, the trading price of our securitiesaddition, competitors with more efficient operating models with lower implementation costs could decline,jeopardize DocGo’s client relationships.
DocGo’s clients depend on DocGo’s support services to resolve any technical issues relating to DocGo’s solution and
you could lose all or part of your investment.Risks Relating to Searching forservices, and Consummating a Business Combination
We are a blank check company with no operating history and no revenues, and our stockholders have no basis on which to evaluate our ability to achieve our business objective.
We are a blank check company with no operating results. Because we lack an operating history, our stockholders have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. Except for the Proposed Transaction, we have no plans, arrangements or understandings with any prospective target business concerning a business combination andDocGo may be unable to complete our initial business combination. If we failrespond quickly enough to complete our initial business combination, we will never generate any operating revenues.
Past performanceaccommodate short-term increases in member demand for support services, particularly as DocGo increases the size of its client, member and patient bases. DocGo may also be unable to modify the format of its support services to compete with changes in support services provided by our management teamcompetitors. It is difficult to predict member demand for technical support services, and their affiliatesif member demand increases significantly, DocGo may be unable to provide satisfactory support services to its consumers. Further, if DocGo is unable to address consumers’ needs in a timely fashion or further develop and enhance its solution, or if a client or member is not satisfied with the quality of work performed by DocGo or with the technical support services rendered, then DocGo could incur additional costs to address the situation or be required to issue credits or refunds for amounts related to unused services, and DocGo’s profitability may be impaired. In addition, clients’ dissatisfaction with DocGo’s solution could damage its ability to expand the number of software-based products and services purchased by such clients. These clients may not renew their contracts, seek to terminate their relationship with DocGo or renew on less favorable terms. Moreover, negative publicity related to DocGo’s client relationships, regardless of its accuracy, may further damage DocGo’s business by affecting its reputation or ability to compete for new business with current or prospective clients. If any of these were to occur, DocGo’s revenue may decline and its business, financial condition and results of operations could be indicativeadversely affected.
DocGo’s reliance on third-party software could adversely affect its business.
DocGo’s success depends in part on its integrations and relationships with third-party software providers, particularly with the development and expansion of future performanceDocGo’s offerings and technologies. DocGo also relies on third-party encryption and authentication technologies licensed from third parties that are designed to securely transmit electronic medical records and other personal patient information. DocGo uses third-party software internally as well, including for communication purposes. If these third parties cease to provide access to the software that DocGo uses, the software is not
available on terms that DocGo believes to be reasonable, or the software is not available in the
Company.Information regarding performance by, or businesses associated with, our management team or businesses associated with them is presented for informational purposes only. Past performance by our management team is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. Stockholders should not rely on the historical record of the performance of our management team or businesses associated with them as indicative of our future performance of an investment in the Company or the returns the Company will, or is likely to, generate going forward.
Members of our management team may in the future be involved in governmental investigations and civil litigation relating to the business affairs of companies with which they are, were, or may in the future be, affiliated. This may negatively affect our ability to consummate an initial business combination.
Members of our management team may in the future be involved in governmental investigations and civil litigation relating to the business affairs of companies with which they are, were or may in the future be affiliated with. Any such investigations or litigations may divert our management team’s attention and resources away from searching for an initial business combination,most current version, DocGo may be detrimentalrequired to our reputation, and thusseek comparable software from other sources, which may negatively affect our ability to complete an initial business combination.
We may seek business combination opportunities in industriesbe more expensive or sectors that mayinferior, or may not be outsideavailable at all. Some of our management’s areaDocGo’s technology partners may also take actions that disrupt the utility of expertise.
Although we intendthe software to focusDocGo or the interoperability of DocGo’s platform with its own products or services, or exert strong business influence on identifying companiesDocGo’s ability to operate and distribute its platform or the terms on which it does so. Additionally, third-party services and products are constantly evolving, and DocGo may not be able to modify its operations or platform to assure its compatibility with that of other third parties following development changes. DocGo’s third-party licenses are typically non-exclusive and its competitors may obtain the right to use any of the technology covered by these licenses to compete directly with it. If any of DocGo’s technology partners limits access or modifies their products, standards or terms of use in a manner that degrades the functionality or performance of DocGo’s platform, that is otherwise unsatisfactory or adverse to DocGo, or that gives preferential treatment to competitive products or services, DocGo’s business, financial condition and results of operations could be adversely affected.
Some of DocGo’s software and systems contain open-source software, which may pose particular risks to DocGo’s proprietary software, technologies, products and services in a manner that could harm its business.
DocGo uses software licensed to DocGo by third-party developers under “open source” licenses in connection with the development or deployment of its proprietary software and expects to continue to use open-source software in the transportationfuture. Some open-source licenses contain express requirements, which may be triggered under certain circumstances, that licensees make available source code for modifications or derivative works or prohibit such modifications or derivative works from being licensed for a fee. Although DocGo monitors its use of any open-source software to avoid subjecting its platform to such requirements, the terms of many open-source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on DocGo’s ability to develop or use its proprietary software. DocGo may face claims from third parties demanding the release or license of the open-source software or derivative works that DocGo developed from such software (which could include its proprietary source code) or otherwise seeking to enforce the terms of applicable open-source licenses. These claims could result in litigation and could require DocGo to publicly release portions of its proprietary source code or cease distributing or otherwise using the implicated solutions unless and until DocGo can re-engineer them.
In addition, DocGo’s use of open-source software may present greater risks than use of other third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code. To the extent that DocGo’s platform depends upon the successful operation of open-source software, any undetected errors or defects in open-source software that DocGo uses could prevent the deployment or impair the functionality of its systems and injure its reputation. In addition, the public availability of such software may make it easier for others to compromise its platform. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have an adverse effect on DocGo’s business, financial condition and results of operations.
Security breaches, loss of data and other disruptions or cybersecurity incidents could compromise sensitive business, customer or patient information or prevent DocGo from accessing critical information and expose it to liability, which could adversely affect DocGo’s business.
DocGo is highly dependent on information technology industrynetworks and systems, including on-site systems, managed data center systems and cloud-based computing center systems, to securely process, transmit and store sensitive data and information, such as PHI and other types of personal data or PII relating to its employees, customers, patients and other confidential or proprietary business information. Computer malware, viruses, spamming and phishing attacks and attempts to gain unauthorized access have become more prevalent, have occurred on DocGo’s systems in the past and may occur on DocGo’s systems in the future. Various other factors may also cause system failures, including power outages, catastrophic events, inadequate or ineffective redundancy, issues with upgrading or creating new systems or platforms, flaws in third-party software or services, errors or intentional acts by DocGo’s employees or third-party service providers, breaches in the security of these systems or platforms or other cybersecurity incidents. These and other issues can create system disruptions, shutdowns or unauthorized access to, or disclosure, exfiltration, manipulation, corruption, loss or modifications of, such sensitive data or information, including PHI or PII. DocGo also utilizes third-party service providers for important aspects of the collection, storage, processing and transmission of this sensitive information and therefore is dependent on these third parties to similarly manage cybersecurity risks.
Because of the sensitivity of PHI, other PII and other sensitive information that DocGo and its service providers collect, store, transmit, and otherwise process, the security of DocGo’s technology platform and other aspects of its
services, including those provided or facilitated by DocGo’s third-party service providers, are important to DocGo’s operations and business strategy. DocGo takes certain administrative, physical and technological safeguards to address these risks, such as requiring contractors and other third-party service providers who handle this PHI, other PII and other sensitive information to enter into agreements that contractually obligate them to use reasonable efforts to safeguard such information. DocGo attained ISO 27001 certification for its subsidiary Dara Technologies, LLC (“Dara”) in November 2021 and is also in the process of upgrading the entire Company’s systems to be Service Organization Controls (“SOC”) 2 compliant. Measures taken to protect DocGo’s systems, those of its contractors or third-party service providers, or the PHI, other PII, or other sensitive information DocGo or its contractors or third-party service providers process or maintain, may not adequately protect DocGo from the risks associated with the collection, storage, processing and transmission of such sensitive information. Additionally, updates or upgrades to systems, including those currently underway with respect to SOC 2 compliance, are time-consuming and costly, may not be effective in preventing data breaches or operate as designed and could create new inefficiencies or vulnerabilities. DocGo may also be required to expend significant capital and other resources to address problems caused by security breaches or other cybersecurity incidents. Despite DocGo’s implementation of security measures, cyberattacks are becoming more sophisticated and frequent. As a related market, we will consider an initial business combination outside of our management’s area of expertise if an initial business combination candidate is presented to us and we determine that such candidate offers an attractive business combination opportunity for our companyresult, DocGo or we areits third-party service providers may be unable to identifyanticipate these techniques or to implement adequate protective measures. If DocGo is unable to earn and/or maintain necessary certifications, including ISO 27001 certification for Dara and SOC 2 compliance for the entire Company, it could result in reputational harm and customer churn and adversely affect DocGo’s ability to provide its services. As a suitable candidateresult, DocGo’s revenue may decline and its business, financial condition and results of operations may be adversely affected.
A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, patient information, including PHI, other PII or other sensitive information that DocGo or its contractors or third-party service providers maintain or otherwise process, could harm DocGo’s reputation; compel it to comply with breach notification laws; cause it to incur significant costs for remediation, fines, penalties, notification to individuals or measures intended to repair or replace systems or technology and to prevent future occurrences; cause potential increases in this sector after having expanded a reasonable amountinsurance premiums; and require DocGo to verify the accuracy of time and effortdatabase contents, resulting in an attemptincreased costs or loss of revenue. If DocGo is unable to prevent or mitigate such security breaches or privacy violations or implement satisfactory remedial measures, or if it is perceived that DocGo has been unable to do so.so, its operations or the functionality of its technology could be disrupted; it may be unable to provide access to its systems; it could lose customers; it could see negative repercussions to its reputation, adverse impacts on customers, loss of customer and investor confidence, and financial loss; and it could be subject to governmental investigations or other actions, regulatory or contractual penalties, and other claims and liabilities. In addition, security breaches and other inappropriate access to, or acquisition or processing of, information can be difficult to detect, and any delay in identifying such incidents or in providing any notification of such incidents may lead to increased harms. Further, disclosure or media reports of actual or perceived security vulnerabilities to DocGo’s systems or those of its third-party service providers, even if no breach has been attempted or occurred, could lead to reputational harm, loss of customers and revenue, or increased regulatory actions, oversight, and scrutiny.
Any such cybersecurity incident or interruption of DocGo’s systems or those of any of its third-party service providers could compromise DocGo’s networks or data security processes, and sensitive information could be made inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such cybersecurity incident, interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws and regulations that protect the privacy of member information or other personal information, such as HIPAA, and regulatory penalties. A cybersecurity incident, unauthorized access, loss or dissemination could also disrupt DocGo’s operations, including its ability to perform its services; access customer and patient health information; collect, process, and prepare company financial information; and provide information about DocGo’s current and future services. Any such cybersecurity incident could also compromise DocGo’s trade secrets and other proprietary information, which could adversely affect DocGo’s business and competitive position. While DocGo maintains insurance covering certain data security and privacy damages and claim expenses, such insurance coverage may not be sufficient to compensate for all costs and liabilities, and even if covered, it would not address the reputational damage that could result from a security incident.
As of the date of this filing, DocGo has not been materially impacted by any security breaches to its technology platform, including its on-site systems, managed data center systems and cloud-based computing center systems.
Risks Related to DocGo’s Operations
DocGo’s success depends on its key management personnel.
DocGo’s success depends to a significant degree upon the contributions of certain key management personnel. The loss of any of DocGo’s key personnel could affect its ability to run its business effectively. DocGo’s success will depend on its ability to retain its current management and to develop, attract and retain qualified personnel in the future. Competition for senior management personnel is intense with increasingly aggressive compensation packages, and DocGo cannot assure you that it can retain its key personnel or that its succession planning will prove effective. The loss of a member of senior management requires the remaining executive officers and the Board of Directors of DocGo (the “Board”) to divert immediate and substantial attention to seeking a replacement. The inability to fill vacancies in DocGo’s key personnel positions, including executive positions, on a timely basis could adversely affect its ability to implement its business strategy, which would negatively impact its results of operations.
DocGo’s labor costs are significant and any inability to control those costs could adversely affect its business.
Labor expenses (which includes both directly employed personnel as well as subcontracted labor) are DocGo’s largest cost, representing approximately 73%, 69% and 60% of its 2023, 2022 and 2021 revenues, respectively. DocGo competes with other healthcare providers in a highly competitive labor market to attract healthcare professionals, including EMTs, paramedics and nurses, to support its operations. In some markets in which DocGo operates, the lack of availability of clinical personnel has become a significant operating issue that all healthcare providers face. This labor shortage has required, and could continue in the future to require, DocGo to increase wages and benefits to recruit and retain qualified personnel or to identify and contract with more expensive temporary personnel. DocGo also depends on the available labor pool of technology-skilled workers in certain of the markets in which it operates.
If DocGo’s labor costs increase, it may be unable to raise rates to offset these increased costs. In particular, because a significant percentage of DocGo’s revenue consists of fixed, prospective payments, its ability to pass along increased labor costs is limited. If labor costs rise at an annual rate greater than its revenues, DocGo’s results of operations and cash flows will likely be adversely affected.
Any union activity that may occur within DocGo’s workforce in the future could contribute to increased labor costs. Certain proposed changes in federal labor laws and the National Labor Relations Board’s modification of its election procedures could increase the likelihood of employee unionization attempts. Although our management will endeavornone of DocGo’s employees are currently represented by a collective bargaining agreement, to evaluate the risks inherentextent a significant portion of its employee base unionizes, it is possible DocGo’s labor costs could increase materially. DocGo’s failure to recruit and retain qualified healthcare professionals, or to control labor costs, could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s inability to successfully recruit, train and retain qualified healthcare professionals could adversely affect its business.
The pool of qualified healthcare professionals, including EMTs, paramedics, LPNs and other nurses, available to staff DocGo’s broad spectrum of contracts and customer needs is limited, and DocGo invests significant resources to attract, train and retain these professionals. There is a relatively high rate of turnover in any particularhealthcare professional positions and, with DocGo’s expansion, its requirements in these positions have increased significantly. A significant number of employees have joined DocGo in recent years as it has grown, and DocGo’s success is dependent on its ability to maintain and instill its culture, align its talent with its business combination candidate,needs, engage its employees and inspire them to be open to change, innovate and maintain a customer-driven focus when delivering DocGo’s services. As such, DocGo’s ability to recruit, train and retain a sufficient number of qualified healthcare professionals has a direct impact on its operations.
From time to time DocGo has experienced, and it expects to continue to experience, difficulty in hiring and retaining healthcare professionals with appropriate qualifications, a difficulty that is amplified by the scope of the geographic and demographic diversity of the markets in which DocGo operates or may expand into in the future. In the United States, this difficulty is exacerbated by the currently tight labor market. Moreover, DocGo’s customers, including the healthcare providers with which it partners, have increasingly demanded a greater degree of specialized skills, training and experience in the healthcare professionals providing services under their contracts, which also decreases the number of healthcare professionals who may be qualified to staff certain of DocGo’s contracts. DocGo competes with other companies to recruit and retain these qualified healthcare professionals, including DocGo’s direct competitors, government
and private emergency and first responders as well as healthcare providers, including DocGo’s partners and customers. Competition to fill these positions can be even greater in certain geographic regions, including more rural or economically depressed areas. If DocGo is unable to attract, train and retain highly qualified healthcare professionals, or if turnover rates are higher than it anticipates, it could have an adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s employees may work in challenging environments, which could result in liability or other costs that could adversely affect DocGo’s business.
DocGo’s employees may work in challenging environments that are highly regulated, and DocGo is subject to constantly evolving legal and regulatory frameworks. Consequently, DocGo is subject to heightened risk of legal claims or other regulatory enforcement actions. Although DocGo has implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be no assurance that weits team members, contractors or agents will not violate its policies and procedures. Moreover, a failure to maintain effective control processes could lead to violations, unintentional or otherwise, of laws and regulations and may put DocGo’s employees and others in close proximity to potentially harmful environments or situations. These potentially harmful environments or situations may result in injuries to DocGo’s employees, which could result in liability to DocGo or delay the completion or commencement of DocGo’s services.
Unsafe work sites also have the potential to lead to claims, litigation or other liability, or increase employee turnover, increase costs, damage DocGo’s reputation and brand and raise its operating and insurance costs. Any of the foregoing could result in, among other things, financial losses, litigation or other liability or reputational harm, which could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s inability to collect on its customer receivables or unfavorable shifts in payor mix could adversely affect its business.
The general practice in DocGo’s industry is to provide healthcare services in advance of payment and, in many cases, prior to any assessment of the patient’s insurance coverage and his or her ability to pay in the event insurance coverage is not available. DocGo ultimately bills a number of different payors, including private insurance, Medicare and Medicaid, the healthcare provider or facility and self-pay patients. These different payors typically have different billing, coding, documentation and other compliance requirements that DocGo must satisfy and any procedural deficiencies or incorrect or incomplete information could result in delays or partial or complete non-payment for the services DocGo has rendered. Changes in payor mix, particularly those that increase the percentage of patients covered by lower paying government programs as compared to private insurance or that increase the percentage of self-pay patients, can reduce the amount DocGo receives for its services and adversely affect DocGo’s ability to collect on its receivables. The ability to bill and collect on certain accounts may also be limited by statutory, regulatory and investigatory initiatives, such as restrictions on charges for out-of-network services or by private lawsuits, including those directed at healthcare charges and collection practices for uninsured and underinsured patients.
In addition, DocGo’s ability to collect on its receivables from government customers has been, and in the future may be, adversely impacted by government contract registration, invoicing and payment processes as well as audits. As a result of these factors, payments from government customers typically lag significantly behind the timing of DocGo’s payment obligations to vendors engaged to provide services to such customers.
Other factors that can adversely affect DocGo’s billing and collection efforts include general macroeconomic conditions, disputes between payors as to which party is responsible for payment, variation in coverage for similar services among various payors and the ability of individual patients to pay. These and other risks and uncertainties that impact DocGo’s ability to timely bill and collect on its receivables or the amount DocGo can charge for its services could adversely affect DocGo’s business, financial condition or results of operations.
DocGo may not accurately assess the costs it will incur under new revenue opportunities.
DocGo must accurately assess the costs it will incur in providing its services in order to realize adequate profit margins and otherwise meet its financial and strategic objectives, particularly with respect to the expansion of its mobile health business. However, increasing pressures from healthcare payors to restrict or reduce reimbursement rates at a time when the costs of providing medical services continue to increase, in particular due to labor shortages and other factors, make it more difficult to assess the costs associated with the pricing of new contracts, maintenance of existing contracts
and pricing new services that DocGo has not previously offered. Starting new contracts and service offerings has typically resulted in a temporary negative impact to cash flow as DocGo absorbed various expenses before it was able to bill and collect revenue associated with the new contracts or services. In addition, integrating new contracts, particularly those in new geographic locations, could prove more costly and require more management time than DocGo anticipates. Any failure to accurately predict costs or the timing of payments from customers or to negotiate an adequate profit margin could have a material adverse effect on DocGo’s business, financial condition and results of operations.
If DocGo is unable to successfully develop new offerings and technologies or adapt to rapidly changing technology and industry standards or changes to regulatory requirements, DocGo’s business could be adversely affected.
Technology, including the mobile technologies DocGo utilizes on its platform, is characterized by rapid change, changing consumer requirements, short product lifecycles, evolving industry standards and changing regulatory requirements. DocGo’s continued success and growth depend in part upon its ability to enhance its solutions with next-generation technologies and to develop or acquire and market new services to access new consumer populations. As DocGo’s operations grow, DocGo must continuously improve and upgrade its systems and infrastructure while maintaining or improving the reliability and integrity of its infrastructure as the cost of technology increases. DocGo’s future success also depends on its ability to adapt its systems and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features and reliability of its solutions in response to competitive services and offerings. DocGo may not be able to maintain its existing systems or replace or introduce new technologies and systems as quickly as DocGo would like or in a cost-effective manner.
There is no guarantee that DocGo will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that DocGo will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of DocGo’s competitors or future competitors will not result in DocGo’s present or future applications and services becoming uncompetitive or obsolete. If DocGo is unable to enhance its offerings and network capabilities to keep pace with rapid technological and regulatory change, or if new technologies emerge that are able to deliver competitive offerings at lower prices, more efficiently, more conveniently, or more securely than DocGo’s offerings, its business, financial condition and results of operations could be adversely affected.
DocGo’s success will also depend on the availability of its mobile apps in app stores and in “super-app” environments, and the creations, maintenance and development of relationships with key participants in related industries, some of which may also be DocGo’s competitors. In addition, if accessibility of various apps is limited by government actions, the full functionality of devices may not be available to its members. Moreover, third-party platforms, services and offerings are constantly evolving, and DocGo may not be able to modify its platform to ensure its compatibility with those third parties. If DocGo loses such interoperability, DocGo experiences difficulties or increased costs in integrating its offerings into alternative devices or systems, or manufacturers or operating systems elect not to include DocGo’s offerings, make changes that degrade the functionality of its offerings or give preferential treatment to competitive products, the growth of DocGo’s business, financial condition and results of operations could be materially adversely affected. This risk may be exacerbated by the frequency with which individuals change or upgrade their devices. In the event individuals choose devices that do not already include or supports DocGo’s platform or do not install DocGo’s mobile apps when they change or upgrade their devices, member engagement may be harmed.
DocGo’s marketing efforts to help grow its business may not be effective.
Promoting awareness of DocGo’s brand, innovative technology and services is important to its ability to grow its business, attract and retain customers and gain market acceptance of its products and services, and these efforts can be costly. DocGo believes that much of the growth in its business is in part attributable to its marketing initiatives. DocGo’s marketing initiatives may become increasingly expensive and generating a meaningful return on those initiatives may be difficult. Even if DocGo successfully increases revenue as a result of its paid marketing efforts, it may not offset the additional marketing expenses it incurs. Any factor that diminishes DocGo’s reputation or that of its brands, including adverse publicity or failing to meet the expectations of customers, could make it substantially more difficult for DocGo to attract new customers. If these marketing efforts are not successful, DocGo’s business, financial condition and results of operations could be adversely affected.
DocGo’s insurance coverage, including the reserves DocGo establishes with respect to its insurable losses, could adversely affect its business.
DocGo self-insures against certain losses. In connection with DocGo’s self-insurance programs, management establishes reserves for losses and related expenses within its self-insured retention limits, which represent estimates involving actuarial and statistical projections, at a given point in time, of DocGo’s expectations of the ultimate resolution and administration costs of losses it has incurred in respect of its liability risks. Insurance reserves are inherently subject to uncertainty. DocGo’s reserves are based on historical claims, demographic factors, industry trends, severity and exposure factors and other actuarial assumptions. DocGo uses these actuarial estimates to determine appropriate reserves, and DocGo’s reserves could be significantly affected if current and future occurrences differ from historical claim trends and expectations. While DocGo monitors claims closely when it estimates reserves, the complexity of the claims and the wide range of potential outcomes may hamper timely adjustments to the assumptions DocGo uses in these estimates. Actual losses and related expenses may deviate, individually and in the aggregate, from the reserve estimates reflected in DocGo’s Consolidated Financial Statements. If DocGo determines that its estimated reserves are inadequate, it would be required to increase reserves at the time of the determination, which would reduce DocGo’s earnings in the period in which the deficiency is determined and could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo also maintains certain insurance coverage through third-party insurers. To the extent DocGo holds policies to cover certain groups of claims or relies on insurance coverage obtained by third parties to cover such claims, DocGo may still be responsible for losses. This could occur for a variety of reasons, including if DocGo or such third parties did not obtain sufficient insurance limits, did not buy an extended reporting period policy, where applicable, or the issuing insurance company is unable or unwilling to pay such claims. Furthermore, for DocGo’s losses that are insured or reinsured through commercial insurance companies, it is subject to the “credit risk” of those insurance companies. In addition, professional liability insurance is expensive and insurance premiums may increase significantly in the future, particularly as DocGo expands the geographies in which it does business. As a result, adequate professional liability insurance may not be available to it in the future at acceptable costs or at all. While DocGo believes its commercial insurance company providers are creditworthy, there can be no assurance that such insurance companies will remain so in the future, and any failure of DocGo’s insurance coverage to adequately ascertaincover any losses could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo is required to make capital expenditures in order to remain competitive.
DocGo’s capital expenditure requirements primarily relate to maintaining, growing and upgrading its vehicle fleet and medical equipment to serve its customers and remain competitive. The aging of DocGo’s ambulance fleet requires DocGo to make regular capital expenditures, including to lease newer replacement ambulances to maintain its current level of service. DocGo’s net capital expenditures totaled $6.8 million, $3.2 million and $4.7 million in the years ended December 31, 2023, 2022 and 2021, respectively, representing acquisitions of property and equipment, less the proceeds from disposals of property and equipment. In addition, changing competitive conditions or assessthe emergence of any significant advances in medical technology could require DocGo to invest significant capital in additional equipment or capacity in order to remain competitive. DocGo may also commit significant capital to acquiring new infrastructure to expand into new geographies. If DocGo is unable to fund any such investment, due to macroeconomic factors such as rising inflation, lack of access to the capital markets, rising interest rates or otherwise, or otherwise fails to invest in new ambulances, medical equipment or other infrastructure, its business, financial condition or results of operations could be materially and adversely affected.
DocGo’s international operations subject it to additional risks that could adversely affect its business.
DocGo currently provides healthcare transportation services in the United Kingdom and may further expand its operations and services internationally. In addition to the risks discussed elsewhere herein that are common to DocGo’s operations more generally, DocGo faces additional risks specific to its U.K. operations, including but not limited to:
•geopolitical, social, macroeconomic and financial instability, including wars, civil unrest, acts of terrorism and other conflicts, such as the war in Ukraine, conflict in Israel and rising tensions in the Taiwan Strait; pandemics and endemics; and an inflationary environment, rising interest rates and recessionary fears;
•difficulties and increased costs in developing, staffing and simultaneously managing foreign operations, including as a result of distance, cultural differences and labor shortages and expenses;
•restrictions and limitations on the transfer or repatriation of funds;
•fluctuations in currency exchange rates;
•costs and challenges associated with complying with varying legal and regulatory environments in the U.K., including privacy laws such as the U.K. General Data Protection Regulation and tax laws;
•laws and business practices that favor local competitors or prohibit foreign ownership of certain businesses;
•potential for privatization and other confiscatory actions; and
•other dynamics in the U.K., any of which could result in substantial additional legal or compliance costs, liabilities or obligations for DocGo or could require it to significantly modify its current business practices or even exit the market.
Foreign operations bring increased complexity, and the costs of managing or overseeing foreign operations, including adapting and localizing services or systems to specific regions and countries, can be material. Further, international operations carry inherent uncertainties regarding the effect of local or domestic actions, such as the unpredictable impact of the United Kingdom’s exit from the European Union (Brexit) and the uncertainty regarding how the agreements reached will operate, any of which could be material. International operations also carry financial risks such as those related to fluctuations in foreign currency exchange rates and disparate tax laws. These and other risks related to DocGo’s existing or future foreign operations, or the associated costs or liabilities, could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s business could be materially and adversely affected by natural disasters, other catastrophic events, acts of war or terrorism, cybersecurity incidents and/or other acts by third parties.
DocGo and its customers depend on the ability of its business to run smoothly, including the ability of its fleet of ambulances, which are often needed in times of emergency, to transport patients. Any material disruption caused by natural disasters, including, fires, floods, hurricanes, volcanoes and earthquakes (in each case, including due to climate change or otherwise); power loss or shortages; environmental disasters; telecommunications or business information systems failures; acts of war or terrorism; viral outbreaks and other similar epidemics; cybersecurity incidents; and other actions by third parties and other similar disruptions could cause DocGo to lose critical data and services and otherwise adversely affect DocGo’s ability to conduct business. Even with disaster recovery arrangements, DocGo’s services could be interrupted and DocGo’s insurance coverage may not compensate it for losses that may occur in the wake of such events. If any disruption results in the destruction of some or all of DocGo’s fleet, causes significant disruption to DocGo’s business, contributes to a general decrease in local, regional or global macroeconomic activity or otherwise impairs DocGo’s ability to meet customer demands, or if DocGo is not able to develop or execute on an adequate recovery plan in such circumstances, DocGo’s business, financial condition and results of operations could be materially adversely affected.
Rising inflation may negatively impact DocGo’s business and financial results.
The inflation rate in the United States, as measured by the Consumer Price Index, has generally trended up since early 2021. This data is reported monthly, showing year-over-year changes in prices across a basket of goods and services. Though the inflation rate declined to 4.1% for the full year 2023 from 8.0% in 2022, it remains above historical averages. The increased inflation rate has had an impact on DocGo’s expenses in several areas, including wages, fuel and medical and other supplies. This has had the effect of compressing gross profit margins, as DocGo is generally unable to pass these higher costs on to its customers, particularly in the short term. In a continued attempt to dampen inflation, the U.S. Federal Reserve implemented four interest rate hikes in 2023, raising its benchmark rate (the “federal funds rate”) to the current level of 5.25-5.50% as of the date of this Annual Report. Looking into 2024, DocGo anticipates a continued moderation of the inflation rate as a result of the recent federal funds rate increases, with an annual rate similar to those witnessed in the 2010-2020 period, when the annual inflation rate ranged from 0.1% to 3.2%. However, if inflation is above the levels that DocGo anticipates, gross margins could be below plan. Efforts by the U.S. Federal Reserve to combat inflation by raising the federal funds rate could also impact DocGo’s financing costs for borrowings bearing interest at rates based on SOFR. As a result, DocGo’s business, operating results and cash flows may be adversely affected.
Risks Related to DocGo’s Intellectual Property
DocGo’s failure to protect or enforce its intellectual property rights could impair its ability to protect its technology and brand.
DocGo’s success depends in part on its ability to enforce and protect its intellectual property rights and technology, including its code, information, data, processes and other forms of information, know-how and technology. DocGo relies on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect its intellectual property and other proprietary rights. DocGo also enters into confidentiality and invention assignment agreements with certain of its employees and consultants and enters into confidentiality agreements with certain of its third-party providers and strategic partners. These laws, procedures and restrictions provide only limited protection, and any of DocGo’s intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
Some of DocGo’s intellectual property protections do not prevent competitors or others from independently developing technologies that are substantially equivalent or superior to DocGo’s offerings. Further, it may still be possible for competitors and other unauthorized third parties to copy DocGo’s technology and use its proprietary information to create or enhance competing platforms, solutions and services. DocGo also enters into strategic relationships, joint development and other similar agreements with third parties where intellectual property arising from such relationships may be jointly owned or may be transferred or licensed to the counterparty. These arrangements may limit DocGo’s ability to protect, maintain, enforce or commercialize such intellectual property rights, including requiring agreement with or payment to the joint development partners before protecting, maintaining, licensing or initiating enforcement of such intellectual property rights, and may allow such joint development partners to register, maintain, enforce or license such intellectual property rights in a manner that may affect the value of the jointly owned intellectual property or DocGo’s ability to compete in the market. As DocGo expands its international activities, its exposure to unauthorized use, copying, transfer and disclosure of proprietary information will likely increase as the laws of some countries do not provide the same level of intellectual property protection as do the laws of the United States, and effective intellectual property protections may not be available or may be limited and harder to enforce in some jurisdictions.
DocGo may be required to spend significant resources in order to establish, monitor and protect its intellectual property rights. DocGo may not always detect infringement of its intellectual property rights, and defending or enforcing its intellectual property rights, even if successfully detected, prosecuted, enjoined or remedied, could result in the expenditure of significant financial and managerial resources. Any enforcement efforts, and litigation in particular, could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of DocGo’s intellectual property. DocGo’s efforts to enforce its intellectual property rights may also be met with defenses, counterclaims and countersuits attacking the validity and enforceability of its intellectual property rights. An adverse determination of any litigation proceedings could put DocGo’s intellectual property at risk factors.of being invalidated or interpreted narrowly and could put DocGo’s related pending patent applications at risk of not issuing. DocGo’s inability to protect its proprietary technology against unauthorized copying or use, as well as any costly litigation or extensive enforcement activities, could impair the functionality of DocGo’s platform, delay introductions of enhancements to the platform, result in DocGo’s substituting inferior or more costly technologies, harm DocGo’s reputation or brand and otherwise have a material adverse effect on its business, financial condition and results of operations.
Claims by others that DocGo infringed their proprietary technology or other intellectual property rights could adversely affect DocGo’s business.
In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Companies in the internet and technology industries are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and DocGo’s competitors and other third parties may hold or have pending patent applications, which could be related to DocGo’s business. These risks have been amplified by the increase in third parties, which DocGo refers to as non-practicing entities, whose sole primary business is to assert such claims. Regardless of the merits of any other intellectual property litigation, DocGo may be required to expend significant management time and financial resources on the defense of such claims, and any adverse outcome of any such claim could have a material adverse effect on DocGo’s business, financial condition and results of operations.
Given the competitive landscape and pervasiveness of litigation in DocGo’s industry, from time to time, third parties may assert claims of infringement of intellectual property rights against DocGo. In addition, third parties have previously sent DocGo correspondence regarding various allegations of intellectual property infringement. DocGo
incorporates technology from third parties into its platform and, as such, it cannot be certain that these licensors are not infringing the intellectual property rights of others or that the suppliers and licensors have sufficient rights to the technology in all jurisdictions in which DocGo may operate. As DocGo gains an increasingly higher public profile, DocGo expects the possibility of these and other types of intellectual property rights claims against it will grow. Although DocGo believes that it has meritorious defenses, there can be no assurance that DocGo will be successful in defending against these and future allegations or in reaching a business resolution that is acceptable to DocGo.
Many potential litigants, including some of DocGo’s competitors and non-practicing entities, have the ability to dedicate substantial resources to assert their intellectual property rights. Any claim of infringement by a third party, even those without merit, could be costly, time-consuming and a significant distraction to management. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, DocGo could risk compromising its confidential information during this type of litigation. In addition, in some instances, DocGo may agree to indemnify its clients against certain third-party claims, which may include claims that DocGo’s solutions infringe the intellectual property rights of such third parties. DocGo’s business could be adversely affected by any significant disputes between DocGo and its clients as to the applicability or scope of DocGo’s indemnification obligations to them. With respect to any intellectual property rights litigation or indemnification obligation, DocGo may need to negotiate a license to continue operations if found to be in violation of a third party’s rights, and these licenses may not be available on favorable or commercially reasonable terms, or at all. DocGo may be required to pay substantial damages, royalties or other fees in connection with a claimant securing a judgment against it, DocGo may be subject to an injunction or other restrictions that prevent it from using the relevant intellectual property, or DocGo may determine it is prudent to agree to a settlement that restricts DocGo’s operations or its use of certain intellectual property, any of which could adversely affect DocGo’s business, financial condition and results of operations.
Risks Related to DocGo’s Legal and Regulatory Environment
DocGo could be subject to lawsuits for which it does not have sufficient reserves, which could have a material adverse effect on DocGo’s business, financial condition and results of operations.
Healthcare providers and other participants in the healthcare industry have become subject to an increasing number of lawsuits alleging medical malpractice and related legal theories such as negligent hiring, supervision and credentialing. Similarly, healthcare transportation services can result in lawsuits related to vehicle collisions and personal injuries, patient care incidents or mistreatment and employee job-related injuries. Moreover, in the normal course of DocGo’s business, it has been and may continue to be involved in lawsuits, claims, audits and investigations, including those arising out of its billing practices, employment disputes, contractual claims and other business disputes for which DocGo may have no insurance coverage, and which are not subject to actuarial estimates. Some of these lawsuits may involve large claim amounts and substantial defense costs. As a public company, DocGo has also been named a defendant in a lawsuit involving its securities, and may continue to be involved in lawsuits, claims, audits and investigations related to its securities.
Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, which may or may not be covered by DocGo’s existing insurance or may require DocGo to modify its services or stop serving certain customers or geographies, all of which could negatively impact its existing business and ability to grow. DocGo may also become subject to periodic audits, which would likely increase its regulatory compliance costs and may require it to change its business practices or the scope of its operations. Managing legal proceedings, litigation and audits, even if DocGo achieves favorable outcomes, is time-consuming and diverts management’s attention from DocGo’s day-to-day business. The outcome of these matters or future claims and disputes are difficult to predict and determining reserves for pending litigation and other legal, regulatory and audit matters requires significant judgment. There can be no assurance that an investmentDocGo’s expectations will prove correct, and even if these matters are resolved in our securities will not ultimately proveits favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could have a material effect on DocGo’s results of operations in the period when it identifies the matter, and could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo is subject to a variety of federal, state and local laws and regulatory regimes, including a variety of labor laws and regulations and SEC rules and regulations, and changes to or the failure to comply with these laws and regulations could adversely affect DocGo’s business.
DocGo is subject to various federal, state, and local laws and regulations including the Employee Retirement Income Security Act of 1974 and regulations promulgated by the Internal Revenue Service (“IRS”), the U.S. Department
of Labor and OSHA. DocGo is also subject to a variety of federal and state employment and labor laws and regulations, including the Americans with Disabilities Act, the federal Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act and other regulations related to working conditions, wage-hour pay, overtime pay, family leave, employee benefits, antidiscrimination, termination of employment, safety standards and other workplace regulations. In addition, as a public company, DocGo is subject to SEC rules and regulations.
Compliance with these and other applicable laws and regulations can be time-consuming and costly. Failure to properly adhere to these and other applicable laws and regulations could result in investigations, the imposition of penalties or adverse legal judgments by public or private plaintiffs. Changes to these laws and regulations can also increase costs and require DocGo to commit additional resources to comply with these laws. For example, the raising of the federal minimum wage or the minimum wage within a state where DocGo has significant operations, which has been and continues to be less favorablea subject of ongoing discussions in Washington, D.C. and other U.S. state capitals, could significantly increase DocGo’s selling, general and administrative expenses. Changes to investorsor any failure to comply with applicable laws and regulations could also have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s ability to utilize its net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2023, 2022 and 2021, DocGo had aggregate federal net operating loss carryforwards of approximately $0, $35.3 million and $53.6 million, respectively. As of December 31, 2023, 2022 and 2021, the Company had state net operating loss carryforwards of approximately $36 million, $2.6 million and $67.2 million, respectively. As of December 31, 2023, 2022 and 2021, DocGo had approximately $10.7 million, $1.5 million and $203 thousand respectively, of foreign net operating loss carryforwards. The federal net operating loss carryforwards generated after December 31, 2017 (including by Ambulnz prior to the Business Combination) of approximately $35.3 million carry forward indefinitely, while the remaining federal net carryforwards of approximately $0 begin to expire in 2037. State and foreign net operating loss carryforwards generated in the tax years from 2017 to 2020 will begin to expire, if not utilized, by 2039. DocGo’s unused losses generally carry forward to offset future taxable income, if any, until such unused losses expire. DocGo may be unable to use these losses to offset income before such unused losses expire. However, U.S. federal net operating losses generated in 2019 and forward are not subject to expiration and, if not utilized by fiscal 2021, are only available to offset 80% of taxable income each year due to changes in tax law attributable to the passage of Tax Cuts and Jobs Act of 2017. In addition, if DocGo undergoes an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended (generally defined as a greater than 50% cumulative change in the equity ownership of certain shareholders over a direct investment, ifrolling three-year period), DocGo’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset future taxable income or taxes may be limited. Although the Business Combination did not constitute such an opportunity were available,ownership change, DocGo may experience ownership changes in an initial business combination candidate. In the event we elect to pursuefuture as a business combination outsideresult of the areaschanges in its stock ownership, some of our management’s expertise, our management’s expertisewhich may not be directly applicablewithin DocGo’s control, which could materially reduce or eliminate DocGo’s ability to use these losses or tax attributes to offset future taxable income or tax and have an adverse effect on its evaluationbusiness, financial condition and results of operations.
Changes in tax laws or operation,unanticipated tax liabilities could adversely affect DocGo’s effective income tax rate and profitability.
DocGo is subject to income taxes in the United States (federal and state) and various foreign jurisdictions. DocGo’s effective income tax rate could be adversely affected in the future by a number of factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations or their interpretations and application, and the outcome of income tax audits in various jurisdictions around the world. In particular, the Biden administration has proposed increases to the U.S. corporate income tax rate from 21% to 28% and made other proposals. If any of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could have a negative impact on DocGo’s effective tax rate. DocGo cannot predict the likelihood, timing or substance of U.S. tax proposals and will continue to monitor the progress of such proposals, as well as other global tax reform initiatives.
DocGo continues to monitor changes in tax laws in the U.S. and the impact of proposed and enacted legislation in the foreign jurisdictions in which it operates. In August 2022, the Inflation Reduction Act of 2022 was enacted, which, among other things, includes a new 15% alternative minimum tax on the adjusted financial statement income of certain large corporations for tax years beginning after December 31, 2022. President Biden has also provided informal guidance on tax law changes he may support. Among other things, proposed changes would raise the rate on both domestic and foreign income. If any of these proposals are ultimately enacted into legislation, they could materially impact DocGo’s tax provision, cash tax liability and effective tax rate.
Changes in accounting rules, assumptions or judgments could materially and adversely affect DocGo.
Accounting rules and interpretations for certain aspects of DocGo’s financial reporting are highly complex and involve significant assumptions and judgment. These complexities could lead to a delay in the preparation and dissemination of DocGo’s financial statements. Furthermore, changes in accounting rules and interpretations or in DocGo’s accounting assumptions or judgments, such as asset impairments and contingencies, are likely to significantly impact its financial statements. In some cases, DocGo could be required to apply a new or revised standard retroactively, resulting in restating financial statements from prior period(s). Any of these circumstances could have a material adverse effect on DocGo’s business, financial condition and results of operations. For additional information, containedsee the Consolidated Financial Statements and the accompanying notes included elsewhere in this report regarding the areas of our management’s expertise wouldAnnual Report.
DocGo’s internal control over financial reporting may not be relevant to an understanding of the business that we elect to acquire. As a result, our managementeffective, and its independent registered public accounting firm may not be able to ascertain or assess adequately allcertify as to their effectiveness, which could adversely affect DocGo’s business.
As a public company, DocGo has significant requirements for enhanced financial reporting and internal controls, including the SEC’s rules implementing Sections 302 and 404 of the
relevant risk factors. Accordingly, any stockholders who chooseSarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act’), which require management to
remain stockholders following our initialcertify financial and other information in its quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. DocGo has made, and will continue to make, changes to its internal controls and procedures for financial reporting and accounting systems to meet its reporting obligations as a public company. The process of designing and implementing effective internal controls is a continuous effort that requires DocGo to anticipate and react to changes in its business
combinationand the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy its reporting obligations as a public company. The measures DocGo takes may not be sufficient to satisfy its obligations as a public company, and if DocGo is unable to establish or maintain appropriate internal financial reporting controls and procedures, it could
suffercause DocGo to fail to meet its reporting obligations on a
reductiontimely basis, result in
the valuematerial misstatements in its Consolidated Financial Statements and harm its results of
their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines,operations. As of December 31, 2023, DocGo is no longer an emerging growth company, and, as a result, its independent registered public accounting firm is required to formally attest to the target businesseffectiveness of its internal control over financial reporting pursuant to Section 404 and may issue a report that is adverse in the event that it is not satisfied with the level at which we enter into our initial business combinationDocGo’s controls are documented, designed or operating, or it may not issue an unqualified report.
To comply with the requirements of being a public company, DocGo may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The rules governing the standards that must be met for DocGo’s management to assess its internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Testing and maintaining internal controls can divert management’s attention from other matters that are important to the operation of DocGo’s business. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, DocGo may identify deficiencies that it may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. DocGo’s testing, or the subsequent testing (if required) by its independent registered public accounting firm, may reveal deficiencies in its internal controls over financial reporting that are deemed to be material weaknesses. Any material weaknesses could result in a material misstatement of DocGo’s annual or quarterly Consolidated Financial Statements or disclosures that may not be prevented or detected. If DocGo identifies material weaknesses in its internal control over financial reporting or is unable to comply with the requirements of Section 404 or assert that its internal control over financial reporting is effective, or if DocGo’s independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal control over financial reporting, investors may lose confidence in the accuracy and completeness of DocGo’s financial reports and the market price of its Common Stock could be negatively affected, and DocGo could become subject to investigations by the SEC or other regulatory authorities, any of which could have attributes entirely consistentan adverse effect on DocGo’s business, financial condition and results of operations.
DocGo conducts business in the heavily regulated healthcare industry, and any failure to comply with ourthese laws and government regulations could require DocGo to make significant changes to its operations and could have a material adverse effect on its business, financial condition and results of operations.
The U.S. healthcare industry is heavily regulated and closely scrutinized by federal and state governments. Comprehensive statutes and regulations govern the manner in which DocGo provides and bills for its services and collects
reimbursement from governmental programs and private payors, its relationship with its providers, vendors and clients, its marketing activities and other aspects of its operations. Of particular importance are:
•the federal False Claims Act that imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits;
•the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;
•reassignment of payment rules that prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs;
•a provision of the Social Security Act that imposes criminal penalties on healthcare providers who fail to disclose or refund known overpayments;
•federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered;
•the criminal healthcare fraud provisions of HIPAA that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. HIPAA also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of PHI. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
•federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to provide professional healthcare services, to enroll and participate in the Medicare and Medicaid programs, to report certain changes in their operations to the agencies that administer these programs, as well as state insurance laws;
•the federal Anti-Kickback Statute that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid. Remuneration has been interpreted broadly to be anything of value, and could include compensation, discounts or free marketing services. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
•similar state law provisions pertaining to false claims, self-referral and anti-kickback issues, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers or services paid out-of-pocket by patients;
•the federal physician self-referral law under Section 1877 of the Social Security Act, commonly referred to as the Stark Law, that, unless one of the statutory or regulatory exceptions applies, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibits the entity from billing Medicare or Medicaid for such designated health services. Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the federal False Claims Act noted below;
•state laws that prohibit general criteriabusiness corporations, such as DocGo, from practicing medicine, controlling physicians’ medical decisions or engaging in some practices such as splitting fees with physicians;
•the Federal Trade Commission Act and guidelines.federal and state consumer protection, advertisement and unfair competition laws, which broadly regulate marketplace activities and activities that could potentially harm consumers; and
•laws that regulate debt collection practices.
DocGo’s ability to provide its services internationally is subject to similar laws and regulations in those jurisdictions, and the interpretation of these laws is evolving and varies significantly from country to county. As in the United States, many of these laws and regulations are enforced by governmental, judicial and regulatory authorities with broad discretion. Although wesimilar to their U.S. counterparts in the subject matters addressed, these foreign laws may be very different in what is required of the business and how they regulate the underlying activities. DocGo cannot be certain that its interpretation of such laws and regulations are correct in how its structures its operations, its arrangements with its healthcare provider partners, services agreements and customer arrangements.
Many of these laws and regulations are complex, broad in scope and have identified general criteriafew or narrowly structured exceptions and guidelines for evaluating prospective target businesses,safe harbors. Often DocGo is required to fit certain activities within one of the statutory exceptions and safe harbors available, and it is possible that a targetsome of DocGo’s current or future business activities could be subject to challenge under one or more of such laws. Achieving and sustaining compliance with which we enter into our initial business combination will not have allthese laws can be time-consuming, requires the commitment of significant resources and may prove costly. The risk of DocGo being found in violation of these positive attributes. If we complete our initial business combination with a targetlaws and regulations is increased by the fact that does not meet some or allmany of these guidelines, such combination maylaws and regulations have not be as successful asbeen fully interpreted by the regulatory authorities or the courts, and their provisions are sometimes open to a combinationvariety of interpretations. DocGo’s failure to accurately anticipate the application of these laws and regulations to its current or future business or any other failure or alleged failure to comply with alegal or regulatory requirements could create liability for DocGo and negatively affect its business. Any action against DocGo for violation of these laws or regulations, even if DocGo successfully defends against it, could cause DocGo to incur significant legal expenses, divert management’s attention from the operation of the business that does meet all of our general criteria and guidelines. In addition, if we announceresult in adverse publicity.
Enforcement officials have a
prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of
stockholders may exercise their redemption rights, which may makemechanisms to combat regulatory compliance, fraud and abuse, and if DocGo fails to comply with applicable laws and regulations, it
difficultcould be liable for
uscivil or criminal penalties, including fines, damages, recoupment of overpayments, loss of licenses needed to
meet any closing conditionoperate, loss of enrollment status and approvals necessary to participate in Medicare, Medicaid and other government and private third-party healthcare and payor programs, and exclusion from participation in Medicare, Medicaid and other government healthcare programs. Investors, officers and managing employees associated with
a target business that requires usentities found to have
a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other reasons, itcommitted healthcare fraud may
also be
more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or lessexcluded from participation in
certain circumstances as described herein, on the liquidation of our Trust Account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.If we seek stockholder approval of our initial business combination, our Sponsor and our officers, directors and their affiliates have agreed to vote their shares in favor of such initial business combination, regardless of how our public stockholders vote.
Our Sponsor and our officers, directors and affiliates have agreed to vote any Founder Shares and any Public Shares held by them in favor of our initial business combination. As a result, in addition to the Founder Shares, we would need only 4,312,501 or 37.5% of the 11,500,000 Public Shares to be voted in favor of a transaction in order to have our initial business combination approved. Our Sponsor, on behalf of our officers, directors and affiliates, currently own shares representing at least 20.0% of our outstanding shares of common stock. Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case if our Sponsor and our officers, directors and their affiliates agreed to vote the Founder Shares in accordance with the majority of the votes cast by our public stockholders.
Our Sponsor may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that our public stockholders do not support.
Our Sponsor, on behalf of our officers, directors and their affiliates, own shares representing 20.0% of our issued and outstanding shares of common stock. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that our public stockholders do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our Sponsor or our officers, directors or their affiliates purchase any additional shares of common stock in the public market, or in privately-negotiated transactions, this would increase their control. Factors that would be considered in making such purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were appointed by certain affiliates of our Sponsor, is divided into three classes, each of which generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our initial business combination, in which case all of the current directors will continue in office until at least the completion of the initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our Sponsor and our officers, directors and their affiliates, because of their ownership interests, will have considerable influence regarding the outcome. Accordingly, our Sponsor and our officers, directors and their affiliates will continue to exert control at least until the completion of our initial business combination.
Stockholders may experience dilution of our Class A common stock at the time of our initial business combination.
Dilution may occur as a result of the anti-dilution provisions of the Founder Shares resulting in the issuance of Class A shares on a greater than one to-one basis upon conversion of the Founder Shares at the time of our initial business combination.government healthcare programs. In addition, because of the anti-dilutionpotential for large monetary exposure, criminal liability and negative publicity, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of damages that may be awarded in litigation proceedings. Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement.
DocGo believes that its business operations materially comply with applicable healthcare laws and regulations. However, some of the healthcare laws and regulations applicable to DocGo are subject to limited or evolving interpretations, and a review of DocGo’s business or operations by a court, law enforcement or a regulatory authority might result in a determination of non-compliance. Any failure to comply with applicable legal and regulatory requirements and the consequences of such non-compliance, including those discussed above, could have a significant adverse effect on DocGo’s business, financial condition and results of operations.
DocGo is required to comply with laws governing the transmission, security and privacy of health information and personally identifiable information.
Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity and other processing of PHI and PII, including HIPAA. HIPAA establishes a set of national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as “covered entities,” and the business associates with whom such covered entities contract for services. HIPAA requires covered entities such as DocGo and their business associates to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and
technical safeguards to protect this information. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.
HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in these cases. While HIPAA does not create a private right of action allowing individuals to sue DocGo in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the Founder Shares,misuse or breach of PHI. In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of covered entities and business associates for compliance with the HIPAA privacy and security requirements. HIPAA also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the fine paid by the violator under the Civil Monetary Penalties Law.
HIPAA further requires that patients be notified of any equityunauthorized acquisition, access, use or equity-linked securities issueddisclosure of their unsecured PHI that compromises the privacy or deemed issuedsecurity of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to a prominent media outlet serving the state or jurisdiction in which the breach occurred. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS within 60 days after the end of the calendar year during which the breach was discovered.
In addition to HIPAA, numerous other federal and state laws and regulations protect the confidentiality, privacy, availability, integrity and security of PHI and other types of PII. State statutes and regulations vary from state to state, and these laws and regulations in many cases are more restrictive than, and may not be preempted by, HIPAA. These laws and regulations are often uncertain, contradictory and subject to change or differing interpretations, and DocGo expects new laws, rules and regulations regarding privacy, data protection and information security to be proposed and enacted in the future. By way of example, the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020 and was amended by the California Privacy Rights Act (“CPRA”), a ballot measure approved by California voters in November 2020 that went into effect January 1, 2023, has had a profound impact on the privacy and data security landscape. As the first comprehensive consumer privacy legislation in the U.S., the CCPA created new consumer rights where applicable (some information may be exempt from most of CCPA’s/CPRA’s requirements if subject to HIPAA, for example), which were further expanded by the CPRA. A number of other states have followed suit, with some of those laws already in effect and others coming into effect between 2024 and 2026, creating a patchwork of overlapping but different state laws and thus complicating compliance efforts.
As existing data security laws evolve and new ones are implemented, DocGo may not be able to comply with such requirements in a timely manner, or such requirements may not be compatible with its current processes. Changing DocGo’s processes could be time-consuming and expensive, and failure to implement required changes within the applicable timeframe could subject DocGo to liability for non-compliance. Some states may afford private rights of action to individuals who believe their PII has been misused. This complex, dynamic legal landscape regarding privacy, data protection and information security creates significant compliance issues for DocGo and potentially restricts its ability to collect, use and disclose data and can expose it to additional expense, adverse publicity and liability.
There is ongoing concern from privacy advocates, regulators and others regarding data protection and privacy issues, and the number of jurisdictions with data protection and privacy laws has been increasing. In addition, the scope of protection afforded to data subjects by many of these data protection and privacy laws has been increasing. There are also ongoing public policy discussions regarding whether the standards for deidentified, anonymous or pseudonymized health information are sufficient, and whether the risk of re-identification is sufficiently small to adequately protect patient privacy. These trends may lead to further restrictions on the use of this and similar categories of information. These initiatives or future initiatives could compromise DocGo’s ability to access and use data or to develop or market current or future services.
While DocGo has implemented data privacy and security measures in an effort to comply with applicable laws and regulations relating to privacy and data protection, some PHI and other PII or confidential information is transmitted to or from DocGo by third parties, who may not implement adequate security and privacy measures, and it is possible that laws, rules and regulations relating to privacy, data protection or information security may be interpreted and applied in a manner that is inconsistent with DocGo’s practices or those of third parties who transmit PHI and other PII or confidential
information to DocGo. Additionally, as a business associate under HIPAA, DocGo may also be liable for privacy and security breaches of PHI and certain similar failures of DocGo’s subcontractors. Even though DocGo contractually requires its subcontractors to safeguard PHI as required by law, DocGo has limited control over their actions and practices. If DocGo or these third parties are found to have violated such laws, rules or regulations, it could result in government-imposed fines, orders requiring that DocGo or these third parties change its or their practices, or criminal charges, which could adversely affect DocGo’s business. Complying with these various laws and regulations could cause DocGo to incur substantial costs or require it to change its business practices, systems and compliance procedures in a manner adverse to its business.
DocGo publishes statements to its patients and partners that describe how it handles and protects PHI. If federal or state regulatory authorities or private litigants consider any portion of these statements to be untrue, DocGo may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including, without limitation, costs of responding to investigations, defending against litigation, settling claims and complying with regulatory or court orders.
DocGo also sends short message service, or SMS, text messages to potential end users who are eligible to use its service through certain customers and partners. While DocGo obtains consent from or on behalf of these individuals to send text messages, federal or state regulatory authorities or private litigants may claim that the notices and disclosures DocGo provides, form of consents it obtains or its SMS texting practices, are not adequate. These SMS texting campaigns are potential sources of risk for class action lawsuits and liability for DocGo. An increased number of class action suits under federal and state laws have been filed in the past year against companies who conduct SMS texting programs, which have resulted in or may result in multimillion-dollar settlements to the plaintiffs. Any future such litigation against DocGo could be costly and time-consuming to defend.
Any failure to comply with HIPAA or similar laws and regulations and the consequences of such non-compliance could have a material adverse impact on DocGo’s business, financial condition and results of operations.
If DocGo does not effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding telehealth, DocGo’s business may be harmed.
The unpredictability of the healthcare regulatory landscape means that sudden changes in laws, rules, regulations and policy are possible. Federal, state and local legislative bodies frequently pass legislation and promulgate regulations that affect the healthcare industry. As has been the trend in the past decade with healthcare reform, it is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future, particularly in times of changing political, regulatory and other influences. DocGo cannot provide any assurances regarding the ultimate content, timing or effect of any new healthcare legislation or regulations, nor is it possible at this time to estimate the impact of potential new legislation or regulations on its business. It is possible that future legislation enacted by Congress or state legislatures, or regulations promulgated by regulatory authorities at the federal or state level, could adversely affect DocGo’s current or future business. The extent to which a jurisdiction considers particular actions or relationships to comply with the applicable legal requirements is also subject to evolving interpretations by medical boards and state attorneys general, among others, each with broad discretion. It is possible that the changes to the Medicare, Medicaid or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payors’ reimbursement policies in a manner adverse to DocGo. Similarly, changes in private payor reimbursements could lead to adverse changes in Medicare, Medicaid and other governmental healthcare programs.
As one example, the telehealth industry is still relatively young, and DocGo’s ability to provide its telehealth solutions is directly dependent upon the development and interpretation of the laws governing remote healthcare, the practice of medicine and healthcare delivery in the applicable jurisdictions and more broadly. A few states have imposed different, and, in some cases, additional, standards regarding the provision of services via telehealth. State medical boards have also established new rules or interpreted existing rules in their respective states in a manner that has limited the way telehealth services can be provided. Although the Covid-19 pandemic has led to the relaxation of certain Medicare, Medicaid and state licensure restrictions on the delivery of telehealth services and many of these relaxed policies were either made permanent or extended through December 31, 2024 (the “Extension”), it is uncertain how long some of the relaxed policies will remain in effect. There can be no guarantee that upon expiration of the Extension such restrictions will not be reinstated or changed in a way that adversely affects DocGo’s current or future telehealth offerings.
Accordingly, DocGo must monitor its compliance with law in every jurisdiction in which it operates, on a regular basis. While DocGo believes that it has structured its contracts and operations in material compliance with applicable
healthcare laws and regulations, the healthcare laws and regulations applicable to DocGo may be amended or interpreted in new or different ways that are adverse to DocGo, and new laws and regulations adverse to DocGo’s current or future business may be adopted in the future. There can be no assurance that DocGo will be able to successfully address changes in the current regulatory environment or new laws and regulations that may be implemented in the future, or that practices which are compliant now will continue to be so in the future. Any failure to comply with any changes to or new developments in the healthcare regulatory environment could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo must be properly enrolled in governmental healthcare programs before it can receive reimbursement for services, and there may be delays in the enrollment process.
Each time DocGo expands into a new market, whether organically or by way of acquisition, DocGo must enroll the new operations under DocGo’s applicable group identification number for Medicare and Medicaid programs and for certain managed care and private insurance programs before DocGo is eligible to receive reimbursement for services rendered to beneficiaries of those programs. The estimated time to receive approval for the enrollment is sometimes difficult to predict.
With respect to Medicare, providers can retrospectively bill Medicare for services provided 30 days prior to the effective date of the enrollment. In addition, the enrollment rules provide that the effective date of the enrollment will be the later of the date on which the enrollment application was filed and approved by the Medicare contractor, or the date on which the provider began providing services. If DocGo is unable to complete the enrollment process within the 30 days after the commencement of services, DocGo will be precluded from billing Medicare for any services which were provided to a Medicare beneficiary more than 30 days prior to the effective date of the enrollment. With respect to Medicaid, new enrollment rules and whether a state will allow providers to retrospectively bill Medicaid for services provided prior to submitting an enrollment application varies by state. Failure to timely enroll could reduce DocGo’s total revenues and have a material adverse effect on the business, financial condition or results of operations.
The Affordable Care Act, as currently structured, added additional enrollment requirements for Medicare and Medicaid, which have been further enhanced through implementing regulations and increased enforcement scrutiny. Every enrolled provider must revalidate its enrollment at regular intervals and must update the Medicare contractors and many state Medicaid programs with significant changes on a timely basis. If DocGo fails to provide sufficient documentation as required to maintain its enrollment, Medicare and Medicaid could deny continued future enrollment or revoke DocGo’s enrollment and billing privileges.
The requirements for enrollment, licensure, certification and accreditation may include notification or approval in the event of a transfer or change of ownership or certain other changes. Other agencies or payors with which DocGo has contracts may have similar requirements, and some of these processes may be complex. Failure to provide required notifications or obtain necessary approvals may result in the delay or inability to complete an acquisition or transfer, loss of licensure, lapses in reimbursement or other penalties. While DocGo makes reasonable efforts to substantially comply with these requirements, it cannot assure you that the agencies that administer these programs or have awarded DocGo contracts will not find that DocGo has failed to comply in some material respects. A finding of non-compliance and any resulting payment delays, refund demands or other sanctions could have a material adverse effect on DocGo’s business, financial condition or results of operations.
Reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program could have a material adverse effect on DocGo.
DocGo generates a significant amount of revenues from Medicare, either directly or through MA plans, particularly in its healthcare transportation segment. Medicare revenues represent approximately 7.7%, 7.6% and 6.6% of DocGo’s revenues for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, many private payors base their reimbursement rates on the published Medicare rates or are themselves reimbursed by Medicare for the services DocGo provides. As a result, DocGo’s results of operations are, in part, dependent on government funding levels for Medicare programs and any changes that limit or reduce MA or general Medicare reimbursement levels, such as reductions in or limitations of reimbursement amounts or rates under programs, reductions in funding of programs, expansion of benefits without adequate funding or elimination of coverage for certain benefits or for certain individuals, could have a material adverse effect on DocGo’s business, financial condition and results of operations.
The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses DocGo for its services. Budget pressures often cause the federal government to reduce or place limits on reimbursement rates under Medicare. Implementation of these and other types of measures could result in substantial reductions in DocGo’s revenues and operating margins. For example, due to the federal sequestration, an automatic 2% reduction in Medicare spending took effect beginning in April 2013. Although temporarily paused/reduced from May 1, 2020 through June 30, 2022 due to The Cares Act, which was signed into law on March 27, 2020, and designed to provide financial support and resources to individuals and business affected by the COVID-19 pandemic, the 2% reduction was reimposed as of July 1, 2022 and is still currently in effect as of the date of this filing.
Each year, CMS issues a final rule to establish the MA benchmark payment rates for the following calendar year. Reductions to MA rates impacting DocGo may be greater than the industry average rate and the final impact of the MA rates can vary from any estimate DocGo may have. In addition, CMS may change the rules governing the Medicare program, including those governing reimbursement. Reductions in reimbursement rates or the scope of services being reimbursed could have a material adverse effect on DocGo’s business, financial condition and results of operations.
State and federal efforts to reduce Medicaid spending could adversely affect DocGo.
Certain of DocGo’s customers who are individuals are dual-eligible, meaning their coverage comes from both Medicare and Medicaid. As a result, a small portion of DocGo’s revenue comes from Medicaid, accounting for approximately 1.4%, 1.8% and 1.1% of revenue for the years ended December 31, 2023, 2022 and 2021, respectively. Medicaid is a joint federal-state program purchasing healthcare services for the low income and indigent as well as certain higher income individuals with significant health needs. Under broad federal criteria, states establish rules for eligibility, services and payment. Medicaid is a state-administered program financed by both state funds and matching federal funds. Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led both the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending.
For example, a number of states have adopted or are considering legislation designed to reduce their Medicaid expenditures, such as financial arrangements commonly referred to as provider taxes. Under provider tax arrangements, states collect taxes from healthcare providers and then use the revenue to pay the providers as a Medicaid expenditure, which allows the states to then claim additional federal matching funds on the additional reimbursements. Current federal law provides for a cap on the maximum allowable provider tax as a percentage of the provider’s total revenue. There can be no assurance that federal law will continue to provide matching federal funds on state Medicaid expenditures funded through provider taxes, or that the current caps on provider taxes will not be reduced. Any discontinuance or reduction in federal matching of provider tax-related Medicaid expenditures could have a significant and adverse effect on states’ Medicaid expenditures, and as a result could have an adverse effect on DocGo’s business, financial condition and results of operations.
Also, as part of the movement to repeal, replace or modify the Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and as a means to reduce the federal budget deficit, there are renewed congressional efforts to move Medicaid from an open-ended program with coverage and benefits set by the federal government to one in which states receive a fixed amount of federal funds, either through block grants or per capita caps, and have more flexibility to determine benefits, eligibility or provider payments. If those changes are implemented, DocGo cannot predict whether the amount of fixed federal funding to the states will be based on current payment amounts, or if it will be based on lower payment amounts, which would negatively impact those states that expanded their Medicaid programs in response to the Affordable Care Act.
DocGo expects these state and federal efforts to continue for the foreseeable future. The Medicaid program and its reimbursement rates and rules are subject to frequent change at both the federal and state level. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which DocGo’s services are reimbursed by state Medicaid plans.
DocGo has been the subject of federal, state and municipal investigations, audits and compliance reviews and may be subject to additional investigations, audits and reviews in the future.
Companies in the broader healthcare industry are subject to a high level of scrutiny by various governmental agencies and their agents. Both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies, as well as their executives and managers. These investigations relate to a wide variety of topics, including referral and billing practices. For example, to enforce compliance with the federal laws, the U.S. Department of Justice and the OIG have established national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ compliance, including compliance with the healthcare reimbursement rules and fraud and abuse laws. DocGo is also required to conduct periodic internal audits in connection with ourits third-party relationships and, in the ordinary course of business receives repayment demands from third-party payors based on allegations that its services were not medically necessary, were billed at an improper level or otherwise violated applicable billing requirements that require investigation. Further, DocGo periodically conducts internal reviews of its regulatory compliance.
DocGo has been the subject of investigations, audits and reviews and may in the future be subject to additional investigations, audits and reviews by the government and its agents, a third-party or DocGo itself. Such investigations, audits and reviews could result in significant expense to DocGo in addition to adverse publicity and diversion of the management’s attention from DocGo’s business regardless of the outcome. Any adverse findings against DocGo could result in significant fines, penalties and other sanctions, any of which could have a material adverse effect on DocGo’s business, financial condition and results of operations.
DocGo’s business practices may be found to constitute illegal fee-splitting or corporate practice of medicine, which may lead to penalties and could adversely affect DocGo’s business.
Many states have laws that prohibit business corporations such as DocGo from practicing medicine, employing physicians, exercising control over medical judgments or decisions of physicians or other healthcare professionals (such as EMTs and nurses), or engaging in certain business arrangements such as fee-splitting, with each of the foregoing activities collectively referred to as the “corporate practice of medicine.” In some states these prohibitions are expressly stated in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. Many of the states in which DocGo currently operates generally prohibit the corporate practice of medicine, and other states may as well, including those into which DocGo may expand in the future.
The state laws and regulations and administrative and judicial decisions that enumerate the specific corporate practice of medicine rules vary considerably from state to state and have been subject to limited judicial or regulatory interpretations. These laws and regulations are enforced by both the courts and government agencies, each with broad discretion. Courts, government agencies or other parties, including physicians, may assert that DocGo is engaged in the unlawful corporate practice of medicine. While penalties for violations of the corporate practice of medicine vary from state to state, as a result of such allegations, DocGo could be subject to civil and criminal penalties, its contracts could be found legally invalid and unenforceable, in whole or in part, or DocGo could be required to restructure its contractual arrangements entirely. If found to be engaged in the corporate practice of medicine, DocGo may not be able to restructure its operations or its contractual arrangements on favorable terms or at all. Any failure to comply with these laws and regulations regarding the corporate practice of medicine and the consequences of such non-compliance could have a material adverse impact on DocGo’s business, financial condition and results of operations.
DocGo believes its business is structured to comply with the applicable regulations governing fee-splitting and the corporate practice of medicine in the states where it generates revenue; however, in many cases and as noted above, these laws and regulations applicable to DocGo are subject to limited or evolving interpretations, and there can be no assurances that a review of DocGo’s business or operations by a court, law enforcement or a regulatory authority might result in a determination of non-compliance.
Risks Related to DocGo’s Indebtedness
DocGo’s future indebtedness could require that it dedicate a portion of its cash flows to debt service obligations and reduce the funds that would otherwise be available for other general corporate purposes and other business opportunities, which could adversely affect DocGo’s operating performance, growth, profitability and financial
condition, which in turn could make it more difficult for it to generate cash flow sufficient to satisfy all of its obligations under its indebtedness.
As of December 31, 2023, DocGo had $25 million outstanding under a credit agreement, dated as of November 1, 2022, among DocGo, Citibank, N.A., as administrative agent (the “Agent”), and the other parties thereto (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility in the initial aggregate principal amount of $90 million (the “Revolving Facility”). The borrowings under the Revolving Facility were used for general corporate purposes, including the funding of working capital needs. DocGo repaid all amounts outstanding under the Revolving Facility in February 2024, and no amounts are outstanding under the Revolving Facility as of the date of this Annual Report. Borrowings under the Revolving Facility bear interest at a per annum rate equal to: (i) at DocGo’s option, (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. DocGo is also required to pay a commitment fee to the lenders under the Revolving Facility in respect of any unutilized commitments thereunder. Any future borrowings under the Credit Agreement or similar future arrangements could require that DocGo dedicate a portion of its cash flows to debt service payments. As a result, any such future indebtedness could reduce the funds that would otherwise be available for operations and future business combinationopportunities, and payments of such debt obligations could limit DocGo’s ability to:
•obtain additional financing, if necessary, for working capital and operations, or such financing may not be available on favorable terms;
•pay dividends and make other distributions on, or redeem or repurchase, capital stock;
•make needed capital expenditures;
•make strategic acquisitions or investments or enter into joint ventures;
•react to changes or withstand a future downturn in its business, the industry or the economy in general;
•meet expected demand growth, budget targets and forecasts of future results;
•engage in business activities, including future opportunities that may be in its interest; and
•react to competitive pressures or compete with competitors with less debt.
These limitations could adversely affect DocGo’s operating performance, growth, profitability and financial condition, which would make it more difficult for it to generate cash flow sufficient to satisfy its obligations under its future indebtedness.
DocGo’s ability to make scheduled payments on its future debt obligations also depends on its then-current financial condition, results of operations and capital resources, which are subject to, among other things: the business, financial, economic, industry, competitive, regulatory and other factors discussed in these risk factors, and on other factors, some of which are beyond its control, including: the level of capital expenditures it makes, including those for acquisitions, if any; its debt service requirements; fluctuations in its working capital needs; its ability to borrow funds and access capital markets; and restrictions on debt service payments and its ability to make working capital borrowings for future debt service payments contained in the Credit Agreement.
If DocGo is unable to generate sufficient cash flow to permit it to meet its future debt obligations under the Credit Agreement or any future arrangements, then it would be
disproportionately dilutive to our Class A common stockin default and,
would be exacerbated to the extent the public stockholders seek redemptions from the Trust Account.Because we are not limited to evaluating a target business in a particular industry sector or any specific target businesses with which to pursue our initial business combination, stockholders will be unable to ascertain the merits or risks of any particular target business’s operations.
We will seek to complete an initial business combination with companies in the transportation software and technology industry or a related market, but may also pursue other business combination opportunities, except that we are not,case of the Credit Agreement, the Agent could accelerate repayment of all amounts outstanding under our amended and restated certificate of incorporation, permittedthe Credit Agreement. If its indebtedness were to effectuate our initial business combination with another blank check company or similar company with nominal operations. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business,accelerated, there can be no assurance that we will properly ascertainDocGo would have, or assess allbe able to obtain, sufficient funds to repay such indebtedness in full. In addition, under the Credit Agreement, in the event of a default, the Agent could seek foreclosure of the Agent’s lien on the assets of DocGo and its subsidiary guarantors and exercise other customary secured creditor rights.
DocGo might incur future debt, which could further increase the risks to its financial condition described above.
DocGo may incur significant risk factors orindebtedness in the future, including off-balance sheet financings, trade credit, contractual obligations and general and commercial liabilities. Although the Credit Agreement contains certain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also would not prevent DocGo from incurring obligations that we will have adequate timedo not constitute indebtedness, and additionally it has its
borrowing capacity under the Revolving Facility, which as of December 31, 2023, had $25 million outstanding and an available borrowing capacity of approximately $65 million (which is subject to complete due diligence. Furthermore, somecustomary borrowing conditions). In February 2024, DocGo repaid all amounts outstanding under the Revolving Facility, and no amounts are outstanding under the Revolving Facility as of these risksthe date of this Annual Report. DocGo may be outsideable to increase the commitments under the Revolving Facility by an additional aggregate principal amount of our controlup to $50 million. DocGo’s future debt levels could further exacerbate the related risks to DocGo’s financial condition that it now faces.
If DocGo is unable to generate sufficient cash to service its future indebtedness, it may be forced to take other actions to fund the satisfaction of its obligations under its future indebtedness, which may not be successful.
If DocGo’s cash flow is insufficient to fund its future debt service obligations, it could face substantial liquidity problems and leave us with nocould be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, raise additional debt or equity capital or restructure or refinance its future indebtedness. DocGo may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow DocGo to meet its future debt service obligations. Even if new financing were available, it may be on terms that are less attractive to DocGo than its then-existing indebtedness or it may not be on terms that are acceptable to DocGo. In addition, the Credit Agreement restricts DocGo’s ability to controldispose of assets and use the proceeds from those dispositions. Thus, DocGo may not be able to consummate those dispositions or reduceto obtain proceeds in an amount sufficient to meet any debt service obligations then due.
If DocGo cannot generate sufficient cash flow to permit it to meet future payment requirements on its debt, then, under the chances that those risks will adversely impact a target business. ThereCredit Agreement, it would be in default and the Agent could accelerate repayment of all amounts outstanding under the Credit Agreement. If DocGo’s future indebtedness were to be accelerated, there can be no assurance that it would have, or be able to obtain, sufficient funds to repay such future indebtedness in full. In addition, in the case of the Credit Agreement, in the event of a default, the Agent could seek foreclosure of the Agent’s lien on the assets of DocGo and its subsidiary guarantors and exercise other customary secured creditor rights, and DocGo could be forced into bankruptcy or liquidation.
The terms of the Credit Agreement and potential future debt arrangements could restrict its current and future operations, particularly its ability to respond to changes or to take certain actions.
The Credit Agreement imposes significant operating and financial restrictions on DocGo and may limit its ability to engage in acts that may be in its best interest, including restrictions on DocGo’s ability to:
•incur or guarantee additional indebtedness;
•pay dividends and make other distributions on, or redeem or repurchase, capital stock;
•make certain investments;
•incur certain liens;
•enter into transactions with affiliates;
•merge or consolidate; and
•transfer or sell assets.
Additionally, the Credit Agreement also requires DocGo to maintain a certain interest coverage ratio and a net leverage ratio. DocGo’s ability to comply with the covenants and restrictions contained in the Credit Agreement may be affected by events beyond its control. If market or other macroeconomic conditions deteriorate, its ability to comply with these covenants and restrictions may be impaired.
A breach of the covenants could result in an event of default under the Credit Agreement, which, if not cured or waived, could have a material adverse effect on DocGo’s business, results of operations and financial condition, including the acceleration of payments as described above. If DocGo’s then-existing indebtedness were to be accelerated, there can be no assurance that it would have, or be able to obtain, sufficient funds to repay such indebtedness in full. In addition, in the event of a default, the Agent could seek foreclosure of the Agent’s lien on the assets of DocGo and its subsidiary
guarantors and exercise other customary secured creditor rights, and DocGo could be forced into bankruptcy or liquidation. Any future debt arrangements that DocGo may enter into could also impose similar restrictions.
DocGo’s variable rate indebtedness could subject it to interest rate risk, which could cause its debt service obligations to increase significantly.
Borrowings under the Revolving Facility are at variable rates of interest and DocGo’s future borrowings under the Revolving Facility could expose DocGo to interest rate risk. If interest rates increase, DocGo’s debt service obligations on its future variable rate indebtedness could increase even though the amount borrowed will remain the same, and DocGo’s net income and operating cash flows, including cash available for servicing its indebtedness, would correspondingly decrease.
If the financial institutions that are lenders under the Revolving Facility fail to extend credit under the facility, DocGo’s liquidity and results of operations may be adversely affected.
Each financial institution that is a lender under the Revolving Facility is responsible on a several but not joint basis for providing a portion of the loans to be made under the facility. If any participant or group of participants with a significant portion of the commitments under the Revolving Facility fails to satisfy its or their respective obligations to extend credit under the facility and DocGo is unable to find a replacement for such participant or participants on a timely basis (if at all), DocGo’s liquidity may be adversely affected. In addition, the lenders under the Revolving Facility may terminate or reduce the Revolving Facility in certain circumstances, which could adversely impact DocGo’s liquidity and results of operations.
Risks Related to Ownership of Common Stock
Nasdaq may delist DocGo’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject DocGo to additional trading restrictions.
The Common Stock is listed on Nasdaq under the symbol “DCGO.” DocGo is required to meet continued listing requirements for its securities to continue to be listed on Nasdaq, including having a minimum number of public securities holders and a minimum stock price. DocGo cannot assure you that it will continue to meet those listing requirements in the future.
If Nasdaq delists DocGo’s securities from trading on its exchange and DocGo is not able to list its securities on another national securities exchange, DocGo expects its securities could be quoted on an over-the-counter market. If this were to occur, it could face significant material adverse consequences, including:
•a limited availability of market quotations for its securities;
•reduced liquidity for its securities;
•a determination that the Common Stock is a “penny stock” which will require brokers trading in Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for its securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
Because there are no current plans to pay cash dividends on Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Common Stock for a price greater than that which you paid for it.
DocGo intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of Common Stock will be at the sole discretion of the Board. The Board may take into account general and economic conditions, DocGo’s financial condition and results of operations, DocGo’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by DocGo to its stockholders or by its subsidiaries to it and such other factors as the Board may deem
relevant. In addition, DocGo’s ability to pay dividends is limited by covenants of DocGo’s existing and outstanding indebtedness and may be limited by covenants of any future indebtedness DocGo incurs. As a result, you may not receive any return on an investment in ourCommon Stock unless you sell Common Stock for a price greater than that which you paid for it.
If securities analysts do not publish research or reports about DocGo’s business or if they downgrade the Common Stock or DocGo’s sector, DocGo’s stock price and trading volume could decline.
The trading market for Common Stock relies in part on the research and reports that industry or financial analysts publish about DocGo or its business. DocGo does not control these analysts. In addition, some financial analysts may have limited expertise with DocGo’s model and operations. If one or more of the analysts who do cover DocGo downgrade its stock or industry, or the stock of any of its competitors, or publish inaccurate or unfavorable research about its business, the price of Common Stock could decline. Furthermore, if one or more of these analysts cease coverage of DocGo or fail to publish reports on it regularly, DocGo could lose visibility in the market, which in turn could cause its stock price or trading volume to decline.
Future sales, or the perception of future sales, by DocGo or its stockholders in the public market could cause the market price for Common Stock to decline.
The sale of shares of Common Stock in the public market, or the perception that such sales could occur, by senior executives, directors and significant stockholders could harm the prevailing market price of shares of Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for DocGo to sell equity securities in the future at a time and at a price that it deems appropriate.
In addition, the shares of Common Stock reserved for future issuance under DocGo’s equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144 under the Securities Act, as applicable. The number of shares of Common Stock reserved for future issuance under its equity incentive plans represents approximately 10.13% of outstanding Common Stock as of December 31, 2023. The compensation committee of the Board may determine the exact number of shares to be reserved for future issuance under its equity incentive plans at its discretion. DocGo has filed a Form S-8 under the Securities Act to register shares of Common Stock and securities convertible into or exchangeable for shares of Common Stock issued pursuant to DocGo’s equity incentive plan and may file additional registration statements on Form S-8 in the future. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.
In the future, DocGo may also issue its securities in connection with investments or acquisitions. The number of shares of Common Stock issued in connection with an investment or acquisition could constitute a material portion of DocGo’s then-outstanding shares of Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to DocGo’s stockholders.
DocGo’s share repurchase program may subject it to certain risks, and DocGo cannot provide any guarantees that it will repurchase Common Stock pursuant to its share repurchase program.
DocGo has adopted a share repurchase program to repurchase shares of its Common Stock. Although the Board has authorized the share repurchase program, the timing, manner, price and amount of any Common Stock repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. DocGo’s share repurchase program does not obligate it to acquire any Common Stock., and DocGo may discontinue the program at any time. If DocGo fails to meet any expectations related to share repurchases, it could have a material adverse impact on investor confidence and the market price of the Common Stock could decline. Additionally, price volatility of the Common Stock over a given period may cause the average price at which DocGo repurchases Common Stock to exceed the stock’s market price at a given point in time.
Any reduction or discontinuance by DocGo of repurchases of its Common Stock pursuant to its current share repurchase program could cause the market price of its Common Stock to decline. Moreover, in the event DocGo’s repurchases of its Common Stock are reduced or discontinued, its failure or inability to resume repurchasing Common Stock at historical levels could result in a lower market valuation of its Common Stock.
Anti-takeover provisions in DocGo’s organizational documents could delay or prevent a change of control.
Certain provisions of DocGo’s certificate of incorporation (as the same may be amended and/or restated from time to time) and bylaws (as the same may be amended and/or restated from time to time) may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by DocGo’s stockholders.
These provisions provide for, among other things:
•a classified board of directors;
•the ability of the Board to issue one or more series of preferred stock;
•advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at DocGo’s annual meetings;
•certain limitations on convening special stockholder meetings;
•limiting the ability of stockholders to act by written consent;
•supermajority provisions to amend the bylaws and certain sections of the certificate of incorporation; and
•providing the Board with express authority to make, alter or repeal the bylaws.
These anti-takeover provisions could make it more difficult for a third party to acquire DocGo, even if the third party’s offer may be considered beneficial by many of DocGo’s stockholders. As a result, DocGo’s stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause DocGo to take other corporate actions you desire.
DocGo’s certificate of incorporation designates, subject to limited exceptions, the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and the federal district courts as the sole and exclusive forum for Securities Act claims, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with DocGo or its directors, officers, employees or stockholders.
DocGo’s certificate of incorporation provides that, unless DocGo, in writing, selects or consents to the selection of an alternative forum: (a) the sole and exclusive forum for any complaint asserting any internal corporate claims, to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, is the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware) and (b) the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act, to the fullest extent permitted by law, shall be the federal district courts of the U.S.; provided however, these provisions of the certificate of incorporation will not apply to suits brought to enforce a duty or liability created by the Exchange Act (as explained below).
As a result, any (1) derivative action or proceeding brought on behalf of DocGo, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to DocGo or its stockholders, (3) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or DocGo’s certificate of incorporation or bylaws, or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware). Any person or entity purchasing or otherwise acquiring any interest in shares of DocGo’s capital stock shall be deemed to have notice of and to have consented to the provisions of the certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with DocGo or its directors, officers or other employees, which may discourage such lawsuits against DocGo and its directors, officers and employees. Alternatively, if a court were to find these provisions of DocGo’s certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings,
DocGo may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect DocGo’s business and financial condition.
DocGo’s certificate of incorporation provides that the exclusive forum provision is applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision does not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
The market price and trading volume of Common Stock may be volatile, and the value of Common Stock has declined and could continue to decline.
Stock markets, including Nasdaq, have from time-to-time experienced significant price and volume fluctuations. The market price of the Common Stock has been and may continue to be volatile and has declined could continue to decline significantly, whether due to matters specific to DocGo or to general market conditions. In addition, the trading volume in Common Stock may fluctuate and cause significant price variations to occur. If the market price of the Common Stock declines significantly, you may be unable to resell your shares of Common Stock at or above the market price of Common Stock. DocGo cannot assure you that the market price of Common Stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:
•the realization of any of the risk factors presented in this Annual Report;
•actual or anticipated differences in DocGo’s estimates, or in the estimates of analysts, for DocGo’s revenues, results of operations, level of indebtedness, liquidity or financial condition;
•additions and departures of key personnel;
•failure to comply with the requirements of the Nasdaq;
•failure to comply with the Sarbanes-Oxley Act or other laws or regulations;
•future issuances, sales or resales, or anticipated issuances, sales or resales, of Common Stock;
•DocGo’s inability to execute its share repurchase program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuances of repurchases thereunder;
•perceptions of the investment opportunity associated with Common Stock relative to other investment alternatives;
•the performance and market valuations of other similar companies;
•future announcements concerning DocGo’s business or its competitors’ businesses;
•broad disruptions in the financial markets, including sudden disruptions in the credit markets;
•speculation in the press or investment community;
•negative publicity regarding DocGo’s business;
•actual, potential or perceived control, accounting or reporting problems;
•changes in accounting principles, policies and guidelines; and
•general macroeconomic and geopolitical conditions, such as the effects of health crises; recessionary fears, rising interest rates and inflationary environment; local and national elections; fuel prices; international currency fluctuations; corruption political instability, including the conflicts in Ukraine and Israel and rising tensions in the Taiwan Strait; and acts of war or terrorism.
In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their securities. DocGo is subject to, and may in the future be subject to, such litigation. This type of litigation could result in substantial costs and divert DocGo’s management’s attention and resources, which could have a material adverse effect on DocGo.
Future issuances of debt securities and equity securities may adversely affect DocGo, including the market price of Common Stock and may be dilutive to existing stockholders.
There is no assurance that DocGo will not incur debt or issue equity ranking senior to Common Stock. Those securities will ultimately provegenerally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting DocGo’s operating flexibility. Additionally, any convertible or exchangeable securities that DocGo issues in the future may have rights, preferences and privileges more favorable than those of Common Stock. Separately, additional financing may not be available on favorable terms, or at all. Because DocGo’s decision to issue debt or equity in the future will depend on market conditions and other factors, it cannot predict or estimate the amount, timing, nature or success of DocGo’s future capital raising efforts. As a result, future capital raising efforts may reduce the market price of Common Stock and be dilutive to existing stockholders.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
In the ordinary course of our business, we collect, use, store and transmit digitally large amounts of confidential, sensitive, proprietary, personal and health-related information. The secure maintenance of this information and our information technology systems is important to our operations and business strategy, and we consider cybersecurity, along with other significant risks that we face, within our overall enterprise risk management framework. To this end, we have implemented processes designed to assess, identify and manage risks from potential unauthorized occurrences on or through our information technology systems that may result in adverse effects on the confidentiality, integrity and availability of these systems and the data residing therein.
These processes are managed and monitored by a dedicated information technology team, which is led by our Chief Technology Officer (“CTO”), and include mechanisms, controls, technologies, systems and other processes designed to prevent or mitigate data loss, theft, misuse or other security incidents or vulnerabilities affecting the data and maintain a stable information technology environment. For example, we conduct penetration and vulnerability testing, data recovery testing, security audits and ongoing risk assessments, including due diligence on and audits of our key technology vendors and other contractors and suppliers. We also conduct regular employee trainings on cyber and information security, among other topics. In addition, we consult with outside advisors and experts, when appropriate, to assist with assessing, identifying, and managing cybersecurity risks, including to anticipate future threats and trends and their impact on the Company’s risk environment. We also rely on information technology and third party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary and other types of information.
With respect to incident response, we have adopted a Cybersecurity Incident Response Plan that applies in the event of a cybersecurity threat or incident (the “IRP”) to provide a standardized framework for responding to security incidents. The IRP sets out a coordinated approach to investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate. In general, our incident response process follows the National Institute of Standards and Technology framework and focuses on four phases:
•preparation and prevention;
•detection and analysis;
•containment, eradication and recovery; and
•post-incident remediation.
The IRP applies to all Company personnel (including third-party contractors, vendors and partners) that perform functions or services that require access to secure Company information, and to all devices and network services that are owned or managed by the Company.
Despite ongoing efforts to continually improve our and our vendors’ ability to protect against cyber incidents, we may not be able to protect all information systems, and such incidents may lead to reputational harm, revenue and client loss, legal actions and statutory penalties, among other consequences. To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us, including our business strategy, results of operations or financial condition, and we do not believe that such risks are reasonably likely to have such an effect over the long term. However, there can be no guarantee that we will not be the subject of future successful cybersecurity attacks, threats or incidents that materially affect our business strategy, results of operations or financial condition. Additional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “Risks Related to Information Technology.”
Governance
Our CTO, who reports directly to our Chief Executive Officer, is responsible for assessing and managing cybersecurity risks. Our CTO has gained substantial information technology and cybersecurity knowledge from over 25 years of work experience at the Company and elsewhere. Our CTO receives reports on cybersecurity threats from our dedicated information technology team on an ongoing basis and, in conjunction with management, regularly review risk management measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. Our CTO also works closely with our legal and compliance departments to oversee compliance with legal, regulatory and contractual security requirements.
The Board, as a whole and at the committee level, has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage and mitigate those risks. The Board’s Audit and Compliance Committee, which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit and Compliance Committee receives regular updates on cybersecurity and information technology matters and related risk exposures from our CTO, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to our peers and third parties. The Board also receives updates from management and the Audit and Compliance Committee on cybersecurity risks on at least an annual basis. In addition, we have protocols by which certain cybersecurity incidents are escalated within the Company and, where appropriate, reported promptly to the Board and Audit and Compliance Committee.
Item 2. Properties.
Facilities
Our principal executive offices are located in New York City, where we occupy approximately 27,000 square feet under a lease that expires in 2026. We use this facility for administration, sales and marketing and general corporate activities for our Corporate segment. In addition to our headquarters, to support our local operations, as of December 31, 2023, we owned or leased 45 office locations elsewhere in the United States (twelve in New York; seven in Wisconsin; six in New Jersey; three in each of Delaware, Michigan and Pennsylvania; two in each of Colorado and Texas; and one in each of Alabama, Arizona, California, Connecticut, New Mexico, South Carolina and Tennessee). These local facilities are used principally for ambulance basing, garaging and maintenance, as well as for administrative activities and general oversight for our Mobile Health Services and Transportation Services segments. Outside of the United States, we currently lease fourteen facilities in England. These facilities are used for administrative functions and ambulance basing for our Transportation Services segment. Our leases for our U.S. facilities expire at various dates through 2029, and our leases for our U.K. facilities expire at various dates through 2032. We believe our existing facilities are adequate to meet our current requirements, and we anticipate that suitable space will be readily available if needed. We intend to procure additional, similar facilities as we expand geographically.
Vehicle Fleet
As of December 31, 2023, we operated 580 vehicles in the United States, including 350 ambulances, 54 wheelchair vans and 176 basic transportation or support vehicles. Approximately 44% of our fleet is leased and 56% is owned. We replace ambulances based upon age and usage, generally every five to eight years. The average age of our
existing active ambulance fleet is approximately four years. We generally prefer to lease vehicles, but we have purchased vehicles in the past when deemed appropriate. Most of our owned vehicles were acquired in connection with business acquisitions.
As of December 31, 2023, we operated another 294 vehicles in the United Kingdom, including 22 first response ambulances, 11 mental health transport vehicles, 27 high dependency units, 200 patient transport vehicles and 34 support vehicles. Approximately 75% of our U.K. fleet is owned and 25% is leased.
We use a combination of commercial and in-house maintenance services to maintain our fleet. In those geographies where quality external commercial maintenance services are able to meet our quality standards, we will utilize those commercial maintenance services. We continue to explore ways to decrease our overall maintenance expenditures for vehicles, including major refurbishing and overhaul of our vehicles to extend their useful life.
Item 3. Legal Proceedings.
We are subject to legal proceedings, claims and litigation arising in the ordinary course of our business. Descriptions of certain legal proceedings to which we are a party are set forth in Note 20 to the Consolidated Financial Statements and are incorporated herein by reference.
In addition, from time to time, in the ordinary course of our business and like others in our industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority. These requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take what we believe to be appropriate action. We have been subject to certain requests for information and investigations in the past and could be subject to such requests for information and investigations in the future.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is currently traded on Nasdaq under the trading symbol “DCGO.”
Holders of Record
As of February 26, 2024, there were 64 holders of record of our Common Stock. Because many of our shares of Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have not declared or paid any cash dividends on our Common Stock to date, and we do not currently intend to pay cash dividends in the foreseeable future. The payment of cash dividends in the future will depend on a number of factors, including our future revenues and earnings, if any, capital requirements and general financial condition. Any future determination relating to our dividend policy will be made at the discretion of our Board. Our ability to declare dividends may be limited by restrictive covenants we may agree to in connection with our indebtedness.
Recent Sales of Unregistered Securities
None.
Performance Graph
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference to such filing.
The following performance graph shows the cumulative total return on our Common Stock as compared to the Russell 2000 Index, S&P 500 Index and S&P 500 Health Care Sector Index from November 8, 2021 (the day our Common Stock began trading as DocGo Inc. following the Business Combination) through December 29, 2023 (the last trading day at year end). The graph assumes an investment of $100 on November 8, 2021 and reinvestment of dividends, as applicable. The graph is based on historical data and is not intended to be a forecast or indication of future performance of our Common Stock.
Repurchasesof Equity Securities
There were no repurchases made during the year ended December 31, 2023. Subsequent to the end of fiscal 2023, on January 30, 2024, the Board approved a share repurchase program to purchase up to $36 million of the Common Stock (the “Repurchase Program”). The Repurchase Program does not obligate DocGo to acquire any specific number of shares and will expire on July 30, 2024, and the Repurchase Program may be suspended, extended, modified or discontinued at any time. Under the terms of the Repurchase Program, DocGo may purchase shares of Common Stock on a discretionary basis from time to time through open market repurchases or privately negotiated transactions or through other means, including by entering into Rule 10b5-1 trading plans or accelerated share repurchase programs, in each case, during an “open window” and when DocGo does not possess material non-public information. The timing, manner, price and amount of any common stock repurchases under the Repurchase Program are determined by DocGo in its discretion and depend on a variety of factors, including stock price, trading volume, market conditions, corporate and regulatory requirements and other general business considerations. Repurchases under the Repurchase Program may be funded from the Company’s existing cash and cash equivalents, future cash flow or proceeds of borrowings or debt offerings.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included elsewhere in this Annual Report. The discussion and analysis below contain certain forward-looking statements about our business and operations that are subject to the risks, uncertainties and other factors described in the section entitled “Risk Factors,” included in Part I, Item 1A, and other factors included elsewhere in this Annual Report. These risks, uncertainties and other factors could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Certain figures included in this section, such as interest rates and other percentages, have been rounded for ease of presentation. Percentage figures included in this section have, in some cases, been calculated on the basis of such rounded figures. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our Consolidated Financial Statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Overview
DocGo is a mobile healthcare services company that uses proprietary dispatch and communication technology to help provide quality mobile, in-person medical treatment directly to patients in the comfort of their homes, workplaces and other non-traditional locations; and medical transportation in major metropolitan cities in the United States and the United Kingdom.
The Company derives revenue primarily from two operating segments:
•Mobile Health Services: The services offered by this segment include a wide variety of healthcare services performed at homes, offices and other locations and event services such as on-site healthcare support at sporting events and concerts. This segment also provides total care management solutions to large, typically underserved population groups, primarily through arrangements with municipalities, which include healthcare services as well as ancillary services, such as shelter.
•Transportation Services: The services offered by this segment encompass both emergency response and non-emergency transport services. Non-emergency transport services include ambulance transports and wheelchair transports. Net revenue from Transportation Services is derived from the transportation of patients based on billings to third party payors and healthcare facilities.
See Item 1, “Business” in this Annual Report for additional information regarding DocGo’s business.
For the year ended December 31, 2023 the Company recorded net income of $10.0 million, compared to net income of $30.7 million and $19.2 million in the years ended December 31, 2022 and 2021, respectively.
Factors Affecting Our Results of Operations
Our operating results and financial performance are influenced by a variety of factors, including, among others, our ability to establish, maintain and grow customer relationships; our ability to execute projects to the satisfaction of our customers; conditions in the healthcare transportation and mobile health services markets; changes in government spending on healthcare and other social services; availability of healthcare professionals and other personnel; changes in the cost of labor; our competitive environment; overall macroeconomic and geopolitical conditions, including rising interest rates, the inflationary environment, the potential recessionary environment, regional conflict and tensions, financial institution instability and the prospect of a shutdown of the U.S. federal government; production schedules of our suppliers; our ability to obtain or maintain operating licenses; and the success of our acquisition strategy. Some of these key factors are briefly discussed below. Future revenue growth and improvement in operating results will be largely contingent on our ability to penetrate new markets and further penetrate existing markets, which is subject to a number of uncertainties, many of which are beyond our control.
Healthcare Services Market
The Mobile Health Services market is dependent on several factors, including increased patient acceptance of services that are provided outside of traditional healthcare facilities, such as in homes, businesses or other designated locations; healthcare coverage of the various Mobile Health Services; and continued desire on the part of government and municipal entities to fund programs to assist currently underserved patient segments via “population health” programs. These programs increased in number, scale and scope since the beginning of the COVID-19 pandemic. While COVID-19 testing and vaccination programs have been dramatically scaled back from their levels at the pandemic’s peak, there have been expansions of these population health programs into other areas, such as the provision of healthcare and related services to recent migrants and asylum seekers.
The Transportation Services market is highly dependent on patients requiring transportation after surgeries and other medical procedures and treatments. The Company primarily focuses on the non-emergency medical transport market, which includes services that are provided to patients who need assistance getting to and from medical appointments. Key drivers of this market are the increase in chronic conditions and the number of elective surgeries as well as the ongoing aging of the population, as older demographics tend to be much more favorablefrequent consumers of medical transportation services. The market will also grow if hospitals and other healthcare facilities continue to investorsoutsource more of their transportation needs to independent providers, such as the Company, allowing these facilities to concentrate their efforts on their core competencies.
Overall Economic Conditions in the Markets in Which We Operate
Economic changes, both nationally and locally, in our markets impact our financial performance. Unfavorable changes in demographics, healthcare coverage of Mobile Health Services and Transportation Services, interest rates, inflation rates, ambulance manufacturing, a weakening of the national economy or of any regional or local economy in which we operate and other factors beyond our control could adversely affect our business.
Our Ability to Control Expenses
We pay close attention to the management of our working capital and operating expenses. Some of our most significant operating expenses are labor costs, medical supplies and vehicle-related costs, such as fuel, maintenance, repair and insurance. Insurance costs include premiums paid for coverage as well as reserves for estimated losses within the Company’s insurance policy deductibles. We employ our proprietary technology to help drive improvements in productivity per transport and per shift. We regularly analyze our workforce productivity to help achieve the optimum, cost-efficient labor mix for our locations. This involves managing the mix of Company-employed labor and subcontracted labor as well as full-time and part-time employees.
Inflation
The inflation rate in the United States, as measured by the Consumer Price Index, has generally trended up since early 2021. This data is reported monthly, showing year-over-year changes in prices across a basket of goods and services. Though the annual inflation rate declined to 4.1% for the full year 2023 from 8.0% in 2022, it remains above historical averages. The increased inflation rate has had an impact on the Company’s expenses in several areas, including wages, fuel and medical and other supplies. This has had the effect of compressing gross profit margins, as the Company is generally unable to pass these higher costs on to its customers, particularly in the short term. In a continued attempt to dampen inflation, the U.S. Federal Reserve implemented four interest rate hikes in 2023, raising its benchmark rate to the current level of 5.25-5.50% as of the date of this Annual Report. Looking into 2024, we anticipate a continued moderation of the inflation rate as a result of these recent interest rate increases, with an annual rate similar to those witnessed in the 2010-2020 period, when the annual inflation rate ranged from 0.1% to 3.2%. If inflation is above the levels that the Company anticipates, gross margins could be below plan and our business, operating results and cash flows may be adversely affected.
Trip Volumes and Average Trip Price
A “trip” is defined as an instance where the Company completes the transportation of a patient to a specific destination, for which we are able to charge a fee. This metric does not include instances where a trip is ordered and subsequently either canceled (by the customer) or declined (by the Company). As trip volume represents the most basic unit of transportation service provided by the Company, the Company believes it is a good measure of the level of demand for the Company’s Transportation Services and is used by management to monitor and manage the scale of the business.
The average trip price is calculated by dividing the aggregate revenue from the total number of trips by the total number of trips and is an important indicator of the effective rate at which the Company is being compensated for its provision of Transportation Services.
Revenues generated from programs under which the Company is paid a fixed hourly or daily rate for the use of a fully staffed and equipped ambulance do not factor in the trip counts or average trip prices mentioned above. We expect these fixed rate, “leased hour” programs to continue to account for an increasing proportion of the Transportation Services segment’s revenues in the future.
Acquisitions
Historically, we have pursued an acquisition strategy to obtain enhanced capabilities or licenses to offer Mobile Health Services or Transportation Services. Future acquisitions may also include companies that may help drive revenue, profitability, cash flow and stockholder value.
During the year ended December 31, 2023, we completed three acquisitions for an aggregate purchase price of $34.2 million. During the year ended December 31, 2022, we completed five acquisitions for a purchase price of $69.1 million. During the year ended December 31, 2021, we completed one acquisition for a purchase price of $2.3 million.
Investing in R&D and Enhancing our Customer Experience
Our performance is dependent on the investments we make in research and development (“R&D”), including our ability to attract and retain highly skilled R&D personnel. We intend to develop and introduce innovative new software services, integrations with third-party products and services, mobile applications and other new offerings. If we fail to innovate and enhance our brand and our products, our market position and revenue may be adversely affected.
Regulatory Environment
The Company is subject to federal, state and local regulations, including healthcare and emergency medical services laws and regulations and tax laws and regulations. The Company’s current business plan assumes no material change in these laws and regulations. In the event that any such change occurs, compliance with new laws and regulations may significantly affect the Company’s operations and cost of doing business.
COVID-19
The spread of COVID-19 and the related shutdowns and restrictions had a mixed impact on the Company’s business. In the ambulance transportation business, which predominantly comprises non-emergency medical transportation, the Company initially saw a decline in volumes from historical and expected levels, as elective surgeries and other procedures were postponed. In some of the Company’s larger markets, such as New York and California, there were declines in trip volume. In addition, the Company experienced lost revenues associated with sporting, concerts and other events, as those events were cancelled or significantly restricted (or entirely eliminated) the number of permitted attendees. Ambulance transports and event-related revenues have both since recovered to pre-COVID levels or higher.
There were two areas in which the Company initially experienced positive business impacts from COVID-19. In April and May 2020, the Company participated in an emergency project with FEMA in the New York City area. This engagement resulted in incremental transportation revenue. In addition, in response to the need for widespread COVID-19 testing, EMTs and paramedics, the Company formed a new subsidiary, Rapid Reliable Testing, LLC (“RRT”), with the goal of performing COVID-19 tests at nursing homes, municipal sites, businesses, schools and other venues. RRT is part of the Mobile Health Services segment. As COVID-19 testing activity slowed and accounted for a more minor portion of the Company’s revenues, RRT expanded its services beyond COVID-19 testing to a wide variety of tests, vaccinations and other procedures. The Company estimates that during 2023, its revenue from COVID-19 related services accounted for less than 1% of total revenues, compared to about 17% in 2022 and nearly 35% in 2021.
The Company’s current business plan assumes increased demand for Mobile Health Services, a direct investment, ifdemand that was accelerated by the pandemic, but which is also being driven by longer-term factors, such opportunity were available,as the increasing desire on the part of patients to receive treatments outside of traditional settings, such as doctor’s offices and hospitals.
Components of Results of Operations
Our business consists of three reportable segments — Mobile Health Services, Transportation Services and Corporate. All revenue and cost of goods sold are contained within the Mobile Health Services and Transportation Services segments. Accordingly, revenues and cost of goods sold are discussed below on a consolidated level and are also broken down between Mobile Health Services and Transportation Services. Operating expenses are discussed on a consolidated level and broken down among all three segments. The Company evaluates the performance of each of its segments based primarily on its results of operations. Accordingly, other income and expenses not included in results of operations are only included in the discussion of consolidated results of operations.
Revenue
The Company’s revenue consists of services provided by its Mobile Health Services segment and its Transportation Services segment.
Cost of Revenues
Cost of revenues consists primarily of revenue generating wages paid to employees, fees to paid to subcontractors, medical supplies, vehicle insurance costs (including insurance premiums and costs incurred under the insurance deductibles), maintenance, fuel and facility rent. We expect cost of revenues to continue to rise as we grow our business.
Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, bad debt expense, insurance expense, consultant fees and professional fees for accounting services. We expect our general and administrative expenses to increase as we continue to scale our business and grow headcount and as a target business. Accordingly, any stockholders whoresult of operating as a public company, including our
compliance with SEC rules and regulations, audit activities, additional insurance expenses, investor relations activities and other administrative and professional services.
Depreciation and Amortization
The Company depreciates its assets using the straight-line method over the estimated useful lives of the respective assets. Amortization of intangibles consists of amortization of definite-lived intangible assets over their respective useful lives.
Legal and Regulatory Expenses
Legal and regulatory expenses include legal fees, consulting fees related to healthcare compliance and legal settlements.
Technology and Development Expenses
Technology and development expenses consists primarily of costs incurred in the design and development of the Company’s proprietary technology, third-party software and technologies. We expect technology and development expenses to increase in future periods to support our growth, including our intent to continue investing in the optimization, accuracy and reliability of our dispatch and communication platform and drive efficiency in our operations. These expenses may vary from period to period as a percentage of revenues, depending primarily upon when we choose to make more significant investments, particularly when entering new business lines or customer sales channels.
Sales, Advertising and Marketing Expenses
Our sales, advertising and marketing expenses consist of costs directly associated with our sales and marketing activities, which primarily include sales commissions, marketing programs, trade shows, promotional materials and general branding. We expect our sales, advertising and marketing expenses to continue to increase over time as we increase our marketing activities, grow our domestic and international operations and continue to build brand awareness.
Interest Expense
Interest expense consists primarily of interest on our outstanding borrowings under our outstanding notes payable and financing obligations, including our Revolving Facility.
Results of Operations
Comparison of Fiscal 2023 with Fiscal 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Change
$ | | Change
% |
| $ in Millions | 2023 | | 2022 | | |
| | | | | | | | | | | |
| Actual Results | | % of Total Revenue | | Actual Results | | % of Total Revenue | | | | |
| Revenues, net | $ | 624.3 | | | 100.0 | % | | $ | 440.5 | | | 100.0 | % | | $ | 183.8 | | | 41.7 | % |
| | | | | | | | | | | |
| Cost of revenues | 428.9 | | | 68.7 | % | | 285.8 | | | 64.9 | % | | 143.1 | | | 50.1 | % |
| Operating expenses: | | | | | | | | | | | |
| General and administrative | 137.2 | | | 22.0 | % | | 103.4 | | | 23.5 | % | | 33.8 | | | 32.7 | % |
| Depreciation and amortization | 16.4 | | | 2.6 | % | | 10.6 | | | 2.4 | % | | 5.8 | | | 54.7 | % |
| Legal and regulatory | 13.1 | | | 2.1 | % | | 8.8 | | | 2.0 | % | | 4.3 | | | 48.9 | % |
| Technology and development | 10.9 | | | 1.7 | % | | 5.4 | | | 1.2 | % | | 5.5 | | | 101.9 | % |
| Sales, advertising and marketing | 2.8 | | | 0.4 | % | | 4.7 | | | 1.1 | % | | (1.9) | | | (40.4 | %) |
| Total expenses | 609.2 | | | 97.6 | % | | 418.7 | | | 95.1 | % | | 190.5 | | | 45.5 | % |
| Income from operations | 15.1 | | | 2.4 | % | | 21.8 | | | 4.9 | % | | (6.7) | | | |
| | | | | | | | | | | |
| Other income: | | | | | | | | | | | |
| Interest income (expense), net | 1.7 | | | 0.3 | % | | 0.8 | | | 0.2 | % | | 0.9 | | | 112.5 | % |
| Gain on remeasurement of warrant liabilities | — | | | — | % | | 1.1 | | | 0.3 | % | | (1.1) | | | |
| Change in fair value of contingent liability | 1.4 | | | 0.2 | % | | — | | | — | % | | 1.4 | | | |
| (Loss) on equity method investments | (0.3) | | | (0.1) | % | | — | | | — | % | | (0.3) | | | |
| Gain on remeasurement of finance leases | — | | | — | % | | 1.4 | | | 0.3 | % | | (1.4) | | | |
| Gain on bargain purchase | — | | | — | % | | 1.6 | | | 0.4 | % | | (1.6) | | | |
| Loss on disposal of fixed assets | (0.9) | | | (0.1) | % | | — | | | — | % | | (0.9) | | | |
| Goodwill impairment | — | | | — | % | | (2.9) | | | (0.7) | % | | 2.9 | | | |
| Other expense | (0.7) | | | (0.1) | % | | (1.0) | | | (0.2) | % | | 0.3 | | | |
| Total other income | 1.2 | | | 0.2 | % | | 1.0 | | | 0.2 | % | | 0.2 | | | 20.0 | % |
| | | | | | | | | | | |
| Net income before (provision for) benefit from income tax | 16.3 | | | 2.6 | % | | 22.8 | | | 5.2 | % | | (6.5) | | | |
| (Provision for) benefit from income taxes | (6.2) | | | (1.0) | % | | 7.9 | | | 1.8 | % | | (14.1) | | | |
| Net income | 10.0 | | | 1.6 | % | | 30.7 | | | 7.0 | % | | (20.7) | | | |
| Net income (loss) attributable to noncontrolling interests | 3.2 | | | 0.5 | % | | (3.9) | | | (0.9) | % | | 7.1 | | | 182.1 | % |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | $ | 6.9 | | | 1.1 | % | | $ | 34.6 | | | 7.9 | % | | $ | (27.7) | | | |
Revenues
Consolidated
For the year ended December 31, 2023, total revenues were $624.3 million, an increase of $183.8 million, or 41.7%, from the total revenues recorded for the year ended December 31, 2022.
Mobile Health Services
For the year ended December 31, 2023, Mobile Health Services revenues were $442.8 million, an increase of $116.9 million, or 35.9%, as compared with the year ended December 31, 2022. The increase in revenues was primarily due to an expansion in services offered by the Mobile Health Services segment, particularly in the government customer sector. This expansion accelerated during the year ended December 31, 2023 as the Company extended several large customer contracts and introduced a broader range of services.
Transportation Services
For the year ended December 31, 2023, Transportation Services revenues were $181.5 million, an increase of $66.9 million, or 58.3%, as compared with the year ended December 31, 2022. This increase was due to a 15.8% increase in trip volumes, from 216,009 trips for the year ended December 31, 2022 to 250,114 trips for the year ended December 31, 2023. The increase in trip volumes was due to a combination of growth in the Company’s customer base in certain core markets and acquisitions made during the second half of 2022. Our average trip price increased from $380 in the year ended December 31, 2022 to $407 in the year ended December 31, 2023. The increase in the average trip price in 2023 reflected a shift in mix toward higher-priced transports with existing customers, as well as the acquisition of licenses to provide higher acuity transports resulting in higher prices per trip. The average trip price also benefited from an 8.7% increase in the average Medicare reimbursement rate for ambulance transports. The Medicare ambulance fee schedule has increased by a further 2.4%, effective January 1, 2024.
Cost of Revenues
For the year ended December 31, 2023, total cost of revenues (exclusive of depreciation and amortization) increased by 50.1% compared to the year ended December 31, 2022, while revenues increased by approximately 41.7%. Cost of revenues as a percentage of revenues increased to 68.7% in the year ended December 31, 2023 from 64.9% in the year ended December 31, 2022.
Total cost of revenues in the year ended December 31, 2023 increased by $143.1 million compared to the same period in 2022. This increase was primarily attributable to a $44.0 million increase in total compensation, due to higher headcount for both the Transportation Services and Mobile Health Services segments; an $80.2 million increase in subcontracted labor costs, primarily driven by new projects in the Mobile Health Services segment that required a greater number of personnel and certain more highly specialized personnel than the Company was able to initially provide through its existing staff; a $19.6 million increase in medical and related supplies; a $2.1 million increase in travel costs for field personnel and other clinicians who traveled out of their home regions to provide Mobile Health Services; and a $1.6 million net increase in other cost of revenues categories. These items were partially offset by a $2.3 million decline in vehicle costs, as the Company exited certain rental agreements, and a $2.1 million reduction in lab fees, as COVID testing services declined to an immaterial amount in 2023.
For the Mobile Health Services segment, cost of revenues (exclusive of depreciation and amortization) in the year ended December 31, 2023 amounted to $306.2 million, up 53.7% from $199.2 million in the year ended December 31, 2022. Cost of revenues as a percentage of revenues increased to 69.1% from 61.1% in the prior year period, despite a significant increase in revenues, reflecting higher compensation expenses as a result of headcount growth, significantly higher subcontracted labor costs and increased costs for medical supplies.
For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the year ended December 31, 2023 amounted to $122.7 million, up 41.8% from $86.5 million in the year ended December 31, 2022. Cost of revenues as a percentage of revenues decreased to 67.6% from 75.5% in the prior year, reflecting the impact of higher per-trip prices, increased revenues from standby contracts (for which we are paid a daily or hourly rate) and the overall increase in revenues, as well as a decline in the average fuel price.
Operating Expenses
For the year ended December 31, 2023, operating expenses were $180.3 million compared to $132.9 million for the year ended December 31, 2022, an increase of $47.4 million, or 35.7%. As a percentage of revenues, operating expenses decreased from 30.2% in 2022 to 28.9% in 2023, even as the Company added to its management infrastructure and total compensation increased, due to the significant increase in overall revenues described above. The increase of $47.4 million related primarily to a $27.1 million increase in total compensation, which included costs for both directly employed and subcontracted staff due to investments in and expansion of corporate infrastructure to support the revenue growth, as well as an increase in stock-based compensation expense; a $5.7 million increase in depreciation and amortization due to an increase in assets to support revenue growth and capitalized software amortization, as well as recently acquired companies; a $4.9 million increase in IT infrastructure, driven by the Company’s business and headcount expansion; a $2.5 million increase in insurance costs, reflecting higher headcount, a larger vehicle fleet and expanded operations; a $1.3 million increase in rent and utilities relating to the Company’s ongoing geographic expansion; and a $5.9 million net increase across a variety of expense categories.
For the Mobile Health Services segment, operating expenses in the year ended December 31, 2023 were $56.3 million, up from $33.9 million in the year ended December 31, 2022. Operating expenses as a percentage of revenues increased to 12.7% from 10.4% in 2022, despite the increase in Mobile Health Services revenues, reflecting significant expenditures that were made in 2023 related to the expansion of services and geographic areas of operation, as well as the continued buildout of the Mobile Health Services management infrastructure and the costs of developing the Company’s “on-demand” direct-to-consumer offering.
For the Transportation Services segment, operating expenses in the year ended December 31, 2023 were $55.2 million, compared to $43.0 million in the year ended December 31, 2022. The increase in operating expenses for this segment, in absolute dollar terms, was driven primarily by higher compensation expense and depreciation charges, reflecting the expansion of the business, including recent acquisitions. Operating expenses as a percentage of revenues decreased to 30.4% for the year ended December 31, 2023 from 37.5% in the year ended December 31, 2022.
For the Corporate segment, which represents primarily shared services that are not contained within the entities included in either the Mobile Health Services or Transportation Services segments, operating expenses in the year ended December 31, 2023 were $68.8 million, compared to $55.1 million in the year ended December 31, 2022. The increase in operating expenses for this segment, in absolute dollar terms, was primarily driven by higher compensation expenses, reflecting the ongoing build-out of the Company’s corporate human resources infrastructure. Corporate expenses amounted to approximately 11.0% of total consolidated revenues in 2023, compared to 12.5% in 2022, reflecting the significant increase in total consolidated revenues.
Interest Income, Net
For the year ended December 31, 2023, the Company recorded approximately $1.7 million of interest income, net compared to $0.8 million of interest income, net in the year ended December 31, 2022. This increase was primarily due to higher rates of interest earned on balances in the Company's interest-bearing accounts in the year ended December 31, 2023, which reflected significantly higher market interest rates. The higher rates of interest earned outweighed the impact of the lower average cash balances in 2023.
Gain on Remeasurement of Warrant Liabilities
During the year ended December 31, 2023, there were no gains or losses recorded relating to remeasurement of warrant liabilities, as all warrants were redeemed during the third quarter of 2022. During the year ended December 31, 2022, the Company recorded a gain of approximately $1.1 million from the remeasurement of warrant liabilities. The warrants were marked-to-market in each reporting period, and this gain reflected the decline in the Company’s stock price relative to the beginning of the period.
Change in Fair Value of Contingent Liability
During the year ended December 31, 2023, the Company recorded a change in fair value of contingent liability of approximately $1.4 million, reflecting a decline in the anticipated payments to be made for a recent acquisition, based upon
performance compared to certain targets. There was no related change in fair value recorded in the year ended December 31, 2022.
(Loss) Gain on Equity Method Investments
During the year ended December 31, 2023, the Company recorded a loss on equity method investments of approximately $0.3 million representing its share of the losses incurred by an entity in which the Company has a minority interest. During the year ended December 31, 2022, the Company recorded a gain on equity method investments of $8,919.
Gain on Remeasurement of Finance Leases
During the year ended December 31, 2023, there were no gains or losses recorded relating to remeasurement of finance leases. During the year ended December 31, 2022, the Company recorded a gain on remeasurement of finance leases of $1.4 million.
Gain on Bargain Purchase
During the year ended December 31, 2023, the Company recorded no gain or loss on bargain purchase. During the year ended December 31, 2022, the Company recorded a gain on bargain purchase of $1.6 million.
Loss on Disposal of Fixed Assets
During the year ended December 31, 2023, the Company recorded a loss on disposal of fixed assets of $0.9 million, compared to a loss on disposal of fixed assets of $21,000 during the year ended December 31, 2022.
Goodwill Impairment
During the year ended December 31, 2023, the Company did not record any impairment to goodwill. During the year ended December 31, 2022, the Company recorded a goodwill impairment of $2.9 million, relating to the Company’s exit from the medical transportation market in California.
(Provision for) Benefit from Income Taxes
During the year ended December 31, 2023, the Company recorded a provision for income taxes of $6.2 million compared to an income tax benefit of $7.9 million in the year ended December 31, 2022. The tax benefit in 2022 was due to the release of the valuation allowance recorded in previous years for net operating losses, as the Company determined that it was more likely than not that it would be able to realize its net operating loss carryforwards in the future.
Net Income (Loss) Attributable to Noncontrolling Interests
For the year ended December 31, 2023, the Company had net income attributable to noncontrolling interests of approximately $3.2 million compared to a net loss attributable to noncontrolling interests of $3.9 million for the year ended December 31, 2022. The income compared to the prior year period loss reflected improved performance in the Company’s joint venture markets in the year ended December 31, 2023.
Comparison of Fiscal 2022 with Fiscal 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Change
$ | | Change
% |
| $ in Millions | 2022 | | 2021 | | |
| | | | | | | | | | | |
| Actual Results | | % of Total Revenue | | Actual Results | | % of Total Revenue | | | | |
| Revenues, net | $ | 440.5 | | | 100.0 | % | | $ | 318.7 | | | 100.0 | % | | $ | 121.8 | | | 38.2 | % |
| | | | | | | | | | | |
| Cost of revenues | 285.8 | | | 64.9 | % | | 209.0 | | | 65.6 | % | | $ | 76.8 | | | 36.8 | % |
| Operating expenses: | | | | | | | | | | | |
| General and administrative | 103.4 | | | 23.5 | % | | 74.9 | | | 23.5 | % | | $ | 28.5 | | | 38.1 | % |
| Depreciation and amortization | 10.6 | | | 2.4 | % | | 7.5 | | | 2.4 | % | | $ | 3.1 | | | 40.7 | % |
| Legal and regulatory | 8.8 | | | 2.0 | % | | 3.9 | | | 1.2 | % | | $ | 4.9 | | | 125.6 | % |
| Technology and development | 5.4 | | | 1.2 | % | | 3.3 | | | 1.0 | % | | $ | 2.1 | | | 63.6 | % |
| Sales, advertising and marketing | 4.7 | | | 1.1 | % | | 4.8 | | | 1.5 | % | | $ | (0.1) | | | (2.4 | %) |
| Total expenses | 418.7 | | | 95.1 | % | | 303.4 | | | 95.2 | % | | $ | 115.3 | | | 38.0 | % |
| Income from operations | 21.8 | | | 4.9 | % | | 15.4 | | | 4.8 | % | | $ | 6.5 | | | |
| | | | | | | | | | | |
| Other income: | | | | | | | | | | | |
| Interest income (expense), net | 0.8 | | | 0.2 | % | | (0.8) | | | (0.2) | % | | $ | 1.6 | | | 200.0 | % |
| Gain on remeasurement of warrant liabilities | 1.1 | | | 0.3 | % | | 5.2 | | | 1.6 | % | | $ | (4.1) | | | |
| Change in fair value of contingent liability | — | | | — | % | | — | | | — | % | | $ | — | | | |
| (Loss) on equity method investments | — | | | — | % | | (0.1) | | | — | % | | $ | 0.1 | | | |
| Gain on remeasurement of finance leases | 1.4 | | | 0.3 | % | | — | | | — | % | | $ | 1.4 | | | |
| Gain on bargain purchase | 1.6 | | | 0.4 | % | | — | | | — | % | | $ | 1.6 | | | |
| Gain from PPP loan forgiveness | — | | | — | % | | 0.1 | | | — | % | | $ | (0.1) | | | |
| (Loss) on disposal of fixed assets | — | | | — | % | | — | | | — | % | | $ | — | | | |
| Goodwill impairment | (2.9) | | | (0.7) | % | | — | | | — | % | | $ | (2.9) | | | |
| Other expense | (1.0) | | | (0.2) | % | | — | | | — | % | | $ | (1.0) | | | |
| Total other income | 1.0 | | | 0.2 | % | | 4.4 | | | 1.4 | % | | $ | (3.4) | | | (77.3 | %) |
| | | | | | | | | | | |
| Net income before benefit from (provision for) income tax | 22.8 | | | 5.2 | % | | 19.8 | | | 6.2 | % | | $ | 3.0 | | | |
| Benefit from (provision for) income tax | 7.9 | | | 1.8 | % | | (0.6) | | | (0.2) | % | | $ | 8.5 | | | |
| Net income | 30.7 | | | 7.0 | % | | 19.2 | | | 6.0 | % | | $ | 11.5 | | | |
| Net (loss) attributable to noncontrolling interests | (3.9) | | | (0.9) | % | | (4.5) | | | (1.4) | % | | $ | 0.6 | | | 13.3 | % |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | $ | 34.6 | | | 7.9 | % | | $ | 23.7 | | | 7.4 | % | | $ | 10.9 | | | |
Revenues
Consolidated
For the year ended December 31, 2022, total revenues were $440.5 million, an increase of $121.8 million, or 38%, from the total revenues recorded in the year ended December 31, 2021.
Mobile Health Services
For the year ended December 31, 2022, Mobile Health Services revenues were $325.9 million, an increase of $91.4 million, or 39%, as compared with the year ended December 31, 2021. This increase was primarily due to the expansion of the services offered by this segment, particularly with respect to testing, vaccination and other healthcare services revenues. This expansion accelerated through 2021 and into 2022 as the Company increased its customer base, primarily in the municipal customer segment, and its geographic reach, while extending the terms of and/or expanding the scope of several large customer contracts and introducing a broader range of services. Compared to the prior year, 2022 featured significantly lower COVID-19 testing revenue, which was outweighed by the substantial increase in other Mobile Health Services, as the Mobile Health Services segment transitioned away from its dependence on COVID-19 related revenue. COVID-19 testing continued to be a significant driver of Mobile Health Services revenues in the first half of 2022, but dropped sharply in the third quarter of the year, and represented an insignificant proportion of total revenues in the fourth quarter.
Transportation Services
For the year ended December 31, 2022, Transportation Services revenues were $114.6 million, an increase of $30.3 million, or 36%, as compared with the year ended December 31, 2021. This increase was due to a 20% increase in trip volumes, from 180,753 trips for the year ended December 31, 2021 to 216,009 trips for the year ended December 31, 2022. The increase in trip volumes was due to a combination of growth in the customer base in certain core markets, entry into new markets in 2021 and early 2022 and acquisitions made during the second half of 2022. Our average trip price increased from $301 in the year ended December 31, 2021 to $380 in the year ended December 31, 2022. The increase in the average trip price in 2022 reflected a shift in mix toward higher-priced transports with existing customers, as well as the acquisition of licenses to provide higher acuity transports resulting in higher prices per trip. The average trip price also benefited from a 5.1% increase in the average Medicare reimbursement rate for ambulance transports.
Cost of Revenues
For the year ended December 31, 2022, total cost of revenues (exclusive of depreciation and amortization) increased by 37%, as compared to the year ended December 31, 2021, while revenues increased by approximately 38%. Cost of revenues as a percentage of revenues decreased to 64.9% in 2022 from 65.5% in 2021.
In absolute dollar terms, cost of revenues in the year ended December 31, 2022 increased by $76.8 million from the levels of the year ended December 31, 2021. This was primarily attributable to a $64.9 million increase in total compensation, due to higher headcount for both the Transportation Services and Mobile Health Services segments; a $16.0 million increase in subcontracted labor, driven mostly by the Mobile Health Services segment, where the Company did not have sufficient personnel to staff the initial phases of large new projects; $13.6 million increase in vehicle costs, driven by a continued increase in the Company’s vehicle fleet and higher fuel and maintenance costs, as well as costs incurred to rent vehicles to provide Mobile Health Services; a $2.1 million increase in travel costs, due to field personnel and other clinicians who traveled out of their home regions to provide Mobile Health Services; a $0.4 million increase in facilities and related costs; and approximately $2.6 million in increases across a variety of other cost of revenues categories relating to the Company’s increased scale and geographic presence. These items were partially offset by a $21.1 million decrease in lab fees related to COVID-19 testing activity, reflecting sharply lower COVID-19 testing activity in the second half of 2022, lower per-test lab fees and a shift toward rapid tests; and a $1.8 million decline in medical supplies, reflecting a decline in COVID-19 testing activity and improved sourcing of various supplies.
For the Mobile Health Services segment, cost of revenues (exclusive of depreciation and amortization) in the year ended December 31, 2022 amounted to $199.2 million, compared to $145.2 million in the year ended December 31, 2021. Cost of revenues as a percentage of revenues decreased slightly to 61.1% from 61.9%, due to the increase in revenues and
the continued shift away from higher-cost subcontracted labor toward Company personnel during 2022, which was partially offset by higher compensation costs associated with some of the Company’s newer projects.
For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the year ended December 31, 2022 was $86.5 million, an increase of $23.1 million, or 36%, from the year ended December 31, 2021. Cost of revenues as a percentage of revenues were essentially unchanged, at 75.5% in 2022 compared to 75.3% in 2021. Increased volumes and higher average trip prices, as described above, combined with lower average hourly wages, as recent market wage pressures began to subside and the Company more effectively managed its staff to reduce overtime hours for field employees, to offset the effects of increased fuel costs. Fuel prices moderated somewhat during the third quarter and in the fourth quarters of 2022, but the full-year average fuel price for 2022 was approximately 29% above the full-year average for 2021. We anticipated that fuel prices would remain stockholders following ourat elevated levels for 2023, but we expected that the full-year average for 2023 would be lower than it was in 2022.
Operating Expenses
For the year ended December 31, 2022, operating expenses were $132.9 million compared to $94.4 million for the year ended December 31, 2021, an increase of 41%. As a percentage of revenues, operating expenses increased slightly, from 29.6% in 2021 to 30.2% in 2022, despite the significant increase in overall revenues described above, as the Company continued to add to its management infrastructure and incurred a full year’s worth of expenses relating to its status as a public company. The increase of $38.3 million related primarily to a $20.1 million increase in total compensation, which includes salaries, benefits, bonuses and commissions for both direct and subcontracted labor, reflecting higher headcount driven by the Company’s overall growth and expansion; a $7.1 million increase in legal, accounting and other professional fees related to increased revenues and related contract generation and SEC filing-related costs; a $2.8 million increase in insurance costs reflecting the growth and expansion of the Company, as well as the addition of directors and officers (D&O) insurance in 2022; a $3.2 million increase in depreciation and amortization charges due to an increase in assets to support revenue growth and capitalized software amortization, including from recently acquired companies; a $2.3 million increase in rent utility expenses due to the Company’s ongoing growth and geographic expansion; a $2.9 million increase in IT infrastructure, driven by the Company’s business and headcount expansion; and a $0.6 million increase in marketing expenses, driven in part by expenditures made to develop and expand the Company’s direct-to-consumer offering and other Mobile Health Services. These items were partially offset by a $0.7 million decline witnessed across several operating expense categories, such as travel, commissions and general office expenses.
For the Mobile Health Services segment, operating expenses in the year ended December 31, 2022 were $58.0 million, up 25% from operating expenses of $46.3 million in the year ended December 31, 2021. Operating expenses as a percentage of revenues decreased to 17.8% from 19.8% in 2021, due to the increase in Mobile Health Services revenues, which outweighed the effect of the significant expenditures that were made in 2022 in the expansion of services and geographic areas of operation, as well as the continued buildout of the Mobile Health Services management infrastructure and the costs of developing the Company’s “on-demand” direct-to-consumer offering.
For the Transportation Services segment, operating expenses in the year ended December 31, 2022 were $74.0 million, up $26.6 million, or 56%, from the year ended December 31, 2021. Operating expenses as a percentage of revenues increased to 64.6% from 56.3% in 2021, despite the increase in revenues, primarily due to increases in the Company’s corporate overhead expenditures, as described above, as these expenses were allocated to the Transportation Services segment for purposes of segment reporting. Operating expenses for the Transportation Services segment were also driven higher by the inclusion of the acquisitions the Company made in the second half of 2022.
Interest Income (Expense), Net
For the year ended December 31, 2022, the Company recorded $0.8 million of interest income, net compared to $0.8 million of interest expense, net in the year ended December 31, 2021. This was due to a significantly higher amount of interest earned during 2022, resulting from an increase in the Company’s cash balances in income-bearing accounts, coupled with higher rates of interest earned on balances in these accounts, which reflected significantly higher market interest rates.
Gain on Remeasurement of Warrant Liabilities
During the year ended December 31, 2022, the Company recorded a net gain of approximately $1.1 million from the remeasurement of warrant liabilities. The warrants were marked-to-market in each reporting period, and this gain
reflected the decrease in DocGo’s stock price relative to the beginning of the period. During the year ended December 31, 2021, the Company recorded a net gain of $5.2 million on the remeasurement of warrant liabilities. On August 15, 2022, the Company announced the redemption of all of its outstanding warrants under the Warrant Agreement, dated as of October 14, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent, on the redemption date of September 16, 2022 (the “Redemption Date”). Warrants surrendered for exercise on a cashless basis resulted in the issuance of 1,406,371 shares of Common Stock. A total of 68,514 warrants were not surrendered on the Redemption Date and were redeemed for $0.10 per warrant.
Gain on Equity Method Investments
During the year ended December 31, 2022, the Company recorded a gain on equity method investments of $8,919, representing its share of the losses incurred by an entity in which the Company has a minority interest, which is accounted for under the equity method. This investment was made in the fourth quarter of 2021, during which period a loss of $66,818 was recorded in relation to this equity method investment.
Gain on Bargain Purchase
During the year ended December 31, 2022, the Company recorded a gain on bargain purchase of approximately $1.6 million in relation to an acquisition made during the fourth quarter of the year, wherein the tangible net asset value of the acquired entity exceeded the purchase price. No such gain or loss was recorded during the same period in 2021.
Gain on Remeasurement of Finance Leases
During the year ended December 31, 2022, the Company recorded a gain on remeasurement of finance leases of approximately $1.4 million, resulting from a change in estimated remaining liabilities under the terms of its leases. No such gain or loss was recorded in the same period in 2021.
Gain from PPP Loan Forgiveness
In 2021, the Company recorded a $0.1 million gain due to the forgiveness of a loan that one of its subsidiaries had obtained via the government’s Paycheck Protection Program (“PPP”) in 2020. No gain from loan forgiveness was recorded during the year ended December 31, 2022.
Benefit From (Provision For) Income Taxes
During the year ended December 31, 2022, the Company recorded a benefit from income taxes of $7.9 million compared to a provision for income taxes of $0.6 million in the year ended December 31, 2021. The tax benefit in 2022 was due to the release of the valuation allowance recorded in previous years for net operating losses, as the Company determined that it was more likely than not that it would be able to realize its net operating loss carryforwards in the future.
Net Loss Attributable to Noncontrolling Interests
For the year ended December 31, 2022, the Company had a net loss attributable to noncontrolling interests of approximately $3.8 million compared to a net loss attributable to noncontrolling interests of $4.6 million for the year ended December 31, 2021. For both periods, the loss reflected ongoing investments in new markets that were entered into during 2021 and 2022, partially offset by income generated by those markets.
Liquidity and Capital Resources
Between the inception of DocGo’s wholly owned subsidiary Ambulnz and the Business Combination, Ambulnz completed three equity financing transactions as its principal source of liquidity. In November 2021, upon the completion of the Business Combination and the PIPE Financing, the Company received proceeds of approximately $158.1 million, net of transaction expenses. Generally, the Company has utilized proceeds from the equity financing transactions and the Business Combination to finance operations, invest in assets, make acquisitions and fund accounts receivable. The Company has also funded these activities through operating cash flows. Despite the fact that the Company generated positive net income for the year ended December 31, 2023, operating cash flows are not always sufficient to meet immediate obligations arising from current operations. For example, as the business has grown, the Company’s expenditures for human capital and supplies has expanded accordingly, and the timing of the payments for payroll and to associated vendors, compared to the timing of receipts of cash from customers, frequently results in the need to use existing
cash balances to fund working capital needs. During the year ended December 31, 2023, as a greater proportion of the Company’s overall revenues were generated through services provided to municipal customers with long payment cycles, and expenditures made by the Company to allow for the provision of these services were substantial, operating cash flows were not sufficient to meet these demands for working capital, leading to a marked decline in the Company’s cash balances. As these invoices are collected, the Company expects cash flows to be sufficient for near term working capital needs.
The Company’s future working capital needs depend on many factors, including the overall growth of the Company and the various payment terms that are negotiated with customers and vendors. The Company’s future capital requirements depend on many factors, including potential acquisitions, the Company’s level of investment in technology and ongoing technology development, and rate of growth in existing markets and into new markets. Capital requirements might also be affected by factors outside of the Company’s control, such as interest rates, rising inflation and other monetary and fiscal policy changes to the manner in which the Company currently operates. If the Company’s growth rate is higher than is currently anticipated, resulting in greater-than-anticipated capital requirements, the Company might need to, or choose to, raise additional capital through debt or equity financings. This last factor was evident during the second half of 2023, leading to a draw down in the Company’s credit line during the fourth quarter of 2023 and the first quarter of 2024, as described below.
On November 1, 2022, the Company entered into the Credit Agreement, which provides for the Revolving Facility in the initial aggregate principal amount of $90 million. The Revolving Facility includes the ability for the Company to request an increase to the commitment by an additional amount of up to $50 million, though no lender (nor the lenders collectively) is obligated to increase its respective commitments. Borrowings under the Revolving Facility bear interest at a per annum rate equal to (i) at the Company’s option, (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. The applicable margins are based on the Company’s consolidated net leverage ratio, adjusted on a quarterly basis. The initial applicable margins were 1.25% for an adjusted term SOFR loan and 0.25% for a base rate loan and are updated based on the Company’s consolidated net leverage ratio. The Revolving Facility matures on November 1, 2027 and is secured by a first-priority lien on substantially all of the Company’s present and future personal assets and intangible assets. The Revolving Facility is subject to certain financial covenants, such as a net leverage ratio and interest coverage ratio, as defined in the Credit Agreement. On October 19, 2023, the Company drew down $25 million under the Revolving Facility, which amount remained outstanding as of December 31, 2023. In February 2024, the Company repaid all amounts outstanding under the Revolving Facility, and no amounts are outstanding as of the date of this Annual Report.
Considering the foregoing, DocGo anticipates that its existing balances of cash and cash equivalents, future expected cash flows generated from its operations and its available line of credit under the Revolving Facility will be sufficient to satisfy operating requirements for at least the next twelve months. Looking beyond the next twelve months, DocGo anticipates that expected future cash flows, its available line of credit and proceeds from potential additional financings will be sufficient to satisfy any operating and potential investing requirements.
Capital Resources
Working capital as of December 31, 2023 and December 31, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, | | Change
$ | | Change
% |
| $ in Millions | | 2023 | | 2022 | | |
| Working capital | | | | | | | | |
| Current assets | | $ | 338.9 | | | $ | 271.1 | | | $ | 67.8 | | | 25.0 | % |
| Current liabilities | | 170.1 | | | 100.2 | | | 70.0 | | | 69.8 | % |
| Total working capital | | $ | 168.8 | | | $ | 170.9 | | | $ | (2.2) | | | (1.2 | %) |
As of December 31, 2023, available cash totaled $59.3 million, which represented a decrease of $98.0 million compared to December 31, 2022, reflecting a significant increase in accounts receivable and acquisitions made during the year ended December 31, 2023. As of December 31, 2023, working capital amounted to $168.8 million, which represented a decrease of $2.2 million compared to December 31, 2022, which reflected the decreased cash balance in 2023. Increased accounts receivable, which reflected the growth of the business combination could sufferand a shift towards higher credit quality customers who have longer payment cycles in 2023, were outweighed by the increase in current liabilities, which reflected the growth of
the business and amounts due to seller and contingent consideration resulting from acquisitions, as well as the draw down of $25 million under the terms of the Revolving Credit Facility.
Cash Flows
Cash flows as of the years ended December 31, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended
December 31, | | Change
$ | | Change
% |
| $ in Millions | 2023 | | 2022 | | |
| Cash flow summary | | | | | | | |
| Net cash (used in) provided by operating activities | $ | (64.2) | | | $ | 28.9 | | | $ | (93.1) | | | (322.1 | %) |
| Net cash used in investing activities | (29.9) | | | (38.4) | | | 8.5 | | | (22.1 | %) |
| Net cash provided by (used in) financing activities | 1.1 | | | (6.2) | | | 7.3 | | | (117.7 | %) |
| Effect of exchange rate changes | 1.1 | | | 0.7 | | | 0.4 | | | 57.1 | % |
| Net decrease in cash | $ | (91.9) | | | $ | (15.0) | | | $ | (76.9) | | | 512.7 | % |
Cash flows as of the years ended December 31, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended
December 31, | | Change
$ | | Change
% |
| $ in Millions | 2022 | | 2021 | | |
| Cash flow summary | | | | | | | |
| Net cash provided by (used in) operating activities | $ | 28.9 | | | $ | (1.9) | | | $ | 30.8 | | | 1621.1 | % |
| Net cash used in investing activities | (38.4) | | | (8.6) | | | (29.9) | | | (347.7 | %) |
| Net cash (used in) provided by financing activities | (6.2) | | | 155.2 | | | (161.4) | | | (104.0 | %) |
| Effect of exchange rate changes | 0.7 | | | — | | | 0.7 | | | 100.0 | % |
| Net (decrease) increase in cash | $ | (15.0) | | | $ | 144.7 | | | $ | (159.7) | | | (110.4 | %) |
Operating Activities
During the year ended December 31, 2023, cash used by operating activities was $64.2 million, despite net income of $10.0 million. Non-cash charges amounted to $38.9 million, which primarily consisted of $11.2 million in depreciation of property and equipment and right-of-use assets, $5.2 million from amortization of intangible assets, $21.0 million of stock compensation expense, a $0.9 million loss on the disposal of assets and a loss of $0.3 million from an investment that is accounted for under the equity method and $3.6 million in bad debt expense. These were partially offset by $2.0 million in deferred taxes and a non-cash gain of $1.4 million resulting from a reduction in the fair value of their securities. Such stockholders are unlikelycontingent consideration. Changes in assets and liabilities resulted in approximately $113.1 million in negative operating cash flow, as a $160.5 million increase in accounts receivable, reflecting the growth of the business and primarily driven by an increased amount of business with municipalities, which tend to have longer payment cycles; a remedy$1.8 million decrease in accounts payable; and a $10.8 million increase in prepaid expenses and other current assets were partially offset by a $59.0 million increase in accrued liabilities and a $1.0 million decline in other assets.
During the year ended December 31, 2022, cash provided by operating activities was $28.9 million, aided by net income of $30.7 million. Non-cash charges were $11.3 million and included $7.3 million in depreciation of property and equipment and right-of-use assets, $3.2 million from amortization of intangible assets, $3.8 million in bad debt expense primarily related to a provision for
such reductionpotential uncollectible accounts receivable, $8.1 million of stock compensation expense and a non-cash loss of $2.9 million related to the impairment of a business unit that was discontinued at the end of the year. These charges were partially offset by non-cash gains of $1.4 million relating to the remeasurement of finance lease liabilities, $1.1 million from the remeasurement of warrant liabilities, $1.6 million in
value.Our public stockholders’ only opportunitya gain on a bargain purchase and $9.9 million in the realization of a deferred tax asset. Changes in assets and liabilities resulted in an approximately $13.2 million decrease to affectoperating cash flow, as an $8.4 million increase in accounts receivable, a $4.2 million increase in prepaid
expenses and a $6.0 million decrease in accrued liabilities outweighed the effect of a $1.8 million decrease in other assets and a $3.6 million increase in accounts payable.
During the year ended December 31, 2021, cash used in operating activities was $1.9 million, despite net income of $19.2 million. Non-cash charges amounted to $7.7 million, as $5.2 million in depreciation of property and equipment and right-of-use assets, $1.8 million from amortization of intangible assets, $4.5 million in bad debt expense primarily related to a provision for potential uncollectible accounts receivable and $1.4 million of stock compensation expense were partially offset by $5.2 million in a non-cash gain on the remeasurement of warrant liabilities. Changes in assets and liabilities resulted in an approximately $28.8 million decrease in operating cash flow and were primarily driven by a $57.1 million increase in accounts receivable arising from the growth of the business, particularly in the fourth quarter of the year, and the inclusion of larger Mobile Health Services customers with extended credit terms, and a $3.5 million increase in prepaid expenses and other current assets, partially offset by a $32.6 million increase in accounts payable and accrued expenses due primarily to the extension of credit and timing of payments, as DocGo attempted to align the timing of payments to vendors with the timing of payments received from customers, where possible, in an attempt to manage cash balances.
Investing Activities
During the year ended December 31, 2023, investing activities used $29.9 million of cash and consisted of the acquisition of property and equipment totaling approximately $7.6 million, the acquisition of intangibles in the amount of $2.5 million, the acquisition of businesses in the amount of $20.2 million and an equity method investment decision regarding a potential business combination will be limitedin the amount of $0.3 million, partially offset by $0.7 million in cash proceeds from the disposal of property and equipment.
During the year ended December 31, 2022, cash used in investing activities was $38.4 million and consisted of the acquisition of property and equipment totaling approximately $3.2 million, the acquisition of intangibles in the amount of $2.3 million and the acquisition of businesses in the amount of $33.0 million, primarily relating to acquisitions the Company completed in the third and fourth quarters of 2022.
During the year ended December 31, 2021, cash used in investing activities was $8.6 million, primarily consisting of the acquisition of property and equipment totaling $4.8 million and the acquisition of businesses and intangibles totaling $3.1 million to support the ongoing growth of the business. In addition, the Company made an equity investment amounting to approximately $0.7 million.
Financing Activities
During the year ended December 31, 2023, cash provided by financing activities was $1.1 million, including $25 million in proceeds from the Company’s Revolving Facility and $1.6 million in proceeds from the exercise of
their redemption rights, unless we seek stockholder approval ofstock options, mostly offset by $4.3 million in payments under the
initial business combination.If we do not seek stockholder approvalterms of a potential business combination, our stockholders’ only opportunityfinance lease, a $13.6 million decrease in amounts due to affectseller, $5.3 million in earnout payments on contingent liabilities and $2.3 million in payments for taxes related to shares withheld for employee taxes.
During the investment decision regardingyear ended December 31, 2022, cash used in financing activities was $6.2 million, including $3.7 million in the repurchase of Common Stock, $3.0 million in payments under the terms of a potential business combination may be limitedfinance lease, a $2.5 million decrease in amounts due to exercising their redemption rightsseller and $0.9 million in repayments of notes payable, which were partially offset by $2.1 million in non-controlling interest contributions and $2.0 million in proceeds from the exercise of stock options.
During the year ended December 31, 2021, cash provided by financing activities was $155.2 million, due primarily to $158.1 million in proceeds from the issuance of Common Stock in connection with the closingBusiness Combination, which is net of $20.0 million in issuance costs. This was slightly offset by $2.2 million in payments on obligations under the terms of a finance lease and $0.5 million in expenditures to acquire the remaining 20% of the Company’s U.K. subsidiary. During 2021, the Company received $8.0 million in proceeds from a revolving bank loan, which was repaid during the fourth quarter of 2021.
Future minimum annual maturities of notes payable as of December 31, 2023 are as follows (in thousands):
| | | | | |
| Notes Payable |
| 2024 | $ | 28.8 | |
| 2025 | 25.8 | |
| 2026 | 15.1 | |
| Total maturities | 69.7 | |
| Current portion of notes payable | (28.1) | |
| Long-term portion of notes payable | $ | 41.6 | |
Future minimum lease payments under finance leases as of the year ended December 31, 2023 are as follows (in millions):
| | | | | |
| Finance Leases |
| 2024 | $ | 4.1 | |
| 2025 | 3.7 | |
| 2026 | 2.9 | |
| 2027 | 1.5 | |
| 2028 | 0.3 | |
| Thereafter | — | |
| Total future minimum lease payments | 12.5 | |
| Less effects of discounting | (1.1) | |
| Present value of future minimum lease payments | $ | 11.4 | |
Future minimum lease payments under operating leases as of the year ended December 31, 2023 are as follows (in millions):
| | | | | |
| Operating
Leases |
| 2024 | $ | 3.3 | |
| 2025 | 3.3 | |
| 2026 | 2.4 | |
| 2027 | 1.2 | |
| 2028 | 0.6 | |
| Thereafter | 0.3 | |
| Total future minimum lease payments | 11.1 | |
| Less effects of discounting | (1.1) | |
| Present value of future minimum lease payments | $ | 10.0 | |
Critical Accounting Policies
Basis of Presentation
The Company’s Consolidated Financial Statements are presented in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. The Consolidated Financial Statements include the accounts and operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests on the Consolidated Balance Sheets represents the portion of consolidated joint ventures and a variable interest entity (“VIE”) in which the Company does not have direct equity ownership.
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, the Company was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Ambulnz stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Ambulnz. The shares of common stock and corresponding capital amounts and earnings per share available for common stockholders, prior to the Business Combination, have been retroactively restated as shares of the Company, reflecting the exchange ratio (645.1452 to 1) established in the Business Combination. Further, Ambulnz was determined to be the accounting acquirer in the transaction; as such, the acquisition is considered to be a business combination under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations and was accounted for using the acquisition method of accounting.
Principles of Consolidation
In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are VIEs. For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.
The Company holds variable interests in legal entities that contract with physicians and other health professionals in order to provide services to the Company. These entities are considered VIEs since they do not have sufficient equity to finance their activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it is the primary beneficiary, meaning it has (1) the power to direct the activities of the VIE that most significantly impacts the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of its VIEs and funds and absorbs all losses of its VIEs. The Company has determined that it is the primary beneficiary of its VIEs and therefore appropriately consolidates its VIEs.
Net loss for the Company’s VIEs were $235,976, $373,456 and $122,982 for the years ended December 31, 2023, 2022 and 2021, respectively. The total assets amounted to $4,364,274 and $610,553 on December 31, 2023 and 2022, respectively. Total liabilities were $4,811,857 and $320,424 on December 31, 2023 and 2022, respectively. The Company’s VIEs total stockholders’ deficit were $447,583 and $290,130 on December 31, 2023 and 2022, respectively.
Business Combinations
The Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”), which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including noncontrolling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill.
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expenses acquisition-related costs and fees associated with business combinations.
The estimated fair value of net assets to be acquired, including the allocation of the fair value to identifiable assets and liabilities, is determined using established valuation techniques. Management uses assumptions on the basis of historical knowledge of the business and projected financial information of the target. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the reporting unit level annually on December 31 or more frequently if events or changes in circumstances indicate that it is more likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our initialfinancial performance; or (iv) a sustained decrease in our market capitalization, as indicated by our publicly quoted share price, below our net book value.
On February 3, 2023, Ambulnz Health, LLC (“Health”), commenced an assignment for the benefit of creditors (“ABC”) pursuant to California law. An ABC is a liquidation process governed by state law (California law in this instance) that is an alternative to a bankruptcy case under federal law. Prior to commencing the ABC, Health ceased business
combination.operations and all of its employees were terminated and treated in accordance with California law. In the ABC, all of Health’s assets were transferred to an assignee (the “Assignee”) who acts as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee. The abilityAssignee is responsible for liquidating the assets. Similar to a bankruptcy case, there is a claims process. Creditors of Health received notice of the ABC and a proof of claim form and were required to submit a proof of claim in order to participate in distribution of net liquidation proceeds by the Assignee.
Based on such filing for Health, the Company impaired the goodwill assigned to that reporting unit as of December 31, 2022 by approximately $5.1 million.
Revenue Recognition
On January 1, 2019, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”).
To determine revenue recognition for contractual arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when (or as) the relevant performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company provides to the customer.
The Company generates revenues from the provision of (1) Mobile Health Services and (2) Transportation Services. The customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled; therefore the Company satisfies performance obligations immediately. The Company has utilized the “right to invoice” expedient, which allows an entity to recognize revenue in the amount of consideration to which the entity has the right to invoice when the amount that the Company has the right to invoice corresponds directly to the value transferred to the customer. Revenues are recorded net of an estimated contractual allowances for claims subject to contracts with responsible paying entities. The Company estimates contractual allowances at the time of billing based on contractual terms, historical collections or other arrangements. All transaction prices are fixed and determinable, which includes a fixed base rate, fixed mileage rate and an evaluation of historical collections by each payor.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or its tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.
Please see Note 2, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market Risks
We are exposed to certain market risks, including those relating to changes in interest rates and foreign currency exchange rates. We do not enter into instruments for trading or speculative purposes.
Interest Rate Risk
We are subject to interest rate risk relating to our cash equivalents and borrowings under our Revolving Facility, which bear interest at a per annum rate equal to (i) at our option, (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. The applicable margins are based on the Company’s consolidated net leverage ratio, adjusted on a quarterly basis. As of December 31, 2023, the Company had $25 million outstanding under the Revolving Facility. In February 2024, the Company repaid all amounts outstanding under the Revolving Facility, and no amounts are outstanding as of the date of this Annual Report. While the applicable interest rate is set for a specific term when amounts are drawn down under the terms of the Revolving Facility, any subsequent draws on the Revolving Facility may be subject to a higher or lower interest rate, depending upon, among other things, the then-prevailing SOFR rate. We have not utilized interest rate hedging or other strategies in an attempt to mitigate our interest rate risk. A hypothetical 10% change in interest rates during the year ended December 31, 2023 would have had a neutral net impact on our Consolidated Financial Statements, as changes in amounts paid for interest expense would have offset changes in interest income earned on cash balances.
Foreign Exchange Risk
We operate our business primarily within the United States and currently execute a majority of our
public stockholderstransactions in U.S. dollars. However, we are exposed to
redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an agreement for an initial business combination with a target.We may seek to enter into an initial business combination agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash, like the Merger Agreement with DocGo does. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and,limited foreign exchange risk as a result would not be able to proceed with the initial business combination. Furthermore, in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (soU.K. operations. The foreign exchange gain (loss) amounted to $4,022 to the Company for the year ended December 31, 2023, compared to $(20,423) and $(45,826) in the years ended December 31, 2022 and 2021, respectively. We have not utilized hedging or other strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our Consolidated Financial Statements. A hypothetical 10% change in the applicable foreign exchange rate during the year ended December 31, 2023 would have resulted in a change in total revenues of approximately 0.7% and a change in total assets of approximately 0.9%.
Concentrations of Risk
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable.
Although we deposit our cash, cash equivalents and restricted cash with multiple financial institutions in the United States and in foreign countries, our deposits, at times, may exceed federally insured limits. We do not believe we are not subjectexposed to significant credit risk due to the SEC’s “penny stock” rules)financial strength of the depository institutions in which the funds are held.
With respect to accounts receivable, for the year ended December 31, 2023, the Company had one customer that accounted for approximately 40% of revenues and 42% of net accounts receivable and another customer accounted for approximately 21% of revenues and 40% of net accounts receivable. For the year ended December 31, 2022, the Company had one customer that accounted for 35% of revenues and 45% of net accounts receivable. For the year ended December 31, 2021, the Company had one customer that accounted for approximately 23% of revenues and 26% of net accounts receivable and another customer that accounted for 26% of revenues and 24% of net accounts receivable. We perform ongoing evaluations of customers’ financial condition, creditworthiness and payment performance. Based on these evaluations, we consider whether or not the accounts receivable exposure to any greater net tangible asset orspecific customer is within an acceptable range for that customer.
Item 8. Financial Statements and Supplementary Data.
DocGo Inc. and Subsidiaries
Index to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
DocGo Inc. and Subsidiaries
New York, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of DocGo, Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash requirement that may be containedflows for each of the three years in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemptionperiod ended December 31, 2023, and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctantnotes (collectively referred to enter into an initial business combination agreement with us.
The ability ofas the “consolidated financial statements”). In our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to completeopinion, the most desirable business combination, if atconsolidated financial statements present fairly, in all or optimize our capital structure.
Atmaterial respects, the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portionfinancial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cashperiod ended December 31, 2023
, in the Trust Account to meet such requirements, or arrange for third-party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commission payable to the underwriter is not required to be adjusted for any shares that are redeemed in connectionconformity with an initial business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commission.The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that our public stockholders would have to wait for liquidation in order to redeem their stock.
If our initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, our public stockholders would not receive their pro rata portion of the Trust Account until we liquidate the Trust Account. If our public stockholders are in need of immediate liquidity, they could attempt to sell their stock in the open market; however, at such time, our stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, our public stockholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with their exercise of redemption rights until we liquidate or they are able to sell their stock in the open market.
The requirement that we complete our initial business combination by October 19, 2022, may give potential target businesses leverage over us in negotiating an initial business combination and may decrease our ability to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning an initial business combination will be aware that we must complete our initial business combination by October 19, 2022. Consequently, such target business may have leverage over us in negotiating an initial business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that the proxy statement with respect to the vote on an initial business combination include historical and pro forma financial statement disclosure. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America (“GAAP”) or international financial reporting standards as issued by the International Accounting Standards Board (“IFRS”) depending on the circumstances and the historical financial statements may be required to beAmerica.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”). These, the Company's internal control over financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.
Unlike most blank check companies, if (i) we issue additional shares of Class A common stock or equitylinked securities for capital-raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), (ii) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (iii) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price. This may make it more difficult for us to consummate an initial business combination with a target business.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Founder Shares at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 50,000,000 shares of Class A common stock, par value $0.0001 per share, 12,500,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2020, there were 38,500,000 and 9,625,000 authorized but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which Class A amount does not take into account the shares of Class A common stock reserved for issuance upon exercise of any outstanding warrants or the shares of Class A common stock issuable upon conversion of outstanding Class B common stock. As of December 31, 2020, there were no shares of preferred stock issued and outstanding. Shares of Founder Shares are convertible into shares of our Class A common stock initially at a one- for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock to redeem the warrants as described in “Description of Securities — Redeemable Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” or upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our certificate of incorporation. Our Class B common stock shall only be convertible at the time of our initial business combination. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional securities that would entitle the holders thereof, to (1) receive funds from the trust account or (2) vote as a class with our Public Shares (a) on any initial business combination or (b) to approve an amendment to our certificate of incorporation. The restriction on issuing additional shares of capital stock described in the prior sentence will expire upon consummation of our initial business combination.
The issuance of additional shares of common or preferred stock:
| ● | may significantly dilute the equity interest of our stockholders, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change of control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; |
| ● | may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and |
| ● | may not result in adjustment to the exercise price of our warrants. |
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitmentsreporting as of December 31, 2020 to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from2023, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the lender a waiverCommittee of any right, title, interest or claim of any kind in or to the monies held in the Trust Account. As such, no issuance of debt will affect the per-share amount available for redemption from the Trust Account. Nevertheless, the incurrence of debt could have a variety of negative effects, including: | ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ● | our inability to pay dividends on our common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
We may be able to complete only one business combination with the proceeds of our Initial Public Offering and Private Placement Warrants, which will cause us to be solely dependent on a single business, which may have a limited number of products or services and limited operating activities. This lack of diversification may negatively impact our operating results and profitability.
Of the net proceeds from our Initial Public Offering and Private Placement Warrants, $115,000,000 may be used to complete our initial business combination and pay related fees and expenses (which includes $4,025,000 for the paymentSponsoring Organizations of the deferred underwriting commission being held in the Trust Account).
We may complete our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to complete our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry. Accordingly, the prospects for our success may be:
| ● | solely dependent upon the performance of a single business, property or asset; or |
| ● | dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability to complete our initial business combination. We do not, however, intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
Resources could be wasted in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our Trust AccountTreadway Commission (“COSO”) and our warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reachreport dated February 28, 2024 expressed an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons, including those beyond our control. Any such event will result in a loss to us of the related costs incurred, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
We intend to target businesses with enterprise values that are greater than we could acquire with the net proceeds of our Initial Public Offering and Private Placement Warrants. As a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy any redemption by public stockholders, we may be required to seek additional financing to complete such proposed initial business combination. There can be no assurance that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. Further, we may be required to obtain additional financing in connection with the closing of our initial business combination for general corporate purposes, including for maintenance or expansion of operations of the post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, or to fund the purchase of other companies. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share plus any pro rata interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes on the liquidation of our Trust Account and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. Neither our Sponsor nor any of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders may only receive approximately $10.00 per share on the liquidation of our Trust Account, and our warrants will expire worthless. Furthermore, as described in the risk factor entitled “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share,” under certain circumstances our public stockholders may receive less than $10.00 per share upon the liquidation of the Trust Account.
We are not required to obtain anunqualified opinion from an independent investment banking firm or from another independent entity that commonly renders valuation opinions, and consequently, stockholders may have no assurance from an independent source that the price we are paying for the target(s) of our initial business combination is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity or our board of directors cannot independently determine the fair market value of the target business or businesses (including with the assistance of financial advisors), we are not required to obtain an opinion from an independent investment banking firm or from another independent entity that commonly renders valuation opinion that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on our redemption of our Public Shares, or less than such amount in certain circumstances, and our warrants will expire worthless.
We expect to encounter competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess similar or greater technical, human and other resources to ours, and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of the Initial Public Offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
thereon.
Furthermore, because we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating an initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation. See “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the coronavirus (COVID-19) pandemic and the status of debt and equity markets.
The COVID-19 pandemic has adversely affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could adversely affect, the economies and financial markets worldwide, and the business of any potential target business with which we consummate an initial business combination could be materially and adversely affected. Furthermore, we may be unable to complete an initial business combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for an initial business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) continue for an extensive period of time, our ability to consummate an initial business combination, or the operations of a target business with which we ultimately consummate an initial business combination, may be materially adversely affected.
In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity in third- party financing being unavailable on terms acceptable to us or at all.
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination.
In recent years and especially in the last several months, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Changes in the market for directors’ and officers’ liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors’ and officers’ liability insurance for special purpose acquisition companies has changed. The premiums charged for such policies have generally increased and the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability of directors’ and officers’ liability insurance could make it more difficult and more expensive for us to negotiate an initial business combination. In order to obtain directors’ and officers’ liability insurance or modify its coverage as a result of becoming a public company, the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to obtain adequate directors’ and officers’ liability insurance could have an adverse impact on the post-business combination’s ability to attract and retain qualified officers and directors.
In addition, even after we were to complete an initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the post-business combination entity will likely need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need for run-off insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate our ability to consummate an initial business combination on terms favorable to our investors.
We may not be able to complete our initial business combination by October 19, 2022, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our amended and restated certificate of incorporation provides that we must complete our initial business combination by October 19, 2022 (within 24 months from the closing of the Initial Public Offering). We may not be able to find a suitable target business and complete our initial business combination within such time period. Our ability to complete our initial business combination may be negatively impacted by general market conditions, political considerations, volatility in the capital and debt markets and the other risks described herein. If we have not completed our initial business combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may receive only $10.00 per share, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.
If we seek stockholder approval of our initial business combination, our Sponsor and our officers, directors and their affiliates may enter into certain transactions, including purchasing shares or warrants from the public, which may influence the outcome of a proposed business combination and reduce the public “float” of our securities.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our Sponsor and our officers, directors and their affiliates may purchase Public Shares or Public Warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so.
Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor and our officers, directors and affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Additionally, at any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material nonpublic information), our Sponsor and our officers, directors and affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of our initial business combination or not redeem their Public Shares. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. The purpose of any such transaction could be to (1) vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination, (2) reduce the number of Public Warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination or (3) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our Class A common stock or warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our Public Shares in connection with our initial business combination, or fails to comply with the procedures for submitting or tendering its shares, such shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy materials or tender offer documents, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials or tender offer documents, as applicable, that we will furnish to holders of our Public Shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or submit Public Shares for redemption. For example, we intend to require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to, at the holder’s option, either deliver their stock certificates to our transfer agent, or to deliver their shares to our transfer agent electronically prior to the date set forth in the proxy materials or tender offer documents, as applicable. In the case of proxy materials, this date may be up to two business days prior to the vote on the proposal to approve the initial business combination. In addition, if we conduct redemptions in connection with a stockholder vote, we intend to require a public stockholder seeking redemption of its Public Shares to also submit a written request for redemption to our transfer agent two business days prior to the vote in which the name of the beneficial owner of such shares is included. In the event that a stockholder fails to comply with these or any other procedures disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed.
Our stockholders do not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, stockholders may be forced to sell their Public Shares or warrants, potentially at a loss.
Our public stockholders are entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) our completion of an initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend our certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our Public Shares if we do not complete our initial business combination by October 19, 2022, or to provide for redemption in connection with a business combination and (iii) the redemption of our Public Shares if we are unable to complete an initial business combination by October 19, 2022, subject to applicable law and as further described herein. In addition, if our plan to redeem our Public Shares if we are unable to complete an initial business combination by October 19, 2022, is not completed for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution of the proceeds held in our Trust Account. In that case, public stockholders may be forced to wait beyond 24 months from the closing of the public offering before they receive funds from our Trust Account. In no other circumstances will a public stockholder have any right or interest of any kind in the Trust Account. Holders of warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants. Accordingly, to liquidate their investment, stockholders may be forced to sell their Public Shares or warrants, potentially at a loss.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if a stockholder or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, they will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), is restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering without our prior consent, which we refer to as the “Excess Shares.” However, we will not restrict our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Our stockholders’ inability to redeem their Excess Shares will reduce their influence over our ability to complete our initial business combination and stockholders could suffer a material loss on their investment in us if they sell Excess Shares in open market transactions. Additionally, our stockholders will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And as a result, stockholders will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell their stock in open market transactions, potentially at a loss.
If the net proceeds of our Initial Public Offering and the sale of the private placement warrants not being held in the Trust Account are insufficient to allow us to operate until October 19, 2022, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
We believe the funds available to us outside of the Trust Account will be sufficient to allow us to operate until October 19, 2022; however, there can be no assurance that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are required to seek additional capital, we would need to borrow funds from our Sponsor, management team or other third parties to operate or may be forced to liquidate. None of our Sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to us upon completion of our initial business combination. Except as may be precluded by the terms of a business combination definitive agreement, up to $1,500,000 of such loans may be convertible into private placement-equivalent warrants at a price of $1.50 per warrant at the option of the lender. Prior to the completion of our initial business combination, we do not expect to seek advances or loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. If we are unable to obtain these loans, we may be unable to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation. See “If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.
Risks Relating to the Post-Business Combination Company
Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, and which could cause stockholders to lose some or all of their investment.
Even if we conduct extensive due diligence on a target business with which we combine, there can be no assurance that this diligence will identify all material issues that may be present within a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre- existing debt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination or thereafter. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
We may seek business combination opportunities with an early stage company, a private company, a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model or with limited historic financial data, volatile revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the relevant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We may also seek to complete our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
Our ability to successfully complete our initial business combination and to be successful thereafter will be totally dependent upon the efforts of members of our management team, some of whom may join us following our initial business combination. The loss of such people could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully complete our business combination is dependent upon the efforts of members of our management team. The role of members of our management team in the target business, however, cannot presently be ascertained. Although some members of our management team may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
In addition, the officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a target business’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
We are dependent upon our officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our officers and directors. We believe that our success depends on the continued service of our executive officers and directors, at least until we have completed our initial business combination. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various their business activities, including identifying potential business combinations and monitoring the related due diligence, negotiations and other activities. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Furthermore, the officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a target business’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
If we consummate our initial business combination with a company with locations, operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we consummate our initial business combination with a company with locations, operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
| ● | higher costs and difficulties inherent in managing cross-border business operations and complying with different commercial and legal requirements of overseas markets; |
| ● | rules and regulations regarding currency redemption; |
| ● | complex corporate withholding taxes on individuals; |
| ● | laws governing the manner in which future business combinations may be effected; |
| ● | tariffs and trade barriers; |
| ● | regulations related to customs and import/export matters; |
| ● | longer payment cycles and challenges in collecting accounts receivable; |
| ● | tax issues, such as tax law changes and variations in tax laws as compared to the United States; |
| ● | currency fluctuations and exchange controls; |
| ● | cultural and language differences; |
| ● | crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars; |
| ● | deterioration of political relations with the United States; and |
| ● | government appropriations of assets. |
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.
We may face risks related to businesses in the transportation software and technology industry.
Business combinations with businesses in the transportation software and technology industry entail special considerations and risks. If we are successful in completing a business combination with such a target business, we may be subject to, and possibly adversely affected by, the following risks:
| ● | if we do not develop successful new products or improve existing ones, our business will suffer; |
| ● | we may invest in new lines of business that could fail to attract or retain users or generate revenue; |
| ● | we will face significant competition and if we are not able to maintain or improve our market share, our business could suffer; |
| ● | the loss of one or more members of our management team, or our failure to attract and retain other highly qualified personnel in the future, could seriously harm our business; |
| ● | if our security is compromised or if our platform is subjected to attacks that frustrate or thwart our users’ ability to access our products and services, our users, advertisers, and partners may cut back on or stop using our products and services altogether, which could seriously harm our business; |
| ● | mobile malware, viruses, hacking and phishing attacks, spamming, and improper or illegal use of our products could seriously harm our business and reputation; |
| ● | if we are unable to successfully grow our user base and further monetize our products, our business will suffer; |
| ● | if we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our business may be seriously harmed; |
| ● | we may be subject to regulatory investigations and proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business; |
| ● | components used in our products may fail as a result of a manufacturing, design, or other defect over which we have no control, and render our devices inoperable; |
| ● | an inability to manage rapid change, increasing consumer expectations and growth; |
| ● | an inability to build strong brand identity and improve subscriber or customer satisfaction and loyalty; |
| ● | an inability to deal with our subscribers’ or customers’ privacy concerns; |
| ● | an inability to license or enforce intellectual property rights on which our business may depend; |
| ● | an inability by us, or a refusal by third parties, to license content to us upon acceptable terms; |
| ● | potential liability for negligence, copyright, or trademark infringement or other claims based on the nature and content of materials that we may distribute; and |
| ● | disruption or failure of our networks, systems or technology as a result of misappropriation of data or other malfeasance, as well as outages, natural disasters, terrorist attacks, accidental releases of information or similar events. |
Any of the foregoing could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses will not be limited to the transportation software and technology industry. Accordingly, if we acquire a target business in another industry, these risks we will be subject to risks attendant with the specific industry in which we operate or target business which we acquire, which may or may not be different than those risks listed above.
Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our initial business combination so that the post-transaction company in which our public stockholders own or acquire shares will own less than 100% of the outstanding equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for the post-transaction company not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target, our stockholders prior to our initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in our initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target, or issue a substantial number of new shares to third-parties in connection with financing our initial business combination. In such cases, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.
Our certificate of incorporation will not provide a specified maximum redemption threshold, except that we will only redeem our Public Shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination (such that we do not then become subject to the SEC’s “penny stock” rules). As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our officers, directors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
Risks Relating to Potential Conflicts of Interest of our Management, Directors, and Others
Our officers and directors may allocate their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
None of our officers or directors is required to commit his or her full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses, including other business endeavors for which he or she may be entitled to substantial compensation. We do not intend to have any full-time employees prior to the completion of our initial business combination. Our independent directors also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs, which may have a negative impact on our ability to complete our initial business combination.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us (and they may also become an officer or director of any other special purpose acquisition company) and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Until we complete our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses or entities. Our officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, although our officers may not become an officer or director of any other special purpose acquisition company which has publicly filed a registration statement with the SEC until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within 24 months after the closing of our Initial Public Offering. Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities in the future to which they owe certain fiduciary or contractual duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us.
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact we may enter into a business combination with a target business that is affiliated with our officers, directors or their affiliates although we do not currently intend to do so. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
Despite our agreement that, in the event we seek to complete our initial business combination with a company business that is affiliated with our officers, directors or their affiliates, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial business combination is fair to us from a financial point of view, potential conflicts of interest still may exist. As a result, the terms of the business combination may not be as advantageous to our company and our public stockholders as they would be absent any conflicts of interest.
Since our Sponsor, officers and directors will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
As of December 31, 2020, our Sponsor owned 100% of the 2,875,000 issued and outstanding Founder Shares. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares after the Initial Public Offering. The Founder Shares will be worthless if we do not complete an initial business combination. In addition, our Sponsor purchased an aggregate of 2,533,333 Private Placement Warrants at $1.50 per warrants for a total purchase price of $3,800,000. Each Private Placement Warrant is exercisable for one share of our Class A common stock at $11.50 per share, and will be deemed worthless if we do not complete an initial business combination. Holders of Founder Shares have agreed (i) to vote any shares owned by them in favor of any proposed initial business combination and not to redeem any Founder Shares in connection with a stockholder vote to approve a proposed initial business combination. In addition, we may obtain loans from our Sponsor, affiliates of our Sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. This risk may become more acute as the deadline for completing our initial business combination nears.
Members of our management team may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Members of our management team may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any members of our management team will remain with us after the completion of our initial business combination. We cannot assure you that any members of our management team will remain in senior management or advisory positions with us. The determination as to whether any members of our management team will remain with us will be made at the time of our initial business combination.
Risks Related to our Securities
We have not registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis. If the issuance of the shares upon exercise of warrants is not registered, qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
We have not yet registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our reasonable best efforts to file, and within 60 business days following our initial business combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants. We will use our reasonable best efforts to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units. There may be a circumstance where an exemption from registration exists for holders of our private placement warrants to exercise their warrants while a corresponding exemption does not exist for holders of the Public Warrants included as part of units sold in our Initial Public Offering. In such an instance, the initial purchasers and their permitted transferees (which may include our directors and executive officers) would be able to exercise their warrants and sell the common stock underlying their warrants while holders of our Public Warrants would not be able to exercise their warrants and sell the underlying common stock. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise their warrants.
We may amend the terms of the warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 50% of the then outstanding Public Warrants. As a result, the exercise price of public stockholders’ warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without public stockholders’ approval.
Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder of Public Warrants if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to stockholders, thereby making their warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant; provided that the reported closing price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the warrant holders and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in our Initial Public Offering. Redemption of the outstanding warrants could force stockholders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. None of the private placement warrants will be redeemable by us so long as they are held by the Sponsor or its permitted transferees.
In addition, unlike many other similarly structured blank check companies, we have the ability to redeem outstanding warrants 90 days after they become exercisable for $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock and provided certain other conditions are met. We would redeem the warrants in this manner when we believe it is in our best interest to update our capital structure to remove the warrants and pay fair market value to the warrant holders. Any such redemption may have similar consequences to the redemption described in the above paragraph. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had your warrants remained outstanding. Finally, this redemption feature provides a ceiling to the value of your warrants since it locks in the redemption price in the number of Class A common stock to be received if we choose to redeem the warrants for common stock. This redemption feature may cause our warrants to be worth less than other blank check companies which do not have this feature.
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities are listed on Nasdaq. There can be no assurance that our securities will continue to be listed on Nasdaq in the future or prior to our initial business combination. In order to continue listing our securities on Nasdaq prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, following our Initial Public Offering, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4.00 per share, our stockholders’ equity would generally be required to be at least $4.0 million, we would be required to have a minimum of 300 round lot holders of our securities and we would be required to have a market value of listed securities of $50.0 million There can be no assurance that we will be able to meet those initial listing requirements at that time.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity for our securities; |
| ● | a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Our units, Class A common stock and warrants, are covered securities. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities.
Our stockholders are not entitled to protections normally afforded to investors of many other blank check companies.
We are a “blank check” company under the U.S. securities laws. However, because we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors are not afforded the benefits or protections of those rules. Among other things, this means we will have a longer period of time to complete our initial business combination than companies subject to Rule 419. Moreover, if our Initial Public Offering had been subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of an initial business combination.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we seek to have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to enter into an agreement waiving such claims to the monies held in the Trust Account, the Company’s management will consider whether competitive alternatives are reasonably available to the Company, and will only enter into an agreement with such third party if the Company’s management believes that such third party’s engagement would be in the best interests of the Company under the circumstances. WithumSmith+Brown P.C., our independent registered public accounting firm, and the underwriter of our Initial Public Offering, have not executed agreements with us waiving such claims to the monies held in the Trust Account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, if we are unable to complete our initial business combination by October 19, 2022, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or by a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriter of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, then our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. We have not asked our Sponsor to reserve for such indemnification obligations. Therefore, we believe it is unlikely our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per public share in connection with any redemption of your Public Shares. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the Delaware General Corporations Law (“DGCL’), stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our Public Shares in the event we do not complete our initial business combination within the allotted time period may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our Public Shares as soon as reasonably possible following the 24th month from the closing of our Initial Public Offering (or the end of any Extension Period) in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our Public Shares in the event we do not complete our initial business combination within the allotted time period is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest, which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors, in exercising their business judgment and subject to their fiduciary duties, may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive (and any other persons who may become an officer or director prior to the initial business combination will also be required to waive) any right, title, interest or claim of any kind in or to any monies in the Trust Account and not to seek recourse against the Trust Account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the Trust Account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board of directors may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.
In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
The grant of registration rights to our Sponsor may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to a registration rights agreement entered into concurrently with our Initial Public Offering, our Sponsor and its permitted transferees can demand that we register the resale of private placement warrants, the shares of Class A common stock issuable upon exercise of the Founder Shares and the private placement warrants held, or to be held, by them and holders of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such warrants or the Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the securities owned by our Sponsor or holders of working capital loans or their respective permitted transferees are registered for resale.
In order to complete our initial business combination, we may seek to amend our certificate of incorporation or other governing instruments, including our warrant agreement, in a manner that will make it easier for us to complete our initial business combination but that our stockholders or warrant holders may not support.
In order to complete a business combination, blank check companies have, in the recent past, amended various provisions of their charters and governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds, extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend our certificate of incorporation or other governing instruments, including to extend the time we have to consummate an initial business combination in order to complete our initial business combination.
The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of at least 65% of our outstanding common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business combination activity, without approval by holders of a certain percentage of the company’s stockholders. In those companies, amendment of these provisions typically requires approval by holders holding between 90% and 100% of the company’s Public Shares. Our certificate of incorporation will provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of our Initial Public Offering and the sale of the private placement warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of at least 65% of our outstanding common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our outstanding common stock entitled to vote thereon. In all other instances, our certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. We may not issue additional securities that would entitle the holders thereof, prior to our initial business combination, to (1) receive funds from the trust account or (2) vote as a class with our Public Shares (a) on any initial business combination or (b) to approve an amendment to our certificate of incorporation. Our Sponsor, which owns, on behalf of our officers, directors and their affiliates, 20.0% of our outstanding common stock, may participate in any vote to amend our certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner it chooses. As a result, we may be able to amend the provisions of our certificate of incorporation which will govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete our initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our certificate of incorporation.
We will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our certificate of incorporation or to redeem 100% of our Public Shares if we do not complete our initial business combination within 24 months from the closing of our Initial Public Offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding Public Shares. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our public stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Our warrants and Founder Shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to complete our initial business combination.
We issued warrants to purchase 3,833,333 shares of our Class A common stock as part of the units offered in our Initial Public Offering, and we issued 2,533,333 in Private Placement Warrants in a private placement. Each warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. Further, our Sponsor, on behalf of our officers, directors and their affiliates, owns an aggregate of 2,875,000 Founder Shares. The Founder Shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, if our Sponsor, officers, directors or their affiliates make any working capital loans, and except as may be precluded by the terms of a business combination definitive agreement, up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
To the extent we issue shares of Class A common stock to complete a business combination, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants and conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of our Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business combination. Therefore, our warrants and Founder Shares may make it more difficult to complete a business combination or increase the cost of acquiring the target business.
The Private Placement Warrants are identical to the warrants sold as part of the units in our Initial Public Offering except that, so long as they are held by the initial purchasers or their permitted transferees, (i) except in certain circumstances, they will not be redeemable by us, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of our initial business combination, (iii) they may be exercised by the holders on a cashless basis and (iv) the holders thereof (including with respect to the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights. In addition, the Private Placement Warrants will not vote on any amendments to the warrant agreement.
Because each unit contains one-third of one redeemable warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank check companies.
Each unit contains one-third of one warrant. Because, pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares, only a whole warrant may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common stock and one whole warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for one third of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive business combination partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they included a warrant to purchase one whole share.
General Risks
We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to complete our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2021. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel. This provision may have the effect of discouraging lawsuits against our directors and officers.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
Purchasing our securities may result in uncertain or adverse U.S. federal income tax consequences.
Purchasing our securities may result in uncertain U.S. federal income tax consequences. For instance, because there are no authorities that directly address instruments similar to the units we issued in our Initial Public Offering, the allocation an investor makes with respect to the purchase price of a unit between the share of Class A common stock and the one-third of one redeemable warrant to purchase one share of our Class A common stock included in each unit could be challenged by the U.S. Internal Revenue Service, or “IRS,” or the courts. Furthermore, the U.S. federal income tax consequences of a cashless exercise of the warrants included in the units we issued in our Initial Public Offering are unclear under current law, and the adjustment to the exercise price and/or redemption price of the warrants could give rise to dividend income to investors without a corresponding payment of cash. Finally, it is unclear whether the redemption rights with respect to our shares of common stock suspend the running of a U.S. holder’s holding period for purposes of determining whether any gain or loss realized by such holder on the sale or exchange of common stock is long-term capital gain or loss and for determining whether any dividend we pay would be considered “qualified dividends” for U.S. federal income tax purposes. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences applicable to their specific circumstances when purchasing, holding or disposing of our securities.
We may be subject to an increased rate of tax on our income if we are treated as a personal holding company.
Depending on the date and size of our initial business combination, it is possible that we could be treated as a “personal holding company” for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a personal holding company for U.S. federal income tax purposes in a given taxable year if more than 50% of its ownership (by value) is concentrated, within a certain period of time, in five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt organizations, pension funds, and charitable trusts), and at least 60% of its income is comprised of certain passive items.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
| ● | restrictions on the nature of our investments; and |
| ● | restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination. |
In addition, we may have imposed upon us burdensome requirements, including:
| ● | registration as an investment company with the SEC; |
| ● | adoption of a specific form of corporate structure; and |
| ● | reporting, record keeping, voting, proxy and disclosure requirements and compliance with other rules and regulations that we are currently not subject to. |
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business is to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities are subject to the Investment Company Act. To this end, the proceeds held in the Trust Account may only be invested in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. Our securities are not intended for persons who are seeking a return on investments in government securities or investment securities. The Trust Account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our Public Shares if we do not complete our initial business combination by October 19, 2022, or to provide for redemption in connection with a business combination; or (iii) absent an initial business combination by October 19, 2022, our return of the funds held in the Trust Account to our public stockholders as part of our redemption of the Public Shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances described herein, on the liquidation of our Trust Account and our warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.
Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our executive offices are located at c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174. Our office space, to the extent it is needed, is being provided to us for no charge by Graubard Miller, our counsel. We consider our current office space, combined with the other office space otherwise available to our executive officers and directors, adequate for our current operations.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information
The Company’s Class A common stock Public Shares, Public Warrants and Units are currently listed on Nasdaq under the symbols MOTN, MOTNW and MOTNU, respectively. Our Units began public trading on October 15, 2020, and our Public Shares and Public Warrants began separate public trading on December 17, 2020.
Holders
As of March 16, 2021 there was one holder of record of our separately traded Class A common stock, two holders of record of our separately traded warrants, and one holder of record of our units.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our business combination. The payment of any cash dividends subsequent to our business combination will be within the discretion of our board of directors. In addition, our board of directors is not currently contemplating and does not anticipate declaring stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
In August 2020, we issued an aggregate of 3,737,500 Founder Shares, for an aggregate purchase price of $25,000, to our Sponsor. Such shares were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. In October 2020, our Sponsor contributed back to our capital an aggregate of 431,250 Founder Shares. Additionally, an aggregate of 431,250 Founder Shares were forfeited in November 2020 because the underwriter of our Initial Public Offering did not exercise its over-allotment option.
On October 19, 2020, we consummated our Initial Public Offering of 11,500,000 Units. Each Unit consists of one share of Class A common stock and one-third of one Public Warrant, each whole Public Warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to adjustment. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $115,000,000. Barclays Capital Inc. served as the sole book-running manager of our Initial Public Offering. The securities sold in our Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-249061). The SEC declared the registration statement effective on October 14, 2020.
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of an aggregate of 2,533,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $3,800,000. The Private Placement Warrants are identical to the Public Warrants sold as part of the Units in the Initial Public Offering except that, so long as they are held by our Sponsor or its permitted transferees, (i) they are not redeemable by us, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of our initial business combination and (iii) they may be exercised by the holders on a cashless basis.
Following the closing of our Initial Public Offering and the Private Placement, $115,000,000 was placed in the Trust Account, comprised of $112,700,000 of the proceeds from our Initial Public Offering (which amount includes $4,025,000 of the underwriter’s deferred discount) and $2,300,000 of the proceeds of the Private Placement. We paid $2,300,000 for the initial underwriting discount and paid or accrued approximately $468,000 for other costs and expenses related to our Initial Public Offering. We also repaid approximately $71,000 in non-interest bearing loans made to us by the Sponsor to cover expenses related to the Initial Public Offering.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account not previously released to us (less taxes payable and deferred underwriting commission) to complete our initial business combination. We may withdraw interest to pay our taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions, and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants, or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate, and complete a business combination.
Concurrently with the execution of the Merger Agreement on March 8, 2021, we entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, we agreed to issue and sell in private placements an aggregate of 12,500,000 shares of our Class A common stock for $10.00 per share. The PIPE is expected to close substantially concurrently with the closing of the Proposed Transaction.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors Summary,” “Item 1A. Risk Factors” and elsewhere in this Annual Report.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We consummated our Initial Public Offering on October 19, 2020. We intend to use the cash proceeds from our public offering and private placement of warrants as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the business combination.
We expect to incur significant costs in the pursuit of our acquisition plans. There can be no assurance that our plans to raise capital or to complete our initial business combination will be successful.
Recent Developments
Merger Agreement
On March 8, 2021, we entered into the Merger Agreement with Merger Sub and DocGo, which provides for the Merger of Merger Sub with and into DocGo, with DocGo being the surviving entity of the Merger and becoming a wholly-owned subsidiary of the Company.
Upon consummation of the Merger, the outstanding DocGo common stock will be exchanged for a pro rata portion of an aggregate of 83,600,000 Closing Shares, less the number of Closing Shares reserved for issuance by the Company upon the exercise of outstanding options and warrants of DocGo which will be assumed by the Company.
As part of the aggregate consideration payable to DocGo pursuant to the Merger Agreement, DocGo’s stockholders will also have the right to receive their pro rata portion of up to an aggregate of 5,000,000 Contingent Shares if the following stock price conditions are met: (i) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the first anniversary of the closing date; (ii) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; (iii) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; and (iv) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $21.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date.
Pursuant to the Merger Agreement, the Sponsor will enter into an escrow agreement and will deposit an aggregate of 575,000 Sponsor Earnout Shares into escrow, which shares will either be released to the Sponsor or forfeited if certain stock price conditions are met or not, as follows: (i) with respect to 287,500 Sponsor Earnout Shares, the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date, and (ii) with respect to the remaining 287,500 Sponsor Earnout Shares, the closing price of our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date.
Consummation of the Proposed Transaction is subject to customary conditions of the respective parties, including the approval of the Merger Agreement, the Proposed Transaction and certain other actions related thereto by our stockholders and DocGo’s stockholders, the availability of at least $175,000,000 in cash from the Trust Account and from the proceeds of the PIPE (discussed below), after giving effect to redemptions, if any, by the Company’s public stockholders and other permitted disbursements, and DocGo having obtained certain regulatory approvals of the New York Department of Health with respect to the Proposed Transaction. The Merger Agreement may also be terminated by either party under certain circumstances.
PIPE Private Placement
Concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements with PIPE Investors, pursuant to which the Company will, substantially concurrently with, and contingent upon, the consummation of the Merger, issue an aggregate of 12,500,000 shares of the Company’s Class A common stock at a price of $10.00 per share, for aggregate gross proceeds to the Company of $125,000,000.
The Company has agreed that, as soon as reasonably practicable, but in no event later than 30 calendar days following the closing date of the Merger, it shall file a registration statement with the SEC covering the resale by the Investors of the Class A common stock issued to them in the PIPE and use its best efforts to have such registration statement declared effective as promptly as practicable thereafter, but in no event later than the earlier of 60 calendar days after filing (or 90 calendar days in the event the SEC issues written comments) or the 10th business day after the Company is notified that the registration statement will not be subject to review or further review.
Liquidity and Capital Resources
Prior to the Initial Public Offering, our liquidity needs were satisfied through a payment of $25,000 from our Chief Executive Officer to fund certain offering costs in exchange for the issuance to the Sponsor of the Founder Shares, and advances to us from our Sponsor of approximately $71,000 under a note payable to pay for other offering costs in connection with the Initial Public Offering. We fully repaid this note payable on October 19, 2020.
Subsequent to the Initial Public Offering, our liquidity needs have been satisfied from the net sales proceeds of the Private Placement Warrants not held in the Trust Account. At December 31, 2020, we had an unrestricted cash balance of approximately $879,000 and working capital of approximately $888,000. We expect our working capital needs will be satisfied through these funds, which are held outside of the Trust Account. Investment income on funds held in the Trust Account may be used to pay income taxes, if any, and Delaware franchise taxes.
In addition, our Sponsor, officers, directors and their affiliates may, but are not obligated to, loan us funds as may be required in connection with the business combination. Except as may be precluded by the terms of a business combination definitive agreement, up to $1,500,000 of these working capital loans may be converted into warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender, and such warrants would be identical to the Private Placement Warrants.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we will be using these funds to pay existing accounts payable and to consummate our initial business combination.
Results of Operations
To date, we have neither engaged in any significant business operations nor generated any revenues. All activities to date relate to our corporate formation, Initial Public Offering, search for suitable business combination candidates, and negotiations with DocGo. Since consummating our Initial Public Offering on October 19, 2020, we have incurred expenses primarily for legal and audit services, Nasdaq listing fees, directors’ and officers’ liability insurance, trust and transfer agent fees, Delaware franchise taxes, diligence-related expenses on our target company, and investor relations.
For the period from August 11, 2020 (inception) through December 31, 2020, we had a net loss of $148,751 which was attributable to general and administrative expenses and formation costs. We will not be generating any revenue until the closing and completion of our initial business combination.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Contractual Obligations
As of December 31, 2020, we did not have any lease obligations or purchase commitments, and we had no long-term liabilities other than the deferred underwriting commission of $4,025,000 that is payable from the Trust Account upon consummating our initial business combination.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company has identified the following as its critical accounting policies:
Redeemable Shares
All of the 11,500,000 Public Shares sold as part of our Initial Public Offering contain a redemption feature as described in this Annual Report. In accordance with FASB ASC 480, “Distinguishing Liabilities from Equity”, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Our amended and restated certificate of incorporation provides a minimum net tangible asset threshold of $5,000,001. We recognize changes in redemption value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares are effected by recording offsetting adjustments to additional paid-in capital. At December 31, 2020, there were 11,500,000 Public Shares, of which 10,688,275 were recorded as redeemable shares and classified outside of permanent equity, and 811,725 were classified as Class A common stock in stockholders’ equity.
Net Income (Loss) per Common Share
In accordance with FASB ASC 260, “Earnings Per Share” (“ASC 260”), shares of Class A common stock are treated as participating securities because such shares are entitled to a pro rata share of undistributed trust earnings but do not share in the Company’s net losses. Consequently, net income (loss) per share is calculated using the two-class method prescribed by ASC 260. Pursuant to this method, net income per share for Class A common stock is calculated by dividing the undistributed interest income earned on investments held in the Trust Account by the weighted average number of Class A shares outstanding since original issuance, and net loss per share for Class B common stock is calculated by dividing the net loss, adjusted for income allocated to the Class A shares, by the weighted average number of Class B shares outstanding during the period.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8.Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Motion Acquisition Corp.
Opinion on the Financial Statement
We have audited the accompanying balance sheet of Motion Acquisition Corp. (the “Company”) as of December 31, 2020, the related statements of operations, changes in stockholders’ equity and cash flows for the period from August 11, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and the results of its operations and its cash flows for the period from August 11, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our
audit.audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (“PCAOB”)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
auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits 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 auditaudits 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.
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: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) 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.
Loss allowance for Accounts Receivable
As described in Note 2 to the consolidated financial statements, the Company recorded consolidated accounts receivable of approximately $262.1 million net of a loss allowance of approximately $6.3 million at December 31, 2023. The allowance is management’s estimate of loss allowance on accounts receivable after considering quantitative and qualitative factors, applied for accounts receivables without a significant financing component by using a loss provision. Management makes periodic as well as individual assessments on the recoverability of accounts receivables based on customer historical credit loss experience, and where necessary, adjusted for information based on macroeconomic factors affecting the ability of its customers to settle the accounts receivables. Accounts receivables from customers with known financial difficulties or with significant doubt on collection of receivables are assessed individually for a loss allowance. Management assesses other customers by grouping them based on shared credit risk characteristics including geographical location, service type and payor.
The principal considerations for our determination that performing procedures relating to the loss allowance for accounts receivables is a critical audit matter are the significant judgment by management in determining the loss allowance for accounts receivable as influenced by qualitative factors in particular, which led to a high level of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence obtained.
The primary procedures we performed to address this critical audit matter included:
•Testing the effectiveness of controls relating to the loss allowance for trade receivables.
•Testing management’s process included (i) evaluating the appropriateness of the methodology and models; (ii) testing the completeness and accuracy of certain data used in the estimate; (iii) evaluating management’s process to identify customers with known financial difficulties; and (iv) evaluating the reasonableness of significant assumptions and judgments made by management to estimate the loss allowance for accounts receivable, including the grouping of accounts receivables based on type of service and historical collections.
Revenue Recognition – Transport Services
As described in Note 2 to the consolidated financial statements, the Company recorded transport services revenue of approximately $181.5 million. Transport revenues are recorded net of an estimated contractual allowances for claims subject to contracts with responsible paying entities. The Company estimates contractual allowances at the time of billing based on contractual terms and historical collections by each payor and geographical location.
The principal considerations for our determination that performing procedures relating to the transport revenue is a critical audit matter are the significant judgement by management in determining the lookback periods of historical collections which led to a high level of auditor judgment, subjectivity, and effort in performing procedures.
The primary procedures we performed to address this critical audit matter included:
•Testing the effectiveness of controls relating to transport services revenue recognition.
•Testing the Company’ process included (i) selected a sample of transactions and verified the transport service has been performed (ii) obtained supporting cash collections for a sample of transactions (iii) obtained the Company’s historical collections for recent completed services, verified the receipts and recalculated the applied historical rate to the recorded revenue (iv) obtained the Company’s historical collections and verified these collections to ensure appropriate reserves for unpaid, open services.
/s/ Urish Popeck & Co., LLC
We have served as the Company’s auditor since 2021.
Pittsburgh, PA
February 28, 2024
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
DocGo, Inc. and Subsidiaries
New York, New York
Opinion on Internal Control over Financial Reporting
We have audited DocGo Inc. and Subsidiaries’ (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of DocGo, Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit 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 audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.
/s/
WithumSmith+Brown, PCWe have served as the Company’s auditor since 2020.
New York, New York
March 30, 2021
Urish Popeck & Co., LLC
Pittsburgh, PA
February 28, 2024
DocGo Inc. and Subsidiaries
CONSOLIDATED BALANCE
SHEETDECEMBER 31, 2020
| Assets: | | | |
| Current Assets: | | | | |
| Cash | | $ | 878,653 | |
| Prepaid expenses | | | 168,527 | |
| Other current assets | | | 350 | |
| | | | | |
| Total Current Assets | | | 1,047,530 | |
| | | | | |
| Cash and marketable securities held in Trust Account | | | 115,020,078 | |
| Total Assets | | $ | 116,067,608 | |
| | | | | |
| Liabilities and Stockholders’ Equity: | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 11,658 | |
| Franchise taxes payable | | | 78,192 | |
| Other accrued liabilities | | | 70,000 | |
| | | | | |
| Total Current Liabilities | | | 159,850 | |
| | | | | |
| Deferred underwriting commissions in connection with the initial public offering | | | 4,025,000 | |
| Total Liabilities | | | 4,184,850 | |
| | | | | |
| Commitments and Contingencies | | | | |
| Class A common stock, 10,688,275 shares subject to possible redemption at $10.00 per share | | | 106,882,750 | |
| | | | | |
| Stockholders’ Equity: | | | | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | | | - | |
| Class A common stock, $0.0001 par value; 50,000,000 shares authorized; 811,725 shares issued and outstanding (excluding 10,688,275 shares subject to possible redemption) | | | 81 | |
| Class B common stock, $0.0001 par value; 12,500,000 shares authorized; 2,875,000 shares issued and outstanding (1) (2) | | | 288 | |
| Additional paid-in capital | | | 5,148,390 | |
| Accumulated deficit | | | (148,751 | ) |
| Total Stockholders’ Equity | | | 5,000,008 | |
| Total Liabilities and Stockholders’ Equity | | $ | 116,067,608 | |
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| ASSETS | | | |
| | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 59,286,147 | | | $ | 157,335,323 | |
| Accounts receivable, net of allowance of $6,276,454 and $7,818,702 as of December 31, 2023 and December 31, 2022, respectively | 262,083,462 | | | 102,995,397 | |
| Assets held for sale | — | | | 4,480,344 | |
| Prepaid expenses and other current assets | 17,499,953 | | | 6,269,841 | |
| | | |
| Total current assets | 338,869,562 | | | 271,080,905 | |
| | | |
| Property and equipment, net | 16,835,484 | | | 21,258,175 | |
| Intangibles, net | 37,682,928 | | | 22,969,246 | |
| Goodwill | 47,539,929 | | | 38,900,413 | |
| Restricted cash | 12,931,839 | | | 6,773,751 | |
| Operating lease right-of-use assets | 9,580,535 | | | 9,074,277 | |
| Finance lease right-of-use assets | 12,003,919 | | | 9,039,663 | |
| Equity method investments | 553,573 | | | 597,977 | |
| Deferred tax assets | 11,888,539 | | | 9,957,967 | |
| Other assets | 2,565,649 | | | 3,625,254 | |
| Total assets | $ | 490,451,957 | | | $ | 393,277,628 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| | | |
| Current liabilities: | | | |
| Accounts payable | $ | 19,827,258 | | | $ | 21,582,866 | |
| Accrued liabilities | 91,340,609 | | | 31,573,031 | |
| Line of credit | 25,000,000 | | | — | |
| Notes payable, current | 28,131 | | | 664,913 | |
| Due to seller | 7,823,009 | | | 26,244,133 | |
| Contingent consideration | 19,792,982 | | | 10,555,540 | |
| Operating lease liability, current | 2,773,020 | | | 2,325,024 | |
| Liabilities held for sale | — | | | 4,480,344 | |
| Finance lease liability, current | 3,534,073 | | | 2,732,639 | |
| Total current liabilities | 170,119,082 | | | 100,158,490 | |
| | | |
| Notes payable, non-current | 41,586 | | | 1,236,601 | |
| Operating lease liability, non-current | 7,223,941 | | | 7,040,982 | |
| Finance lease liability, non-current | 7,896,392 | | | 5,914,164 | |
| Total liabilities | 185,281,001 | | | 114,350,237 | |
| | | |
| Commitments and contingencies | | | |
| | | |
| Stockholders’ equity: | | | |
| Common stock ($0.0001 par value; 500,000,000 shares authorized as of December 31, 2023 and December 31, 2022; 104,055,168 and 102,411,162 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively) | 10,406 | | | 10,241 | |
| Additional paid-in-capital | 320,693,866 | | | 301,451,435 | |
| Accumulated deficit | (21,394,310) | | | (28,972,216) | |
(1) | On October 14, 2020, the Sponsor effected a surrender of 431,250 Class B common shares to the Company for no consideration, resulting in a decrease in the total number of Class B common shares then outstanding from 3,737,500 to 3,306,250 (see Note 4). |
(2) | Effective November 16, 2020, the Sponsor forfeited 431,250 Class B common shares as a result of the underwriter waiving its over-allotment option (see Note 3). |
DocGo Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (CONTINUED)
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Accumulated other comprehensive income | 1,484,905 | | | 741,206 | |
| Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries | 300,794,867 | | | 273,230,666 | |
| Noncontrolling interests | 4,376,089 | | | 5,696,725 | |
| Total stockholders’ equity | 305,170,956 | | | 278,927,391 | |
| Total liabilities and stockholders’ equity | $ | 490,451,957 | | | $ | 393,277,628 | |
| | | |
The accompanying notes are an integral part of these financial statements.Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) TO DECEMBER 31, 2020
| Operating and formation costs | | $ | 168,830 | |
| Loss from operations | | | (168,830 | ) |
| | | | | |
| Other income: | | | | |
| Interest earned on marketable securities held in Trust Account | | | 20,078 | |
| | | | | |
| Net loss | | $ | (148,751 | ) |
| | | | | |
| Weighted average number of Class A common shares outstanding, basic and diluted | | | 11,500,000 | |
| | | | | |
| Basic and diluted net income per Class A common share | | $ | 0.00 | |
| | | | | |
| Weighted average number of Class B common shares outstanding, basic and diluted | | | 2,875,000 | |
| | | | | |
| Basic and diluted net loss per Class B common share | | $ | (0.06 | ) |
(1) | On October 14, 2020, the Sponsor effected a surrender of 431,250 Class B common shares to the Company for no consideration, resulting in a decrease in the total number of Class B common shares then outstanding from 3,737,500 to 3,306,250. All shares and associated amounts have been retroactively restated to reflect the share surrender (see Note 4). |
(2) | Effective November 16, 2020, the Sponsor forfeited 431,250 Class B common shares as a result of the underwriter waiving its over-allotment option (see Note 3). These forfeited shares are excluded from weighted average Class B common shares outstanding. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended
December 31, |
| | | | | | | 2023 | | 2022 | | 2021 |
| | | | | | | | | | | |
| Revenues, net | | | | | | | $ | 624,288,642 | | | $ | 440,515,746 | | | $ | 318,718,580 | |
| Expenses: | | | | | | | | | | | |
| Cost of revenues (exclusive of depreciation and amortization, which is shown separately below) | | | | | | | 428,906,225 | | | 285,794,520 | | | 208,971,062 | |
| Operating expenses: | | | | | | | | | | | |
| General and administrative | | | | | | | 137,152,512 | | | 103,403,416 | | | 74,892,828 | |
| Depreciation and amortization | | | | | | | 16,431,892 | | | 10,565,578 | | | 7,511,579 | |
| Legal and regulatory | | | | | | | 13,082,569 | | | 8,780,590 | | | 3,907,660 | |
| Technology and development | | | | | | | 10,858,724 | | | 5,384,853 | | | 3,320,183 | |
| Sales, advertising and marketing | | | | | | | 2,801,740 | | | 4,755,161 | | | 4,757,970 | |
| Total expenses | | | | | | | 609,233,662 | | | 418,684,118 | | | 303,361,282 | |
| Income from operations | | | | | | | 15,054,980 | | | 21,831,628 | | | 15,357,298 | |
| | | | | | | | | | | |
| Other income: | | | | | | | | | | | |
| Interest income (expense), net | | | | | | | 1,684,399 | | | 762,685 | | | (763,030) | |
| Gain on remeasurement of warrant liabilities | | | | | | | — | | | 1,127,388 | | | 5,199,496 | |
| Change in fair value of contingent liability | | | | | | | 1,437,525 | | | — | | | — | |
| (Loss) gain on equity method investments | | | | | | | (343,336) | | | 8,919 | | | (66,818) | |
| (Loss) gain on remeasurement of operating and finance leases | | | | | | | (866) | | | 1,388,273 | | | — | |
| Gain on bargain purchase | | | | | | | — | | | 1,593,612 | | | — | |
| Gain from PPP loan forgiveness | | | | | | | — | | | — | | | 142,667 | |
| Loss on disposal of fixed assets | | | | | | | (852,544) | | | (21,173) | | | (34,342) | |
| Goodwill impairment | | | | | | | — | | | (2,921,958) | | | — | |
| Other expense | | | | | | | (686,865) | | | (987,482) | | | (40,086) | |
| Total other income | | | | | | | 1,238,313 | | | 950,264 | | | 4,437,887 | |
| | | | | | | | | | | |
| Net income before (provision for) benefit from income tax | | | | | | | 16,293,293 | | | 22,781,892 | | | 19,795,185 | |
| (Provision for) benefit from income taxes | | | | | | | (6,244,965) | | | 7,961,321 | | | (615,697) | |
| Net income | | | | | | | 10,048,328 | | | 30,743,213 | | | 19,179,488 | |
| Net income (loss) attributable to noncontrolling interests | | | | | | | 3,189,873 | | | (3,841,285) | | | (4,564,270) | |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | | | | | | | 6,858,455 | | | 34,584,498 | | | 23,743,758 | |
| Other comprehensive income | | | | | | | | | | | |
| Foreign currency translation adjustment | | | | | | | 743,699 | | | 773,707 | | | 16,038 | |
| Total comprehensive income | | | | | | | $ | 7,602,154 | | | $ | 35,358,205 | | | $ | 23,759,796 | |
| | | | | | | | | | | |
| Net income per share attributable to DocGo Inc. and Subsidiaries - Basic | | | | | | | $ | 0.07 | | | $ | 0.34 | | | $ | 0.30 | |
| Weighted-average shares outstanding - Basic | | | | | | | 103,511,299 | | 101,228,369 | | 80,293,959 |
| | | | | | | | | | | |
| Net income per share attributable to DocGo Inc. and Subsidiaries - Diluted | | | | | | | $ | 0.06 | | | $ | 0.34 | | | $ | 0.25 | |
| Weighted-average shares outstanding - Diluted | | | | | | | 105,617,817 | | 102,975,831 | | 94,863,613 |
The accompanying notes are an integral part of these
financial statements.Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) TO DECEMBER 31, 2020
| | | Common Stock | | | Additional | | | | | | Total | |
| | | Class A | | | Class B | | | Paid-In | | | Accumulated | | | Stockholders’ | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Equity | |
| Balance – August 11, 2020 (inception) | | | - | | | $ | - | | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Issuance of Class B common shares to Sponsor (1) (2) | | | | | | | | | | | 3,306,250 | | | | 331 | | | | 24,669 | | | | - | | | | 25,000 | |
| Sale of 11,500,000 Units, net of underwriting discount and offering expenses | | | 11,500,000 | | | | 1,150 | | | | | | | | | | | | 108,205,359 | | | | | | | | 108,206,509 | |
| Sale of 2,533,333 private warrants | | | | | | | | | | | | | | | | | | | 3,800,000 | | | | | | | | 3,800,000 | |
| Forfeiture of Class B common stock | | | | | | | | | | | (431,250 | ) | | | (43 | ) | | | 43 | | | | | | | | - | |
| Class A common shares subject to possible redemption | | | (10,688,275 | ) | | | (1,069 | ) | | | | | | | | | | | (106,881,681 | ) | | | | | | | (106,882,750 | ) |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (148,751 | ) | | | (148,751 | ) |
| Balance – December 31, 2020 | | | 811,725 | | | $ | 81 | | | | 2,875,000 | | | $ | 288 | | | $ | 5,148,390 | | | $ | (148,751 | ) | | $ | 5,000,008 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series A Preferred Stock | | Class A Common Stock | | Class B Common Stock | | Additional
Paid-in-
Capital | | Accumulated
Deficit | | Accumulated
Other
Comprehensive
(Loss) Income | | Noncontrolling
Interests | | Total
Stockholders’
Equity |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | | | |
| Balance - December 31, 2020 | | 28,055 | | $ | — | | | 35,497 | | $ | — | | | 55,008 | | $ | — | | | $ | 142,346,852 | | | $ | (87,300,472) | | | $ | (48,539) | | | $ | 11,949,200 | | | $ | 66,947,041 | |
| Effect of reverse acquisition | | 18,099,548 | | — | | 22,900,719 | | — | | | 35,488,938 | | — | | — | | | — | | | — | | | — | | | — | |
| Conversion of share due to merger recapitalization | | (18,099,548) | | — | | (22,900,719) | | 7,649 | | | (35,488,938) | | — | | — | | | — | | | — | | | — | | | 7,649 | |
| Effect of reverse acquisition | | — | | | — | | | 76,489,205 | | 7,649 | | | — | | | — | | | 142,346,852 | | | (87,300,472) | | | (48,539) | | | 11,949,200 | | | 66,954,690 | |
| Share issued for services | | — | | | — | | | 171,608 | | 17 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17 | |
| Exercise of cashless warrants | | — | | | — | | | 1,817,507 | | 182 | | | — | | | — | | | — | | | — | | | — | | | — | | | 182 | |
| Issuance of shares net redemption and issuance costs of $9,566,304 | | — | | | — | | | 5,297,097 | | 530 | | | — | | | — | | | 43,404,558 | | | — | | | — | | | — | | | 43,405,088 | |
| PIPE, net of issuance costs of $10,396,554 | | — | | | — | | | 12,500,000 | | 1,250 | | | — | | | — | | | 114,602,318 | | | — | | | — | | | — | | | 114,603,568 | |
| Exercise of stock options | | — | | | — | | | 1,235,131 | | 123 | | | — | | | — | | | 628,469 | | | — | | | — | | | — | | | 628,592 | |
| Stock based compensation | | — | | | — | | | — | | — | | | — | | | — | | | 1,376,353 | | | — | | | — | | | — | | | 1,376,353 | |
| Fair value of Warrants from reverse acquisition | | — | | | — | | | — | | — | | | — | | | — | | | (18,717,998) | | | — | | | — | | | — | | | (18,717,998) | |
| UK Ltd. Shares purchase | | — | | | — | | | 50,192 | | 5 | | | — | | | — | | | (479,336) | | | — | | | — | | | (242,945) | | | (722,276) | |
| Sponsor Earnout shares | | — | | | — | | | 2,573,213 | | 257 | | | — | | | — | | | — | | | — | | | — | | | — | | | 257 | |
| Noncontrolling interest contribution | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 333,025 | | | 333,025 | |
| Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 16,038 | | | — | | | 16,038 | |
| Net loss attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,564,270) | | | (4,564,270) | |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 23,743,758 | | | — | | | — | | | 23,743,758 | |
| Balance - December 31, 2021 | | — | | $ | — | | | 100,133,953 | | $ | 10,013 | | | — | | $ | — | | | $ | 283,161,216 | | | $ | (63,556,714) | | | $ | (32,501) | | | $ | 7,475,010 | | | $ | 227,057,024 | |
| Equity cost | | — | | | — | | | — | | — | | | — | | | — | | | (19,570) | | | — | | | — | | | — | | | (19,570) | |
| Noncontrolling interest contribution | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | | 2,063,000 | | | 2,063,000 | |
| Common stock repurchased | | — | | | — | | | (536,839) | | (54) | | | — | | | — | | | (3,731,658) | | | — | | | — | | | — | | | (3,731,712) | |
| Exercise of stock options | | — | | | — | | | 1,053,401 | | 105 | | | — | | | — | | | 1,980,674 | | | — | | | — | | | — | | | 1,980,779 | |
| Cashless exercise of options | | — | | | — | | | 354,276 | | 36 | | | — | | | — | | | (230) | | | — | | | — | | | — | | | (194) | |
| Stock based compensation | | — | | | — | | | — | | — | | | — | | | — | | | 7,183,992 | | | — | | | — | | | — | | | 7,183,992 | |
| Restricted stock units | | — | | | — | | | — | | — | | | — | | | — | | | 495,579 | | | — | | | — | | | — | | | 495,579 | |
| Share warrants conversion | | — | | | — | | | 1,406,371 | | 141 | | | — | | | — | | | 12,381,432 | | | — | | | — | | | — | | | 12,381,573 | |
| Net loss attributable to noncontrolling interests | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | | (3,841,285) | | | (3,841,285) | |
| Foreign currency translation | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — | | | 773,707 | | | — | | | 773,707 | |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | | — | | | — | | | — | | — | | | — | | | — | | | — | | | 34,584,498 | | | — | | | — | | | 34,584,498 | |
| Balance - December 31, 2022 | | — | | $ | — | | | 102,411,162 | | $ | 10,241 | | | — | | $ | — | | | $ | 301,451,435 | | | $ | (28,972,216) | | | $ | 741,206 | | | $ | 5,696,725 | | | $ | 278,927,391 | |
| UK Ltd. restricted stock | | — | | | — | | | — | | — | | — | | | — | | | 167,175 | | — | | — | | — | | 167,175 | |
| Health liquidation | | — | | | — | | | — | | — | | — | | | — | | | — | | 70,284 | | — | | — | | 70,284 | |
| Acquisition of CRMS | | — | | | — | | | 117,330 | | 12 | | — | | | — | | | 1,000,000 | | — | | — | | — | | 1,000,012 | |
(1) | On October 14, 2020, the Sponsor effected a surrender of 431,250 Class B common shares to the Company for no consideration, resulting in a decrease in the total number of Class B common shares then outstanding from 3,737,500 to 3,306,250 (see Note 4). |
(2) | Effective November 16, 2020, the Sponsor forfeited 431,250 Class B common shares as a result of the underwriter waiving its over-allotment option (see Note 3). |
DocGo Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Acquisition of FMC NA | | — | | | — | | | 360,145 | | 36 | | — | | | — | | | (1,432,963) | | 649,167 | | — | | (3,213,956) | | (3,997,716) | |
| Acquisition of Healthworx | | — | | | — | | | — | | — | | — | | | — | | | — | | — | | — | | (1,296,553) | | (1,296,553) | |
| Exercise of stock options | | — | | | — | | | 465,429 | | 46 | | — | | | — | | | 1,413,962 | | — | | — | | — | | 1,414,008 | |
| Cashless exercise of options | | — | | | — | | | 6,374 | | 1 | | — | | | — | | | (1) | | — | | — | | — | | — | |
| Shares withheld for taxes | | — | | | — | | | (280,654) | | (27) | | — | | | — | | | (2,308,927) | | — | | — | | — | | (2,308,954) | |
| Stock-based compensation | | — | | | — | | | 975,382 | | 97 | | — | | | — | | | 20,403,185 | | — | | — | | — | | 20,403,282 | |
| Net loss attributable to noncontrolling interests | | — | | | — | | | — | | — | | — | | | — | | | — | | — | | — | | 3,189,873 | | 3,189,873 | |
| Foreign currency translation | | — | | | — | | | — | | — | | — | | | — | | | — | | — | | 743,699 | | — | | 743,699 | |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | | — | | | — | | | — | | — | | — | | | — | | | — | | 6,858,455 | | — | | — | | 6,858,455 | |
| Balance - December 31, 2023 | | — | | $ | — | | | 104,055,168 | | $ | 10,406 | | | — | | $ | — | | | $ | 320,693,866 | | | $ | (21,394,310) | | | $ | 1,484,905 | | | $ | 4,376,089 | | | $ | 305,170,956 | |
The accompanying notes are an integral part of these
financial statements.Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) TO DECEMBER 31, 2020
| Cash Flows from Operating Activities: | | | |
| Net loss | | $ | (148,751 | ) |
| | | | | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
| Interest earned on marketable securities held in Trust Account | | | (20,078 | ) |
| Changes in operating assets and liabilities: | | | | |
| Prepaid expenses | | | (168,527 | ) |
| Other current assets | | | (350 | ) |
| Accounts payable | | | 11,658 | |
| Franchise taxes payable | | | 78,192 | |
| Net cash used in operating activities | | | (247,856 | ) |
| | | | | |
| Cash flow from investing activities: | | | | |
| Deposit of cash into Trust Account | | | (115,000,000 | ) |
| Net cash used in investing activities | | | (115,000,000 | ) |
| | | | | |
| Cash flow from financing activities: | | | | |
| Proceeds from sale of Units, net of underwriting discounts paid | | | 112,700,000 | |
| Proceeds from sale of Private Warrants | | | 3,800,000 | |
| Proceeds from related party note payable | | | 71,473 | |
| Repayment of related party note payable | | | (71,473 | ) |
| Payment of offering costs | | | (373,491 | ) |
| Net cash provided by financing activities | | | 116,126,509 | |
| | | | | |
| Net change in cash | | | 878,653 | |
| Cash - beginning of the period | | | - | |
| Cash - end of the period | | $ | 878,653 | |
| | | | | |
| Supplemental disclosure of noncash investing and financing activities: | | | | |
| Deferred offering costs paid by related party in exchange for issuance of Class B common stock | | $ | 25,000 | |
| Deferred offering costs included in other accrued liabilities | | $ | 70,000 | |
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2023 | | 2022 | | 2021 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | |
| Net income | $ | 10,048,328 | | | $ | 30,743,213 | | | $ | 19,179,488 | |
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | |
| | | | | |
| Depreciation of property and equipment | 4,829,780 | | | 4,114,346 | | | 2,312,437 | |
| Amortization of intangible assets | 5,249,358 | | | 3,214,814 | | | 1,845,193 | |
| Amortization of finance lease right-of-use assets | 6,352,754 | | | 3,236,418 | | | 2,913,925 | |
| Loss on disposal of assets | 852,544 | | | 21,173 | | | 34,342 | |
| Deferred income tax | (1,981,519) | | | (9,957,967) | | ) | — | |
| Gain from PPP loan forgiveness | — | | | — | | | (142,667) | |
| Loss (gain) on equity method investments | 343,336 | | | (8,919) | | ) | 66,818 | |
| Bad debt expense | 3,601,520 | | | 3,815,187 | | | 4,467,956 | |
| Stock-based compensation | 20,969,174 | | | 8,054,571 | | | 1,376,353 | |
| Loss on remeasurement of operating and finance leases | 866 | | | (1,388,273) | | ) | — | |
| Loss on liquidation of business | 70,284 | | | — | | | — | |
| Gain on remeasurement of warrant liabilities | — | | | (1,127,388) | | | (5,199,496) | |
| Gain on bargain purchase | — | | | (1,593,612) | | | — | |
| Goodwill impairment | — | | | 2,921,958 | | | — | |
| Change in fair value of contingent consideration | (1,437,525) | | | — | | | — | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts receivable | (160,524,934) | | | (8,415,793) | | | (57,996,613) | |
| Asset held for sale | — | | | 190,312 | | | — | |
| Prepaid expenses and other current assets | (10,843,890) | | | (4,181,035) | | | (961,165) | |
| Other assets | 1,059,605 | | | 1,557,655 | | | (2,490,564) | |
| Accounts payable | (1,780,403) | | | 3,637,305 | | | 11,879,850 | |
| Accrued liabilities | 58,968,844 | | | (5,964,064) | | | 20,766,723 | |
| Net cash (used in) provided by operating activities | (64,221,878) | | | 28,869,901 | | | (1,947,420) | |
| | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
| Acquisition of property and equipment | (7,584,561) | | | (3,198,234) | | | (4,808,409) | |
| Acquisition of intangibles | (2,541,661) | | | (2,299,558) | | | (1,849,136) | |
| Acquisition of businesses | (20,203,464) | | | (32,953,179) | | | (1,300,000) | |
| Equity method investments | (298,932) | | | — | | | (655,876) | |
| Proceeds from disposal of property and equipment | 747,088 | | | 3,000 | | | 74,740 | |
| Acquisition of leased assets | — | | | — | | | (50,504) | |
| Net cash used in investing activities | (29,881,530) | | | (38,447,971) | | | (8,589,185) | |
| | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
| Proceeds from revolving credit line | 25,000,000 | | | — | | | 8,000,000 | |
| Repayments of revolving credit line | — | | | (25,881) | | | (8,000,000) | |
| Repayments of notes payable | (25,926) | | | (925,151) | | | (604,826) | |
| Due to seller | (13,590,382) | | | (2,535,521) | | | (595,528) | |
| Earnout payments on contingent liabilities | (5,266,681) | | | — | | | — | |
| Noncontrolling interest contributions | — | | | 2,063,000 | | | 333,025 | |
| Proceeds from exercise of stock options | 1,581,183 | | | 1,980,585 | | | 628,592 | |
| Acquisition of UK Ltd remaining 20% shares | — | | | — | | | (479,331) | |
DocGo Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| | | | | | | | | | | | | | | | | |
| Payments for taxes related to shares withheld for employee taxes | (2,308,954) | | | — | | | — | |
| Common stock repurchased | — | | | (3,731,712) | | | — | |
| Equity costs | — | | | (19,570) | | | — | |
| Payments on obligations under finance lease | (4,270,553) | | | (2,985,568) | | | (2,216,309) | |
| Issuance costs related to merger recapitalization | — | | | — | | | (19,961,460) | |
| Proceeds from issuance of Class A common stock, net of transaction cost | — | | | — | | | 178,102,313 | |
| Net cash provided (used) in financing activities | 1,118,687 | | | (6,179,818) | | | 155,206,476 | |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents | 1,093,633 | | | 761,232 | | | (21,414) | |
| | | | | |
| Net (decrease) increase in cash and restricted cash | (91,891,088) | | | (14,996,656) | | | 144,648,457 | |
| Cash and restricted cash at beginning of period | 164,109,074 | | | 179,105,730 | | | 34,457,273 | |
| Cash and restricted cash at end of period | $ | 72,217,986 | | | $ | 164,109,074 | | | $ | 179,105,730 | |
| | | | | |
| | | | | |
| Year Ended
December 31, |
| 2023 | | 2022 | | 2021 |
| Supplemental disclosure of cash and non-cash transactions: | | | | | |
| | | | | |
| Cash paid for interest | $ | 250,100 | | | $ | 197,005 | | | $ | 315,272 | |
| | | | | |
| Cash paid for interest on finance lease liabilities | $ | 600,239 | | | $ | 559,596 | | | $ | 525,476 | |
| | | | | |
| Cash paid for income taxes | $ | 4,251,658 | | | $ | 1,505,235 | | | $ | 615,697 | |
| | | | | |
| Right-of-use assets obtained in exchange for lease liabilities | $ | 7,621,538 | | | $ | 5,035,201 | | | $ | 5,271,662 | |
| | | | | |
| Fixed assets acquired in exchange for notes payable | $ | — | | | $ | 923,377 | | | $ | 1,113,102 | |
| | | | | |
| Gain from PPP loan forgiveness | $ | — | | | $ | — | | | $ | 142,667 | |
| | | | | |
| Due to seller non-cash | $ | — | | | $ | — | | | $ | 434,494 | |
| | | | | |
| Acquisition of remaining FMC NA through due to seller and issuance of stock | $ | 7,000,000 | | | $ | — | | | $ | — | |
| | | | | |
| Acquisition of CRMS through issuance of stock | $ | 1,000,000 | | | $ | — | | | $ | — | |
| | | | | |
| Receivable exchanged for trade credits | $ | 1,500,000 | | | $ | — | | | $ | — | |
| | | | | |
| Reconciliation of cash and restricted cash | | | | | |
| Cash | $ | 59,286,147 | | | $ | 157,335,323 | | | $ | 175,537,221 | |
| | | | | |
| Restricted cash | 12,931,839 | | | 6,773,751 | | | 3,568,509 | |
| | | | | |
| Total cash and restricted cash shown in statement of cash flows | $ | 72,217,986 | | | $ | 164,109,074 | | | $ | 179,105,730 | |
The accompanying notes are an integral part of these financial statements.Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (AUGUST 11, 2020) TO DECEMBER 31, 2020
NOTE
.
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONSDescription of Organization and Business Operations
On November 5, 2021, DocGo Inc., a Delaware corporation, then known as Motion Acquisition Corp.
(the(collectively with its subsidiaries, the “Company”)
is, consummated a
blank check company incorporated in Delaware on August 11, 2020. The Company’s sponsor is Motion Acquisition LLC, a Delaware limited liability company (the “Sponsor”). The Company’s fiscal year end is December 31.Business Purpose
The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. The Company is not limitedpursuant to a particular industry or geographic region for purposesthat certain Agreement and Plan of consummating a business combination. The Company has neither engaged in any operations nor generated revenue to date.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its initial public offering of units (the “Initial Public Offering”), although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward completing a business combination. Furthermore, there is no assurance that the Company will be able to successfully complete a business combination.
Proposed Business Combination
OnMerger, dated March 8, 2021 (the “Merger Agreement”), by and among the Company, entered intoMotion Merger Sub Corp., a merger agreement with Ambulnz, Inc. The proposed business combination is subject to the approvalDelaware corporation and a direct wholly owned subsidiary of both companies’ stockholders, obtaining the required regulatory approvals, and the fulfillment of other conditions. See Note 9 for a further description of this proposed business combination.
Financing
The registration statement for the Company’s Initial Public Offering was declared effective on October 14, 2020. On October 19, 2020, the Company consummated its Initial Public Offering of 11,500,000 units (the “Units”(“Merger Sub”), and with respectAmbulnz, Inc., a Delaware corporation (“Ambulnz”). The transactions contemplated by the Merger Agreement are referred to herein as the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $115.0 million, and incurring offering costs of approximately $6.7 million, inclusive of $4.0 million in deferred underwriting commissions (Note 3).
Simultaneously“Business Combination.” In connection with the closing of the Initial Public Offering,Business Combination, the Company consummatedchanged its name from Motion Acquisition Corp. to DocGo Inc.
As contemplated by the private placementMerger Agreement and as described in the Company’s definitive proxy statement/consent solicitation/prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 14, 2021, Merger Sub merged with and into Ambulnz, with Ambulnz continuing as the surviving corporation. As a result of the Business Combination, Ambulnz became a wholly owned subsidiary of the Company and each share of Series A preferred stock of Ambulnz, no par value, Class A common stock of Ambulnz, no par value, and Class B common stock of Ambulnz, no par value, was cancelled and converted into the right to receive a portion of the merger consideration issuable as common stock of the Company, par value $0.0001 (“Private Placement”Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement.
In connection with the Business Combination, the Company raised $158,000,000 of
2,533,333 warrants (each, a “Private Placement Warrant”net proceeds. This amount consisted of (i) $43,400,000 of cash held in the Company’s trust account established in connection with its initial public offering, net of the Company’s transaction costs and
collectively,underwriters’ fees of $9,600,000, and (ii) $114,600,000 of cash from the
“Private Placement Warrants”)sale of shares of Common Stock to certain investors at a price of
$1.50$10.00 per
Private Placement Warrantshare in a private placement
that closed concurrently with the Business Combination (the “PIPE Financing”), net of $10,400,000 in transaction costs in connection with the PIPE Financing. These transaction costs consisted of banking, legal, and other professional fees, which were recorded as a reduction to
the Sponsor, generating gross proceeds of $3.8 million (Note 4).additional paid-in capital.
The Business
The Company
granted the underwriteris a
45-day option from the date of Initial Public Offeringmobile healthcare services company that uses proprietary dispatch and communication technology to
purchase uphelp provide quality mobile, in-person medical treatment directly to
1,725,000 additional Units to cover over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. In November 2020, the underwriter advised the Company that it had elected to not exercise the over-allotment option (Note 3).Trust Account
Upon the closing of the Initial Public Offering and the Private Placement, $115.0 million ($10.00 per Unit) of the net proceeds of the sale of the Unitspatients in the Initial Public Offeringcomfort of their homes, workplaces and Private Placement Warrantsother non-traditional locations and healthcare transportation in the Private Placement were placed in a trust account (“Trust Account”) locatedmajor metropolitan cities in the United States (“U.S.”) and the United Kingdom (“U.K.”).
Ambulnz was originally formed in Delaware on June 17, 2015 as Ambulnz, LLC, a limited liability company. On November 1, 2017, with
Continental Stock Transfer & Trust Company acting as trustee. The proceeds heldan effective date of January 1, 2017, Ambulnz converted its legal structure from a limited liability company to a C-corporation and changed its name to Ambulnz, Inc. Ambulnz is the sole owner of Ambulnz Holdings, LLC (“Holdings”), which was formed in the
Trust Account will either be heldstate of Delaware on August 5, 2015 as
cash or invested onlya limited liability company. Holdings is the owner of multiple operating entities incorporated in
U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account as described below.
Pursuant to stock exchange listing rules, the Company must complete an initial business combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets heldvarious states in the Trust Account (as defined below) (excludingU.S. as well as within England and Wales, U.K.
The Company conducts business in three operating segments: Mobile Health Services, Transportation Services and Corporate. Mobile Health Services include a wide variety of healthcare services performed at homes, offices and other locations and event services such as on-site healthcare support at sporting events and concerts. This segment also provides total care management solutions to large, typically underserved, population groups primarily through arrangements with municipalities, which include healthcare services as well as ancillary services, such as shelter. Transportation Services encompass both emergency response and non-emergency transport services. Non-emergency transport services include ambulance transports and wheelchair transports. Net revenue from Transportation Services is derived from the
deferred underwriting commissionstransportation of patients based on billings to third party payors and
taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial business combination. However, the Company will only complete a business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).healthcare facilities. The Company’s amendedCorporate segment primarily represents shared services and restated certificatepersonnel that support both the Transportation Services and Mobile Health Services segments. It contains operating expenses such as information technology costs, certain insurance costs and the compensation costs of incorporation provides that, other than the withdrawal of interest earned on the funds that may be released to the Company to pay taxes, none of the funds held in the Trust Account will be released until the earliest of: (i) the completion of the business combination; (ii) the redemption of any of Public Shares to its holders (the “Public Stockholders”) properly tendered in connection with a stockholder vote to amend certain provisionssenior and executive leadership. None of the Company’s amended and restated certificaterevenues or cost of incorporation prior to an initial business combination and (iii) the redemption of 100% of the Public Shares if the Company does not complete a business combinationrevenues are reported within the Combination Period (as defined below).
The Company, having signed a definitive agreement for an initial business combination (Note 9), will either (i) seek stockholder approvalCorporate segment.
DocGo Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of
whether they vote for or against the business combination or do not vote at all, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, or (ii) provide the Public Stockholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes. As a result, such redeemable common stock was recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with FinancialSignificant Accounting
Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Except as required by applicable law, the decision as to whether the Company will seek stockholder approval of the business combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval. If the Company seeks stockholder approval, it will complete its business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 either immediately prior to or upon consummation of the Company’s initial business combination. In such case, the Company would not proceed with the redemption of its Public Shares and the related business combination, and instead may search for an alternate business combination.The Company will have 24 months from the closing of the Initial Public Offering, or October 19, 2022, to complete its initial business combination (the “Combination Period”). If the Company does not complete a business combination within this period of time (and stockholders do not approve an amendment to the Company’s amended and restated certificate of incorporation to extend this date), it will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Company’s Sponsor and the Company’s officers and directors have entered into agreements with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their Founder Shares (as defined below) in the event the Company does not complete a business combination within the required time period; provided, however, if the Sponsor or any of the Company’s officers, directors or affiliates acquire Public Shares after the Initial Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a business combination within the Combination Period. In the event of such distribution, it is possible that the per share value in the Trust Account will be less than the Initial Public Offering price per Unit of $10.00.
Policies
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
Presentation
The accompanying financial statementsConsolidated Financial Statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of AmericaU.S. (“U.S. GAAP”) and pursuant to theapplicable rules and regulations of the SecuritiesSEC.
Principles of Consolidation
The Consolidated Financial Statements include the accounts and
Exchange Commission operations of DocGo Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests on the Consolidated Financial Statements represent a portion of consolidated joint ventures and a variable interest entity in which the Company does not have direct equity ownership. Certain amounts in the prior years’ consolidated statements of changes in stockholders’ equity and statements of cash flows have been reclassified to conform to the current year presentation.
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, the Company was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Ambulnz stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Ambulnz. The shares and corresponding capital amounts and earnings per share available for common stockholders prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio (645.1452 to 1) established in the Business Combination. Further, Ambulnz was determined to be the accounting acquirer in the transaction, and as such, the acquisition is considered a business combination under Accounting Standards Codification (“SEC”ASC”) Topic 805, Business Combinations (“ASC 805”) and was accounted for using the acquisition method of accounting.
In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.
The Company holds variable interests in legal entities, which contract with physicians and other health professionals in order to provide services to the Company. These entities are considered VIEs since they do not have sufficient equity to finance their activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it is the primary beneficiary, meaning it has (1) the power to direct the activities of the VIE that most significantly impacts the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of its VIEs and funds and absorbs all losses of its VIEs. The Company has determined that it is the primary beneficiary of its VIEs and therefore appropriately consolidates its VIEs.
Net loss for the Company’s VIEs were $235,976, $373,456 and $122,982 for the years ended December 31, 2023, 2022 and 2021, respectively. The total assets amounted to $4,364,274 and $610,553 on December 31, 2023 and 2022, respectively. Total liabilities were $4,811,857 and $320,424 on December 31, 2023 and 2022, respectively. The Company’s VIEs total stockholders’ deficit were $447,583 and $290,130 on December 31, 2023 and 2022, respectively.
Foreign Currency
The Company’s functional currency is the U.S. dollar. The functional currency of our foreign operation is the British pound. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date, except for equity accounts which are translated at historical rates. The Consolidated Statements of Operations and Comprehensive Income are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment for the years ended December 31, 2023, 2022 and 2021 were $743,699, $773,707, and $16,038, respectively.
DocGo Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The preparation of
the financial statements
in conformity with GAAP requires
the Company’s management to make estimates and assumptions that affect the reported amounts of assets,
and liabilities and
expenses and the disclosure of contingent assets and liabilities
at the date of thein its financial statements and the reported amounts of
revenues and expenses during the reporting period.
Making The most significant estimates requires management to exercise significant judgment. It is at least reasonably possible thatin the estimate of the effect of a condition, situation or set of circumstances that existed at the date of theCompany’s financial statements relate to revenue recognition related to the allowance for doubtful accounts, stock-based compensation, calculations related to the incremental borrowing rate for the Company’s lease agreements, estimates related to ongoing lease terms, software development costs, impairment of long-lived assets, goodwill and indefinite-lived intangible assets, business combinations, reserve for losses within the Company’s insurance deductibles, income taxes, and deferred income tax. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which management considered in formulating its estimate, could change inform the near term due to one or more future confirming events. Accordingly,basis for making judgments about the actual results could differ significantly from those estimates.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a)carrying values of assets and liabilities and the Securities Actrecording of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companiesexpenses that are not emerging growth companiesreadily apparent from other sources.
Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations could be adversely affected.
Self-Insurance Reserves
The Company self-insures a number of risks, including, but not limited to, workers’ compensation, general liability, auto liability and certain employee-related healthcare benefits. Standard actuarial procedures and data analysis are used to estimate the liabilities associated with these risks on an undiscounted basis. The recorded liabilities reflect the ultimate cost for claims incurred but not being requiredpaid and any estimable administrative run-out expenses related to complythe processing of these outstanding claim payments. On a regular basis, the liabilities are evaluated for appropriateness with claims reserve valuations. To limit exposure to some risks, the auditor attestation requirementsCompany maintains insurance coverage with varying limits and retentions, including stop-loss insurance coverage for workers’ compensation, general liability and auto liability.
Concentration of Section 404Credit Risk and Off-Balance Sheet Risk
The Company is potentially subject to concentration of credit risk with respect to its cash, cash equivalents and restricted cash, which the Company attempts to minimize by maintaining cash, cash equivalents and restricted cash with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to significant credit risk due to the financial strength of the
Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensationdepository institutions in
its periodic reports and proxy statements, and exemptions fromwhich the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act)funds are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.held. The Company has elected notno financial instruments with off-balance sheet risk of loss.
Major Customers
The Company had one customer that accounted for approximately 40% of revenues and 42% of net accounts receivable and another customer that accounted for 21% of revenues and 40% of net accounts receivable for the year ended December 31, 2023.
The Company had one customer that accounted for approximately 35% of revenues and 45% of net accounts receivable for the year ended December 31, 2022.
The Company had one customer that accounted for approximately 23% of revenues and 26% of net accounts receivable and another customer that accounted for 26% of revenues and 24% of net accounts receivable for the year ended December 31, 2021.
DocGo Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Major Vendor
The Company had one vendor that accounted for approximately 14%, 12% and 11% of total cost for the years ended December 31, 2023, 2022 and 2021, respectively. The Company expects to opt outmaintain this relationship with the vendor and believes the services provided from this vendor are available from alternatives sources.
Reclassifications
Certain reclassifications of
such extended transition period which means that when a standard is issuedamounts previously reported have been made to the accompanying Consolidated Financial Statements to maintain consistency between periods presented. The reclassifications had no impact on previously reported net income or
revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.retained earnings.
Cash and Cash Equivalents
Cash consists of proceeds from the sale of the Private Placement Warrants held outside of the Trust Account which may be used to pay for operating expenses, including expenses associated with identifying target businesses and consummating an initial business combination. The Company considers cash equivalents to beinclude all short-termhighly liquid investments with an original maturity of three months or less when purchased.less. The Company didmaintains most of its cash and cash equivalents with financial institutions in the U.S. The Company’s accounts at financial institutions in the U.S. are insured by the FDIC and are in excess of FDIC insured limits.The Company had cash balances of approximately $3,699,793 and $8,125,966 with foreign financial institutions on December 31, 2023 and 2022, respectively.
Restricted Cash
Cash and cash equivalents subject to contractual restrictions and not have anyreadily available are classified as restricted cash in the Consolidated Balance Sheets. Restricted cash is classified as either a current or non-current asset depending on the restriction period. The Company is required to pledge or otherwise restrict a portion of cash and cash equivalents as collateral for self-insurance exposures, transportation equipment leases and a standby letter of credit as required by its insurance carrier (see Notes 9 and 15).
The Company utilizes a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, automobile liability, general liability and professional liability. Liabilities associated with the risks that are retained by the Company within its high deductible limits are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions. The Company has commercial insurance in place for catastrophic claims above its deductible limits.
ARM Insurance, Inc. a Vermont-based wholly-owned captive insurance subsidiary of the Company, charges the operating subsidiaries premiums to insure the retained workers’ compensation, automobile liability, general liability and professional liability exposures. Pursuant to Vermont insurance regulations, ARM Insurance, Inc. maintains certain levels of cash and cash equivalents related to its self-insurance exposures.
The Company also maintains certain cash balances related to its insurance programs, which are held in a self-depleting trust and restricted as to withdrawal or use by the Company other than to pay or settle self-insured claims and costs. These amounts are reflected in “Restricted cash” in the accompanying Consolidated Balance Sheets.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:
Level 1: Quoted prices in active markets for identical assets or liabilities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31,
2020.Concentration of Credit Risk
Financial2023, December 31, 2022 and December 31, 2021 . For certain financial instruments, that potentially subjectincluding cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, restricted cash, accounts payable and accrued expenses, and due to seller, the carrying amounts approximate their fair values as it is short term in nature. The notes payable are presented at their carrying value, which based on borrowing rates currently available to the Company to concentration of credit risk consist of cash accountsfor loans with similar terms, approximates its fair values.
Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions in
a financial institution which, at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. At December 31, 2020, the assets heldmeasuring fair value. Future changes in
the Trust Account were substantially all held in U.S. Treasury Bills.
Fair Value of Financial Instruments
The fair value of the Company’scontingent financial milestone consideration, as a result of changes in significant inputs such as the discount rate and estimated probabilities of financial milestone achievements, could have a material effect on the Consolidated Statements of Operations and Comprehensive Income and Consolidated Balance Sheets in the period of the change.
During the year ended December 31, 2022, the Company recorded $4,000,000 in contingent consideration in connection with the acquisition by Holdings of Ryan Bros. Fort Atkinson, LLC (“Ryan Brothers”) to be paid based on the completion of certain performance obligations over a 24-month period. During the year, the Company recorded a change in fair value of contingent consideration in the amount of $338,956 and made a payment of $1,840,026. As of December 31, 2023, the remaining contingent liability balance was $1,821,018 (see Note 4).
In connection with the acquisition of Exceptional Medical Transportation, LLC (“Exceptional”), the Company also agreed to pay up to $2,000,000 in contingent consideration upon meeting certain performance conditions within two years of the closing date of such acquisition. During the year, the Company recorded a change in fair value of contingent consideration in the amount of $374,044 and made a payment of $426,655. The estimated contingent consideration amount for Exceptional was $279,301 and $1,080,000 as of December 31, 2023 and December 31, 2022 , respectively (see Note 4).
During the year ended December 31, 2022, the Company also recorded $2,475,540 estimated contingent consideration in connection with the acquisition by Holdings of Location Medical Services, LLC (“LMS”) to be paid upon LMS meeting certain performance conditions in 2023. The Company recorded a change in fair value of contingent consideration in the amount of $2,000,312 and recorded $129,599 as a result of foreign exchange movement. The outstanding balance as of December 31, 2023 was $604,827 (see Note 4).
In connection with the acquisition by Holdings of Government Medical Services, LLC (“GMS”), the Company recorded $3,000,000 in contingent consideration to be paid upon GMS meeting certain performance conditions within a year of the closing date of such acquisition. During the year, the Company made a $3,000,000 payment to settle the contingent liability balance as of December 31, 2023. As of December 31, 2022, there was a balance of $3,000,000 (see Note 4).
In connection with the acquisition by Holdings of Cardiac RMS, LLC (“CRMS”), the Company recorded $15,822,190 in contingent consideration to be paid out over 36 months for the remaining 49% equity of CRMS, based on CRMS’ attainment of full-year EBITDA targets. The Company recorded a change in fair value of contingent consideration in the amount of $1,265,645 for the year ended December 31, 2023. As of December 31, 2023, there was a remaining contingent liability balance of $17,087,835 (see Note 4).
Accounts Receivable
The Company contracts with hospitals, healthcare facilities, businesses, state and local government entities, and insurance providers to provide Mobile Health Services and to transport patients at specified rates. These rates are either on a per procedure or per transport basis, or on an hourly or daily basis. Accounts receivable consist of billings for transportation and healthcare services provided to patients. Billings typically are either paid or settled on the patient’s behalf by health insurance providers, managed care organizations, treatment facilities, government sponsored programs or businesses, or by patients directly. Accounts receivable are net of insurance provider contractual allowances, which are estimated at the time
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of billing based on contractual terms or other arrangements. Accounts receivable are periodically evaluated for collectability based on past credit history with payors and their current financial condition. Changes in the estimated collectability of accounts receivable are recorded in the results of operations for the period in which the estimate is revised. Accounts receivable deemed uncollectible are offset against the allowance for uncollectible accounts. The Company generally does not require collateral for accounts receivable.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. When an item is sold or retired, the costs and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is recorded in operating expenses in the Consolidated Statements of Operations and Comprehensive Income. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the respective assets. A summary of estimated useful lives is as follows:
| | | | | | | | |
| | Estimated Useful Life |
| Buildings | | 39 years |
| Office equipment and furniture | | 3 years |
| Vehicles | | 5-8 years |
| Medical equipment | | 5 years |
| Leasehold improvements | | Shorter of useful life of asset or lease term |
Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures that improve an asset or extend its estimated useful life are capitalized.
Software Development Costs
Costs incurred during the preliminary project stage, maintenance costs and routine updates and enhancements of products are expensed as incurred. The Company capitalizes software development costs intended for internal use in accordance with ASC 350-40, Internal-Use Software. Costs incurred in developing the application of its software and costs incurred to upgrade or enhance product functionalities are capitalized when it is probable that the expenses would result in future economic benefits to the Company and the functionalities and enhancements are used for their intended purpose. Capitalized software costs are amortized over its useful life.
Estimated useful life of software development activities are reviewed annually or whenever events or changes in circumstances indicate that intangible assets may be impaired and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades or enhancements to the existing functionality.
Business Combinations
The Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”), which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including noncontrolling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill.
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expenses acquisition-related costs and fees associated with business combinations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated fair value of net assets to be acquired, including the allocation of the fair value to identifiable assets and liabilities, is determined using established valuation techniques. Management uses assumptions based on historical knowledge of the business and projected financial information of the target. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of the recorded amount of long-lived assets, primarily property and equipment and finite-lived intangible assets, whenever events or changes in circumstance indicate that the recorded amount of an asset may not be fully recoverable. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. If an asset is determined to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets targeted for disposal are reported at the lower of the carrying amount or fair value less cost to sell.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed in a business combination. Goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment at the reporting unit level annually on December 31 or more frequently if events or changes in circumstances indicate that it is more likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of the Company’s financial performance; or (iv) a sustained decrease in the Company’s market capitalization, as indicated by its publicly quoted share price, below its net book value.
In 2022, the Company reassigned all the assets at Ambulnz Health, LLC (“Health”) to assets held for sale as a result of an assignment for the benefit of creditors (“ABC”) (see Note 5). The Company also recognized a non-cash charge of $2,921,958 for Goodwill impairment for the year ended December 31, 2022 in the Consolidated Statements of Operations and Comprehensive Income.
Line of Credit
The costs associated with the Company’s line of credit are deferred and recognized over the term of the line of credit as interest expense.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to interest rate, market or foreign currency risks. The Company evaluates its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.
Related Party Transactions
The Company defines related parties as affiliates of the company, entities for which investments are accounted for by the equity method, trusts for the benefit of employees, principal owners (beneficial owners of more than 10% of the voting interest), management, and members of immediate families of principal owners or management, other parties with which the Company may deal with if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Related party transactions are recorded within operating expenses in the Consolidated Statements of Operations and Comprehensive Income. For details regarding the related party transactions that occurred during the years ended December 31, 2023, 2022 and 2021 refer to Note 17.
Revenue Recognition
On January 1, 2019, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
To determine revenue recognition for contractual arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when (or as) the relevant performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company provides to the customer.
The Company generates revenues from the provision of (1) Mobile Health Services and (2) Transportation Services. Since the customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled, the Company satisfies performance obligations immediately. The Company has utilized the “right to invoice” expedient, which allows an entity to recognize revenue in the amount of consideration to which the entity has the right to invoice when the amount that the Company has the right to invoice corresponds directly to the value transferred to the customer. Revenues are recorded net of an estimated contractual allowances for claims subject to contracts with responsible paying entities. The Company estimates contractual allowances at the time of billing based on contractual terms, historical collections or other arrangements. All transaction prices are fixed and determinable, which includes a fixed base rate, fixed mileage rate and an evaluation of historical collections by each payor.
Nature of Our Services
Revenue is primarily derived from:
i.Mobile Health Services: These services include a wide variety of healthcare services performed at homes, offices and other locations and event services such as on-site healthcare support at sporting events and concerts. This segment also provides total care management solutions to large, typically underserved population groups, primarily through arrangements with municipalities, which include healthcare services as well as ancillary services, such as shelter.
ii.Transportation Services: These services encompass both emergency response and non-emergency transport services. Non-emergency transport services include ambulance transports and wheelchair transports. Net revenue from Transportation Services is derived from the transportation of patients based on billings to third party payors and healthcare facilities.
For Mobile Health Services, the performance of the services and any related support activities in the majority of the Company’s contracts are a single performance obligation under ASC 606. Mobile Health Services are typically billed based on a fixed rate (i.e., time and materials separately or combined) fee structure taking into consideration staff and materials utilized. The Company concluded that Transportation Services and any related support activities are a single performance obligation under ASC 606. The transaction price is determined by the fixed rate usage-based fees or fixed fees which are agreed upon in the Company’s executed contracts.
As the performance associated with such services is known and quantifiable at the end of a period in which the services occurred (i.e., monthly or quarterly), revenues are typically recognized in the respective period performed. The typical billing cycle for Mobile Health Services and Transportation Services is same day to five days with payments generally due within 30 days. For large municipal customers in the Mobile Health Services segment, invoices are generally produced on a monthly basis, in arrears, and are generally due within 30-60 days of when they are submitted to the customer. For Transportation Services, the Company estimates the amount unbilled at month end and recognizes such amounts as revenue, based on available data and customer history. The majority of the Company’s Mobile Health Services and Transportation Services each represent a single performance obligation. Therefore, allocation is not necessary as the transaction price (fees) for the services provided is standard and explicitly stated in the contractual fee schedule and/or invoice. For contracts with multiple distinct performance obligations, the Company allocates the transaction price based on their agreed-upon price to the individually identified performance obligations in the contract. The Company monitors and evaluates all contracts on a case-by-case basis to determine if multiple performance obligations are present in a contractual arrangement.
For Mobile Health Services, the customer also generally simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled. Therefore, the Company satisfies performance obligations at the same time. For certain Mobile Health Services that have a fixed fee arrangement and are provided over time, revenue is recognized over time as the services are provided to the customer. For Transportation Services, since the customer
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled, the Company satisfies performance obligations at the same time. For Transportation Services, where the customer pays fixed rate usage-based fees, the actual usage in the period represents the best measure of progress.
In the following table, revenue is disaggregated as follows:
| | | | | | | | | | | | | | | | | | | | |
| Revenue Breakdown | | Year ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Primary Geographical Markets | | | | | | |
| United States | | $ | 571,887,943 | | | $ | 419,578,082 | | | $ | 309,218,594 | |
| United Kingdom | | 52,400,699 | | | 20,937,664 | | | 9,499,986 | |
| Total revenue | | $ | 624,288,642 | | | $ | 440,515,746 | | | $ | 318,718,580 | |
| | | | | | |
| Major Segments/Service Lines | | | | | | |
| Mobile Health Services | | $ | 442,793,537 | | | $ | 325,891,440 | | | $ | 234,449,763 | |
| Transportation Services | | 181,495,105 | | | 114,624,306 | | | 84,268,817 | |
| Total revenue | | $ | 624,288,642 | | | $ | 440,515,746 | | | $ | 318,718,580 | |
Stock Based Compensation
The Company maintained stock incentive plans under which incentive and non-qualified stock options, restricted stock units and performance-based stock units. The Company accounts for stock-based compensation using the provisions of ASC 718, Stock-Based Compensation, which requires the recognition of the fair value of stock-based compensation. The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company accounts for forfeitures as they occur. For performance-based awards, expense is recognized over the period from the grant date to the estimated attainment date, which is the derived service period of the award, if the management determines that it is probable that the performance-based vesting conditions will be achieved. All stock-based compensation costs are recorded in operating expenses in the Consolidated Statements of Operations and Comprehensive Income.
Earnings per Share
Earnings per share represents the net income attributable to stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock during the reporting periods. Potential dilutive Common Stock equivalents consist of the incremental shares of Common Stock issuable upon exercise of warrants and the incremental shares issuable upon exercise of stock options. In reporting periods in which the Company has a net loss, the effect is considered anti-dilutive and excluded from the diluted earnings per share calculation.
DocGo Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | | 6,858,455 | | | 34,584,498 | | | 23,743,758 | |
| Weighted-average shares - basic | | 103,511,299 | | | 101,228,369 | | | 80,293,959 | |
| Effect of dilutive options | | 2,106,518 | | | 1,747,462 | | | 14,569,654 | |
| Weighted-average shares - dilutive | | 105,617,817 | | | 102,975,831 | | | 94,863,613 | |
| Net income per share attributable to DocGo Inc. and Subsidiaries - Basic | | 0.07 | | | 0.34 | | | 0.30 | |
| Net income per share attributable to DocGo Inc. and Subsidiaries - Diluted | | 0.06 | | | 0.34 | | | 0.25 | |
| Anti-dilutive employee share-based awards excluded | | 10,638,371 | | | 9,000,750 | | | — | |
Equity Method Investment
The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial instruments under FASBpolicies of the investee but does not exercise control. The Company’s judgment regarding its level of influence over an equity method investee includes considering key factors, such as ownership interest, representation on the board of directors and participation in policy-making decisions.
Under the equity method, the Company’s investment is initially measured at cost and subsequently increased or decreased to recognize the Company’s share of income and losses of the investee, capital contributions and distributions and impairment losses. The Company performs a qualitative assessment annually and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.
On October 26, 2021, the Company acquired a 50% interest in RND Health Services Inc. (“RND”) for $655,876. During the year ended December 31, 2023, the Company made an additional investment amounting to $298,932. The Company’s carrying value in RND, an equity method investee, is reflected in the caption “Equity method investments” in the Condensed Consolidated Balance Sheets. Changes in value of RND are recorded in “(Loss) gain on equity method investments” on the accompanying Consolidated Statements of Operations and Comprehensive Income.
On November 1, 2021, the Company acquired a 20% interest in National Providers Association, LLC (“NPA”) for $30,000. Effective December 21, 2021, three members withdrew from NPA, resulting in the remaining two members obtaining the remaining ownership percentage. As of December 31, 2023 and December 31, 2022, the Company owned 50% of NPA. The Company’s carrying value in NPA, an equity method investee, is reflected in the caption “Equity method investments” in the accompanying Consolidated Balance Sheets. Changes in value of NPA are recorded in “(Loss) gain on equity method investments” in the Consolidated Statements of Operations and Comprehensive Income.
Leases
The Company categorizes leases at their inception as either operating or finance leases based on the criteria in ASC 820, “Fair Value Measurements842, Leases (“ASC 842”). The Company adopted ASC 842 on January 1, 2019, using the modified retrospective approach, and Disclosures,”has established a right-of-use asset and a current and non-current lease liability for each lease arrangement identified. The lease liability is recorded at the present value of future lease payments discounted using the discount rate that approximates the carrying amounts represented inCompany’s incremental borrowing rate for the balance sheet primarily due to their short-term nature.Income Taxes
lease established at the commencement date, and the right-of-use asset is measured as the lease liability plus any initial direct costs, less any lease incentives received before commencement. The Company followsrecognizes a single lease cost, so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis.
The Company has lease arrangements for vehicles, equipment and facilities. These leases typically have original terms not exceeding 10 years and in some cases contain multi-year renewal options, none of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component. The Company has incorporated residual value obligations in leases for which there are such occurrences. Regarding short-term leases, ASC 842-10-25-2
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permits an entity to make a policy election not to apply the recognition requirements of ASC 842 to short-term leases. The Company has elected not to apply the ASC 842 recognition criteria to any leases that qualify as short-term leases.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability methodapproach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”).events that have been included in the financial statements or its tax returns. Deferred tax assets and liabilities are recognized fordetermined based on the estimated future tax consequences attributable to differencesdifference between the financial statement carrying amountsand tax basis of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in effect for the yearsyear in which those temporarythe differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income during the period that included the enactment date.reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets toprovided if based upon the amount expected to be realized.In assessing the realizationweight of deferred tax assets, management considers whetheravailable evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realizationCompany accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.
Recently Issued Accounting Standards
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. ASU 2022-02 also requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. ASU 2022-02 only affects entities that have already adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which is effective for fiscal years beginning after December 15, 2022. The Company adopted ASU 2022-02 on January 1, 2023, which did not have a material impact on the Company’s Consolidated Financial Statements.
Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU on its disclosures.
3. Property and Equipment, net
Property and equipment, net as of December 31, 2023 and 2022 are as follows:
| | | | | | | | | | | |
| December 31,
2023 | | December 31,
2022 |
| | | |
| Transportation equipment | $ | 17,438,072 | | | $ | 20,773,862 | |
| Medical equipment | 7,104,161 | | | 5,177,520 | |
| Office equipment and furniture | 3,701,657 | | | 2,686,065 | |
| Leasehold improvements | 709,619 | | | 579,658 | |
| Buildings | 527,283 | | | 527,283 | |
| Land | 37,800 | | | 37,800 | |
| 29,518,592 | | | 29,782,188 | |
| Less: Accumulated depreciation | (12,683,108) | | | (8,524,013) | |
| Property and equipment, net | $ | 16,835,484 | | | $ | 21,258,175 | |
During the year ended December 31, 2023, the Company disposed of assets with a cost of $12,343,547 and accumulated depreciation of $10,743,915 for proceeds of $747,088. The Company recorded a loss on disposal of assets of $852,544.
During the year ended December 31, 2022, the Company disposed of assets with a cost of $50,353 and accumulated depreciation of $26,180 for proceeds of $3,000. The Company recorded a loss on disposal of assets of $21,173.
During the year ended December 31, 2021, the Company disposed of assets with a cost of $119,026 and accumulated depreciation of $9,944 for proceeds of $74,740. The Company recorded a loss on disposal of assets of $34,342.
The Company recorded depreciation expenses of $4,829,780, $4,114,346 and $2,312,437 as of December 31, 2023, 2022 and 2021, respectively.
4. Acquisitions
Government Medical Services, LLC
On July 6, 2022, Holdings acquired 100% of the outstanding shares of common stock of GMS, a provider of medical services. The aggregate purchase price consisted of $20,338,789 in cash consideration. Holdings also agreed to pay GMS an additional $3,000,000 upon GMS meeting certain performance conditions within a year of the closing date of such acquisition. Acquisition costs are included in general and administrative expenses and totaled $1,001,883 for the year ended December 31, 2022. During the year ended December 31, 2023, the Company made a $3,000,000 payment to settle the contingent liability balance. As of December 31, 2023 and 2022, there was a due to seller balance of $0 and $3,000,000, respectively.
Exceptional Medical Transportation, LLC
On July 13, 2022, the Company acquired 100% of the outstanding shares of common stock of Exceptional, a provider of medical transportation services, in exchange for $13,708,333 consisting of $7,708,333 in cash at closing and $6,000,000 payable over a 24 month period following the closing date of the acquisition. The Company also agreed to pay up to $2,000,000 in contingent consideration upon meeting certain performance conditions within two years of the closing date of such acquisition. Acquisition costs are included in general and administrative expenses totaled $56,571 for the year ended December 31, 2022.
During the year ended December 31, 2023, the Company recorded a change in contingent consideration in the amount of $374,044. During the year ended December 31, 2023, the Company made a payment for the first installment due on the
contingent liability in the amount of $426,655. The estimated contingent consideration amount payable for Exceptional was $279,301 and $1,080,000 as of December 31, 2023 and 2022, respectively. Additionally, the Company paid $3,000,000 of the $6,000,000 remaining purchase price payable as of December 31, 2023. As of December 31, 2023 and 2022, there was a due to seller balance of $3,000,000 and $6,000,000, respectively.
Ryan Brothers Fort Atkinson, LLC
On August 9, 2022, the Company acquired 100% of the outstanding shares of common stock of Ryan Brothers, a provider of medical transportation services, in exchange for an aggregate purchase price of $11,422,252 consisting of $7,422,252 in cash at closing and an estimated $4,000,000 in contingent consideration to be paid out over 24 months, commencing on August 1, 2022, based on performance of certain obligations. Acquisition costs are included in general and administrative expenses and totaled $230,175 for the year ended December 31, 2022.
During the year ended December 31, 2023, the Company recorded a change in contingent consideration in the amount of $338,956. During the year ended December 31, 2023, the Company made a payment for the first installment due on the contingent liability in the amount of $1,840,026. The estimated contingent consideration amount payable for Ryan Brothers was $1,821,018 and $4,000,000 as of December 31, 2023 and 2022, respectively.
Community Ambulance Service Ltd
On October 12, 2022, Holdings, through its indirect wholly owned subsidiary Ambulnz U.K. Ltd. (“UK Ltd.”), acquired Community Ambulance Service Ltd (“CAS”), a provider of emergency and non-emergency transport services, including high dependency, urgent care, mental health and blue light transport services, and diagnostics testing in the U.K. The aggregate purchase price consisted of approximately $5,541,269 in cash. The net assets acquired through the CAS acquisition was $7,134,881 mainly from the vehicles with high fair market value, which directly lead to a gain on bargain purchase amounting to $1,593,612. The Company expects this acquisition to help increase the Company’s presence in the U.K. market and help provide improved access to municipal contracts. Acquisition costs are included in general and administrative expenses totaling $171,779 for the year ended December 31, 2022.
Location Medical Services, LLC
On December 9, 2022, Holdings, through UK Ltd., acquired 100% of the outstanding shares of common stock of LMS. The aggregate purchase price consisted of $302,450 in cash consideration. The Company also agreed to pay LMS an additional $11,279,201 in deferred consideration and an estimated $2,475,540 in contingent consideration upon LMS meeting certain performance conditions in 2023. Acquisition costs are included in general and administrative expenses and totaled $4,200 for the year ended December 31, 2022.
During the year ended December 31, 2023, the Company recorded a change in contingent consideration in the amount of $2,000,312 and recorded $129,599 in foreign exchange movement. The estimated contingent consideration amount payable for LMS was $604,827 and $2,475,540 as of December 31, 2023 and 2022, respectively. Additionally, the Company paid $11,279,201 of deferred consideration to LMS during the year ended December 31, 2023. As of December 31, 2023 and 2022, there was a due to seller balance of $0 and $11,279,201, respectively.
Cardiac RMS, LLC
On March 31, 2023, Holdings acquired 51% of the outstanding shares of common stock of CRMS, a provider of cardiac implantable electronic device remote monitoring and virtual care management services. The closing consideration of $10,000,000 consisted of $9,000,000 in cash and $1,000,000 worth of shares of Common Stock issued in a private placement transaction. A further probable consideration of $15,822,190 is to be paid out over 36 months following the closing of the transaction for the remaining 49% equity of CRMS, based on CRMS’ attainment of full-year EBITDA targets. $5,000,000 of such further probable consideration is to be paid in cash and the remaining $10,822,190 is to be paid in shares of Common Stock. Acquisition costs are included in general and administrative expenses and totaled $229,937 for the year ended December 31, 2023.
During the year ended December 31, 2023, the Company recorded a change in contingent consideration in the amount of $1,265,645. As of December 31, 2023, there was a remaining contingent liability balance of $17,087,835.
Ambulnz-FMC North America LLC
On April 1, 2023, the Company acquired the remaining outstanding shares of common stock of Ambulnz-FMC North America LLC (“FMC NA”),a prominent healthcare company that focuses on providing vital products and services for patients suffering from kidney diseases and renal failure, from its joint venture with Holdings in exchange for $4,000,000 in cash and $3,000,000 in Common Stock. Acquisition costs are included in general and administrative expenses totaling approximately $35,560 for the year ended December 31, 2023.
Healthworx LLC
On May 10, 2023, the Company acquired the remaining outstanding shares of common stock of Healthworx LLC (“Healthworx”), a provider of management, administration and support services to service providers focused on medical testing and diagnostic screening, from its joint venture with Rapid Reliable Testing, LLC (“RRT”) in exchange for $1,385,156 in cash.
The following table presents the assets acquired and liabilities assumed at the date of the acquisitions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FMC NA | | CRMS | | LMS | | CAS | | Ryan Brothers | | Exceptional | | GMS | | Total |
| | | | | | | | | | | | | | | | |
| Consideration: | | | | | | | | | | | | | | | | |
| Cash consideration | | $ | 4,000,000 | | | $ | 9,000,000 | | | $ | 302,450 | | | $ | 5,541,269 | | | $ | 7,422,252 | | | $ | 6,375,000 | | | $ | 20,338,789 | | | $ | 52,979,760 | |
| Stock consideration | | 3,000,000 | | | 1,000,000 | | | | | | | | | | | | | 4,000,000 | |
| Due to seller | | — | | | — | | | 11,279,201 | | | — | | | — | | | 6,000,000 | | | — | | | 17,279,201 | |
| Amounts held under an escrow account | | — | | | — | | | — | | | — | | | — | | | 1,333,333 | | | — | | | 1,333,333 | |
| Contingent liability | | — | | | 15,822,190 | | | 2,475,540 | | | — | | | 4,000,000 | | | 1,080,000 | | | 3,000,000 | | | 26,377,730 | |
| Total consideration | | $ | 7,000,000 | | | $ | 25,822,190 | | | $ | 14,057,191 | | | $ | 5,541,269 | | | $ | 11,422,252 | | | $ | 14,788,333 | | | $ | 23,338,789 | | | $ | 101,970,024 | |
| | | | | | | | | | | | | | | | |
| Recognized amounts of identifiable assets acquired and liabilities assumed | | | | | | | | | | | | | | | | |
| Cash | | $ | — | | | $ | 1,574,604 | | | $ | 5,404,660 | | | $ | 892,218 | | | $ | 620,548 | | | $ | 299,050 | | | $ | 1,005,453 | | | $ | 9,796,533 | |
| Accounts receivable | | — | | | 2,033,533 | | | 623,635 | | | 7,002,325 | | | 5,844,494 | | | 3,785,490 | | | 3,975,160 | | | 23,264,637 | |
| Other current assets | | — | | | 293,478 | | | 134,216 | | | 1,167,326 | | | 136,157 | | | — | | | 30,734 | | | 1,761,911 | |
| Property, plant and equipment | | — | | | — | | | 519,391 | | | 4,548,956 | | | 2,125,134 | | | 2,450,900 | | | 4,092 | | | 9,648,473 | |
| Intangible assets | | — | | | 15,930,000 | | | 2,419,600 | | | — | | | 387,550 | | | 125,000 | | | 10,305,000 | | | 29,167,150 | |
| Total identifiable assets acquired | | — | | | 19,831,615 | | | 9,101,502 | | | 13,610,825 | | | 9,113,883 | | | 6,660,440 | | | 15,320,439 | | | 73,638,704 | |
| | | | | | | | | | | | | | | | |
| Accounts payable | | — | | | 28,978 | | | 40,447 | | | 2,036,714 | | | 44,911 | | | — | | | 137,239 | | | 2,288,289 | |
| Due to seller | | — | | | 2,448,460 | | | — | | | — | | | 5,844,494 | | | 4,084,540 | | | — | | | 12,377,494 | |
| Other current liabilities | | — | | | 174,177 | | | 1,012,992 | | | 4,439,230 | | | 286,792 | | | — | | | 562,809 | | | 6,476,000 | |
| Total liabilities assumed | | — | | | 2,651,615 | | | 1,053,439 | | | 6,475,944 | | | 6,176,197 | | | 4,084,540 | | | 700,048 | | | 21,141,783 | |
| | | | | | | | | | | | | | | | |
| Noncontrolling interests | | 2,567,037 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,567,037 | |
| | | | | | | | | | | | | | | | |
| Goodwill | | — | | | 8,642,190 | | | 6,009,128 | | | (1,593,612) | | | 8,484,566 | | | 12,212,433 | | | 8,718,398 | | | 42,473,103 | |
| Additional paid-in-capital | | 4,432,963 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,432,963 | |
| | | | | | | | | | | | | | | | |
| Total purchase price | | $ | 7,000,000 | | | $ | 25,822,190 | | | $ | 14,057,191 | | | $ | 5,541,269 | | | $ | 11,422,252 | | | $ | 14,788,333 | | | $ | 23,338,789 | | | $ | 101,970,024 | |
Pro Forma Disclosures
The following unaudited pro forma combined financial information for the fiscal years ended December 31, 2023, 2022 and 2021 gives effect to the acquisitions disclosed above as if they had occurred on January 1, 2021. The pro forma
information is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company.
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| Revenue | $ | 627,402,261 | | | $ | 539,522,587 | | | $ | 461,001,227 | |
| Net Income | 11,087,122 | | | 46,960,359 | | | 43,763,036 | |
The unaudited pro forma combined financial information presented above includes the accounting effects of the acquisitions, including, to the extent applicable, amortization charges from acquired intangible assets; depreciation of property, plant and equipment that have been revalued; transaction costs; interest expense; and the related tax effects.
5. ABC Transaction and Held for Sale
During the year 2022, the Company started discussions regarding the potential liquidation process of Health through an ABC, with a targeted timeline for the transaction to be fully closed by December 31, 2022. The conversation involved operations, human resources, external legal counsel and the Assignee, Amb, LLC (a California limited liability company). Due to operational processes, the filing was extended and finalized on February 3, 2023.
An ABC is a liquidation process governed by state law (California law in this instance) that is an alternative to a bankruptcy case under federal law. Prior to commencing the ABC, Health ceased business operations and all of its employees were terminated and treated in accordance with California law. In the ABC, all of Health’s assets were transferred to the Assignee, who acts as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee. The Assignee is responsible for liquidating the assets. Similar to a bankruptcy case, there is a claims process. Creditors of Health received notice of the ABC and a proof of claim form and were required to submit a proof of claim in order to participate in distribution of net liquidation proceeds by the Assignee.
As of December 31, 2022, Health met the criteria to be classified as held for sale. As the entity has met this criteria, the Company is required to record the respective assets and liabilities at the lower of carrying value or fair value, less any costs to sell, and present the related assets and liabilities as separate line items in the Consolidated Balance Sheets.
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in the Company’s Consolidated Balance Sheets as of December 31, 2022 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pre ABC Adjustment | | 2022 Adjustments | | December 31, | | YTD 2023 Adjustments | | December 31, |
| | | | 2022 | | | 2023 |
| ASSETS | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | | $ | (190,312) | | | | $ | 190,312 | | | | $ | — | | | | $ | — | | | | $ | — | |
| Accounts receivable, net | | | 1,219,927 | | | | (1,219,927) | | | | — | | | | — | | | | — | |
| Prepaid expenses and other current assets | | | 22,850 | | | | (22,850) | | | | — | | | | — | | | | — | |
| Total current assets | | | 1,052,465 | | | | (1,052,465) | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | |
| Property and equipment, net | | | 1,107,279 | | | | (1,107,279) | | | | — | | | | — | | | | — | |
| Intangibles, net | | | 30,697 | | | | (30,697) | | | | — | | | | — | | | | — | |
| Goodwill | | | 5,085,689 | | | | (5,085,689) | | | | — | | | | — | | | | — | |
| Operating lease right-of-use assets | | | 29,753 | | | | (29,753) | | | | — | | | | — | | | | — | |
| Assets held for sale | | | — | | | | 4,480,344 | | | | 4,480,344 | | | | (4,480,344) | | | | — | |
| Other assets | | | 18,053,495 | | | | (96,419) | | | | 17,957,076 | | | | (17,957,076) | | | | — | |
| Total assets | | | $ | 25,359,378 | | | | $ | (2,921,958) | | | | $ | 22,437,420 | | | | $ | (22,437,420) | | | | $ | — | |
| | | | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | |
| Accounts payable | | | $ | 196,122 | | | | $ | (196,122) | | | | $ | — | | | | $ | — | | | | $ | — | |
| Accrued liabilities | | | 63,655,442 | | | | (4,250,603) | | | | 59,404,839 | | | | (59,404,839) | | | | — | |
| Operating lease liability, current | | | 33,619 | | | | (33,619) | | | | — | | | | — | | | | — | |
| Liabilities held for sale | | | — | | | | 4,480,344 | | | | 4,480,344 | | | | (4,480,344) | | | | — | |
| Total current liabilities | | | 63,885,183 | | | | — | | | | 63,885,183 | | | | (63,885,183) | | | | — | |
| Total liabilities | | | $ | 63,885,183 | | | | $ | — | | | | $ | 63,885,183 | | | | $ | (63,885,183) | | | | $ | — | |
| | | | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | | | | |
| Accumulated deficit | | | $ | (38,525,805) | | | | $ | (2,921,958) | | | | $ | (41,447,763) | | | | $ | 41,447,763 | | | | $ | — | |
| Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries | | | (38,525,805) | | | | (2,921,958) | | | | (41,447,763) | | | | 41,447,763 | | | | — | |
| Noncontrolling interests | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total stockholders’ equity | | | $ | (38,525,805) | | | | $ | (2,921,958) | | | | $ | (41,447,763) | | | | $ | 41,447,763 | | | | $ | — | |
| Total liabilities and stockholders’ equity | | | $ | 25,359,378 | | | | $ | (2,921,958) | | | | $ | 22,437,420 | | | | $ | (22,437,420) | | | | $ | — | |
The intercompany receivables and intercompany payables are eliminated in the Company’s Consolidated Balance Sheets.
6. Goodwill
In connection with the ABC, the Company evaluated its goodwill balances as of December 31, 2022 and determined that there was an impairment of goodwill related to its Health reporting unit. The impairment was primarily due to the ABC filing.
As a result of this impairment, the Company recognized a non-cash charge of $2,921,958 in the year ended December 31, 2022 in the Consolidated Statements of Operations and Comprehensive Income. The charge was recorded as part of other income in the Company’s Consolidated Statements of Operations and Comprehensive Income and has no impact on its cash flow, liquidity or compliance with debt covenants.
Additionally, the Company recorded an aggregate of $8,642,190 and $35,299,136 in goodwill in connection with its acquisitions in the year ended December 31, 2023 and December 31, 2022, respectively.
The Company also updated the carrying value of the goodwill in its Condensed Consolidated Balance Sheets to reflect the additional goodwill. The carrying value of goodwill amounted to $47,539,929 as of December 31, 2023. The changes in the carrying value of goodwill for the year ended December 31, 2023 are as noted in the table below:
| | | | | | | | |
| | Carrying Value |
| Balance as of December 31, 2021 | | $ | 8,686,966 | |
| Goodwill acquired during the period | | 35,299,136 | |
| Impairment recognized during the year | | (2,921,958) | |
| Reassignment of Goodwill to Assets held for sale | | (2,163,731) | |
| Balance as of December 31, 2022 | | $ | 38,900,413 | |
| Goodwill acquired during the period | | 8,642,190 | |
| Currency translation adjustment and others | | (2,674) | |
| Balance as of December 31, 2023 | | $ | 47,539,929 | |
7. Intangibles
Intangible assets consisted of the following as of December 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Estimated Useful
Life (Years) | | Gross Carrying
Amount | | Additions | | Accumulated
Amortization | | Net Carrying
Amount |
| Patents | 15 years | | $ | 62,823 | | | $ | 20,961 | | | $ | (15,592) | | | $ | 68,192 | |
| Computer software | 5 years | | 247,828 | | | — | | | (235,967) | | | 11,861 | |
| Operating licenses | Indefinite | | 8,799,004 | | | 600,000 | | | — | | | 9,399,004 | |
| Internally developed software | 4-5 years | | 8,284,058 | | | 1,794,029 | | | (8,821,563) | | | 1,256,524 | |
| Material contracts | Indefinite | | 62,550 | | | — | | | — | | | 62,550 | |
| Customer relationships | 8-9 years | | 12,397,954 | | | 15,939,570 | | | (3,334,925) | | | 25,002,599 | |
| Trademark | 8 years | | 326,646 | | | 17,101 | | | (46,549) | | | 297,198 | |
| Non-compete agreements | 5 years | | — | | | 100,000 | | | (15,000) | | | 85,000 | |
| Trade credits | 5 years | | — | | | 1,500,000 | | | — | | | 1,500,000 | |
| | | $ | 30,180,863 | | | $ | 19,971,661 | | | $ | (12,469,596) | | | $ | 37,682,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Estimated Useful
Life (Years) | | Gross Carrying
Amount | | Additions | | Accumulated
Amortization | | | Net Carrying
Amount |
| Patents | 15 years | | $ | 48,668 | | | $ | 14,155 | | | $ | (10,116) | | | | $ | 52,707 | |
| Computer software | 5 years | | 294,147 | | | (46,319) | | | (224,886) | | | | 22,942 | |
| Operating licenses | Indefinite | | 8,375,514 | | | 423,490 | | | — | | | | 8,799,004 | |
| Internally developed software | 4-5 years | | 6,013,513 | | | 2,270,545 | | | (6,378,911) | | | | 1,905,147 | |
| Material contracts | Indefinite | | — | | | 62,550 | | | — | | | | 62,550 | |
| Customer relationships | 8-9 years | | — | | | 12,397,954 | | | (594,301) | | | | 11,803,653 | |
| Trademark | 8 years | | — | | | 326,646 | | | (3,403) | | | | 323,243 | |
| | | $ | 14,731,842 | | | $ | 15,449,021 | | | $ | (7,211,617) | | | | $ | 22,969,246 | |
The intangible assets include an immaterial foreign currency translation adjustment in the amount of $8,621. Intangible asset balances are translated into U.S. dollars using exchange rates in effect at period end, and adjustments related to foreign currency translation are included in other comprehensive income.
The Company recorded amortization expense of $5,249,358, $3,214,814 and $1,845,193 for the periods ended December 31, 2023, 2022 and 2021, respectively.
Future amortization expense at December 31, 2023 for the next five years and in the aggregate are as follows:
| | | | | |
| Amortization
Expense |
| 2024 | $ | 3,905,132 | |
| 2025 | 3,855,130 | |
| 2026 | 3,249,936 | |
| 2027 | 3,249,222 | |
| 2028 | 3,232,758 | |
| Thereafter | 9,229,196 | |
| Total | $ | 26,721,374 | |
8. Accrued Liabilities
Accrued liabilities consisted of the following at the dates indicated:
| | | | | | | | | | | |
| December 31,
2023 | | December 31,
2022 |
| Accrued subcontractors | $ | 37,858,755 | | | $ | 8,101,150 | |
| Accrued general expenses | 27,001,232 | | | 11,436,462 | |
| Accrued workers' compensation and other insurance liabilities | 12,881,902 | | | 3,766,469 | |
| Accrued payroll | 6,464,192 | | | 4,245,838 | |
| Accrued bonus | 4,784,005 | | 1,500,717 |
| Other current liabilities | 2,350,523 | | | 2,522,395 | |
| Total accrued liabilities | $ | 91,340,609 | | | $ | 31,573,031 | |
9. Line of Credit
On November 1, 2022, the Company entered into a credit agreement (the “Credit Agreement”) with two banks, with one bank in the capacity as a lender and the administrative agent (collectively with the other lender, the “Lenders”). The Credit Agreement provides for a revolving credit facility in the initial aggregate principal amount of $90,000,000 (the “Revolving Facility”). The Revolving Facility includes the ability for the Company to request an increase to the commitment by an additional amount of up to $50,000,000, though no Lender (nor the Lenders collectively) is obligated to increase its respective commitments. Borrowings under the Revolving Facility bear interest at a per annum rate equal to: (i) at the Company’s option, (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. The applicable margins are based on the Company’s consolidated net leverage ratio, adjusted on a quarterly basis. The initial applicable margins are 1.25% for an adjusted term SOFR loan and 0.25% for a base rate loan and will be updated based on the Company's consolidated net leverage ratio. The Revolving Facility matures on the five-year anniversary of the closing date, November 1, 2027. The Revolving Facility is secured by a first-priority lien on substantially all of the Company’s present and future personal assets and intangible assets. The Revolving Facility is subject to certain financial covenants such as a net leverage ratio and interest coverage ratio, as defined in the Credit Agreement. On October 19, 2023, the Company drew down $25,000,000 under the Revolving Facility. As of December 31, 2023, the outstanding balance of the line of credit under the Revolving Facility was $25,000,000. The unused line of credit under the Revolving Facility was $65,000,000 as of December 31, 2023. The Company incurred $359,330 in interest charges relating to its line of credit during 2023, which is reflected in interest income (expense) on the Company's Consolidated Statements of Operations and Comprehensive Income.
10. Notes Payable
The Company has various loans with finance companies with monthly installments aggregating $3,784, inclusive of interest ranging from 2.5% through 7.5%. The notes mature at various times through 2026 and are secured by transportation equipment.
The following table summarizes the Company’s notes payable:
| | | | | | | | | | | |
| December 31,
2023 | | December 31,
2022 |
| Equipment and financing loans payable, between 2.5% and 7.5% interest and maturing between March 2024 and August 2026 | $ | 69,717 | | | $ | 1,901,514 | |
| Total notes payable | 69,717 | | | 1,901,514 | |
| Less: current portion of notes payable | 28,131 | | | 664,913 | |
| Total non-current portion of notes payable | $ | 41,586 | | | $ | 1,236,601 | |
Interest expenses were $(201,883), $117,664 and $61,324 for the periods ended December 31, 2023, 2022 and 2021, respectively.
Future minimum annual maturities of notes payable as of December 31, 2023 are as follows:
| | | | | |
| Notes Payable |
| 2024 | $ | 28,755 | |
| 2025 | 25,847 | |
| 2026 | 15,115 | |
| Total maturities | 69,717 | |
| Current portion of notes payable | (28,131) | |
| Long-term portion of notes payable | $ | 41,586 | |
11. Derivative Warrant Liabilities
For the year ended December 31, 2021, the Company determined the fair value of its warrants that were previously publicly traded in active markets (“Public Warrants’) using quoted market prices for identical instruments. Accordingly, the Public Warrants were classified as Level 1 financial instruments. As of December 31, 2021, there were 3,833,333 Public Warrants outstanding at a fair value of $8.1 million. Because the transfer of the Company’s warrants that were issued in a private placement simultaneously with the closing of its initial public offering (“Private Warrants” and together with the Public Warrants, the “warrants”) to anyone outside of a small group of individuals constituting the sponsors of the Company would result in the Private Warrants having substantially the same terms as the Public Warrants, management determined that the fair value of each Private Warrant was the same as that of a Public Warrant, with an insignificant adjustment for marketability restrictions. Accordingly, the Private Warrants were classified as Level 1 financial instruments. As of December 31, 2021, 2,533,333 Private Warrants remained outstanding at a fair value of $5.4 million. Due to fair value changes throughout the year ended December 31, 2021, we recorded a gain on remeasurement of warrant liabilities of $5.2 million.
For the year ended December 31, 2022, the Company recorded a gain of approximately $1.1 million from the remeasurement of warrant liabilities. The warrants were marked-to-market in each reporting period, and this loss reflected the increase in the Company’s stock price relative to the beginning of the period. On August 15, 2022, the Company announced the redemption of all of its outstanding warrants under the Warrant Agreement, dated as of October 14, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent, on the redemption date of September 16, 2022 (the “Redemption Date”). Warrants surrendered for exercise on a cashless basis resulted in the issuance of 1,406,371 shares of Common Stock. A total of 68,514 warrants were not surrendered on the Redemption Date and were redeemed for $0.10 per warrant.
There were no warrants liabilities outstanding for the years ended December 31, 2023 and 2022.
12. Business Segment Information
The Company conducts business in three operating segments: Mobile Health Services, Transportation Services, and Corporate. In accordance with ASC 280, Segment Reporting, operating segments are components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, the Company’s Chief Executive Officer and Chief Financial Officer, in deciding how to allocate resources and assessing performance. Prior to 2023, the Company reported in two segments because the Company’s entities have two main revenue streams. Beginning with the first quarter of 2023, the Company began reporting in three operating segments, adding a Corporate segment to allow for analysis of shared services and personnel that support both the Transportation Services and Mobile Health Services segments. Previously, these costs had been allocated almost entirely to the Transportation Services segment. All of the Company’s revenues and costs of revenues continue to be reported within the Transportation Services and Mobile Health Services segments. The Corporate segment contains operating expenses such as information technology costs, certain insurance costs and the compensation costs of senior and executive leadership. The segment reporting for the prior-year period has been adjusted to conform to the new methodology, for the purposes of allowing a clearer analysis of year-over-year performance. The Company’s Chief Executive Officer and Chief Financial Officer evaluate the Company’s financial information and resources and assesses the performance of these resources by revenue stream and by operating income or loss performance.
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its Mobile Health Services, Transportation Services, and Corporate segments based primarily on results of operations.
Operating results for the business segments of the Company are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Mobile Health
Services | | Transportation
Services | | Corporate | | Total |
| Year Ended December 31, 2023 | | | | | | | |
| Revenues | $ | 442,793,537 | | | $ | 181,495,105 | | | $ | — | | | $ | 624,288,642 | |
| | | | | | | |
| Income (loss) from operations | 80,362,820 | | | 3,541,377 | | | (68,849,217) | | | 15,054,980 | |
| | | | | | | |
| Total assets | 280,646,925 | | | 132,178,214 | | | 77,626,818 | | | 490,451,957 | |
| | | | | | | |
| Depreciation and amortization expense | 4,226,657 | | | 9,393,895 | | | 2,811,340 | | | 16,431,892 | |
| | | | | | | |
| Stock compensation | 1,698,350 | | | 1,434,505 | | | 17,836,319 | | | 20,969,174 | |
| | | | | | | |
| Long-lived assets | 32,841,680 | | | 78,848,587 | | | 11,952,528 | | | 123,642,795 | |
| | | | | | | |
| Capital expenditures | 30,163,882 | | | 20,254,373 | | | 597,283 | | | 51,015,538 | |
| | | | | | | |
| Year Ended December 31, 2022 | | | | | | | |
| Revenues | $ | 325,891,440 | | | $ | 114,624,306 | | | $ | — | | | $ | 440,515,746 | |
| | | | | | | |
| Income (loss) from operations | 92,710,163 | | | (14,546,171) | | | (56,332,364) | | | 21,831,628 | |
| | | | | | | |
| Total assets | 116,821,500 | | | 118,627,613 | | | 157,828,515 | | | 393,277,628 | |
| | | | | | | |
| Depreciation and amortization expense | 1,685,114 | | | 6,050,265 | | | 2,830,199 | | | 10,565,578 | |
| | | | | | | |
| Stock compensation | 1,425,299 | | | 1,415,670 | | | 5,213,602 | | | 8,054,571 | |
| | | | | | | |
| Long-lived assets | 33,181,594 | | | 65,580,291 | | | 2,479,889 | | | 101,241,774 | |
| | | | | | | |
| Capital expenditures | 39,569,802 | | | 52,105,196 | | | 2,542,854 | | | 94,217,852 | |
| | | | | | | |
| Year Ended December 31, 2021 | | | | | | | |
| Revenues | $ | 234,449,763 | | | $ | 84,268,817 | | | $ | — | | | $ | 318,718,580 | |
| | | | | | | |
| Income (loss) from operations | 59,605,712 | | | (20,983,766) | | | (23,264,648) | | | 15,357,298 | |
| | | | | | | |
| Total assets | 61,503,278 | | | 59,299,426 | | | 188,799,948 | | | 309,602,652 | |
| | | | | | | |
| Depreciation and amortization expense | (888,355) | | | 6,458,218 | | | 1,941,716 | | | 7,511,579 | |
| | | | | | | |
| Stock compensation | 536,910 | | | 479,542 | | | 359,901 | | | 1,376,353 | |
| | | | | | | |
| Long-lived assets | 4,382,704 | | | 38,370,683 | | | 2,848,312 | | | 45,601,699 | |
| | | | | | | |
| Capital expenditures | 4,180,004 | | | 10,636,454 | | | 3,766,289 | | | 18,582,747 | |
Long-lived assets include property and equipment, goodwill, intangible assets, operating lease right-of-use assets and finance lease right-of-use assets.
Geographic Information
The following table summarizes long-lived assets by geographic location for the years ended December 31, 2023, 2022, and 2021:
| | | | | | | | | | | | | | |
| December 31,
2023 | | December 31,
2022 | December 31,
2021 |
| Primary Geographical Markets | | | | |
| United States | $ | 103,779,506 | | | $ | 83,145,362 | | $ | 42,166,999 | |
| United Kingdom | 19,863,289 | | | 18,096,412 | | 3,434,700 | |
| Total Long-Lived Assets | $ | 123,642,795 | | | $ | 101,241,774 | | $ | 45,601,699 | |
Revenues by geographic location are included in Note 2.
13. Equity
Share Repurchase Program
On May 24, 2022, the Company’s Board of Directors (the “Board of Directors”) authorized a share repurchase program to purchase up to $40 million of Common Stock (the “Program”). During the second and fourth quarter of 2022, the Company repurchased 536,839 shares of its Common Stock for $3,731,712. These shares were subsequently cancelled. There were no shares repurchased during the year ended December 31, 2023. The Program did not oblige the Company to acquire any specific number of shares and expired on November 24, 2023. Under the Program, shares could be repurchased using a variety of methods, including privately negotiated and/or open market transactions, under plans complying with Rule 10b5-1 under the Exchange Act of 1934, as amended, as part of accelerated share repurchases, block trades and other methods. The timing, manner, price and amount of any Common Stock repurchases under the Program were determined by the Company in its discretion and depended on a variety of factors, including legal requirements, price and economic and market conditions.
14. Stock Based Compensation
Stock Options
In 2021, the Company established the DocGo Inc. 2021 Equity Incentive Plan (the “Plan”) replacing Ambulnz, Inc.’s 2017 Equity Incentive Plan. The Plan reserved 16,607,894 shares of Class A common stock for issuance under the Plan. The Company’s stock options generally vest on various terms based on continuous services over periods ranging from three to five years. The stock options are subject to time vesting requirements through 2033 and are nontransferable. Stock options granted have a maximum contractual term of 10 years. As of December 31, 2023, approximately 4.7 million employee stock options had vested.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Before the consummation of the Business Combination, management took the average of several publicly traded companies that were representative of the Company’s size and industry in order to estimate its expected stock volatility. Subsequent to the Business Combination, the Company utilized publicly available pricing. The expected term of the options represented the period of time the instruments were expected to be outstanding. The Company based the risk-free interest rate on the rate payable on the U.S. Treasury securities corresponding to the expected term of the awards at the date of grant. Expected dividend yield was zero based on the fact that the Company had not historically paid and does not intend to pay a dividend in the foreseeable future.
The following assumptions were used to compute the fair value of the stock option grants during the years ended December 31, 2023 and 2022:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Risk-free interest rate | 4.1% - 4.9% | | 0.71% - 4.3% |
| Expected term (in years) | 6.25 | | 6.25 |
| Volatility | 52% - 62% | | 60% - 69% |
| Dividend yield | — | % | | — | % |
The following table summarizes the Company’s stock option activity under the Plan for the years ended December 31, 2022 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Options
Shares | | Weighted
Average
Exercise Price | | Weighted
Average
Remaining
Contractual
Life in Years | | Aggregate
Intrinsic
Value |
| Balance as of December 31, 2021 | 8,422,972 | | $ | 6.21 | | | 8.77 | | $ | 24,706,020 | |
| Granted/vested during the year | 5,443,368 | | 7.04 | | | — | | | — | |
| Exercised during the year | (1,699,720) | | 2.03 | | | — | | | — | |
| Cancelled during the year | (595,312) | | 8.28 | | | — | | | — | |
| Balance as of December 31, 2022 | 11,571,308 | | 7.11 | | | 9.05 | | 39,389,063 |
| Granted/vested during the year | 1,566,010 | | 7.93 | | | — | | | — | |
| Exercised during the year | (514,065) | | 3.55 | | | — | | | — | |
| Cancelled during the year | (680,989) | | 7.52 | | | — | | | — | |
| Balance as of December 31, 2023 | 11,942,264 | | 7.36 | | | 8.16 | | $ | 50,315,593 | |
| Options vested and exercisable as of December 31, 2023 | 4,703,686 | | $ | 7.02 | | | 7.47 | | $ | 3,199,037 | |
The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Common Stock price and the exercise price of the stock options. The weighted average grant date fair value per share for stock option grants during the years ended December 31, 2023 and 2022 was $7.93 and $7.04, respectively.
On December 31, 2023, 2022 and 2021, the total recorded stock-based compensation related to stock option awards granted was $11,795,320, $6,232,992, and $1,376,353, respectively.
On December 31, 2023, 2022 and 2021, the total unrecognized compensation related to unvested stock option awards granted was $29,058,756, $41,666,564 and $20,792,804, respectively, which the Company expects to recognize over a weighted-average period of approximately 1.79 years.
Restricted Stock Units
The fair value of restricted stock units (“RSUs”) is determined on the date of grant. The Company records compensation expenses in the Consolidated Statements of Operations and Comprehensive Income on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board of Directors ranges from one to four years.
Activity under RSUs for the year ended December 31, 2023 was as follows:
| | | | | | | | | | | |
| RSUs | | Weighted-
Average
Grant Date
Fair Value
Per RSU |
| Balance as of December 31, 2022 | 305,587 | | $ | 8.35 | |
| Granted | 3,104,766 | | 6.15 | |
| Vested | (986,258) | | 8.61 | |
| Forfeited | — | | | 0 |
| Balance as of December 31, 2023 | 2,424,095 | | 5.61 | |
| Vested and unissued as of December 31, 2023 | 49,490 | | 5.47 | |
| Non-vested as of December 31, 2023 | 2,424,095 | | 5.61 | |
The total grant-date fair value of RSUs granted during the year ended December 31, 2023 was $19,526,515.
For the year ended December 31, 2023, the Company recorded stock-based compensation expense related to RSUs of $9,101,027, of which $493,043 is included in accrued liabilities.
For the year ended December 31, 2022, the Company recorded stock-based compensation expense related to RSUs of $1,821,579, of which $375,000 is included in accrued liabilities.
On December 31, 2023, and 2022, the total unrecognized compensation related to unvested RSUs granted was $12,602,662, and $2,177,713, respectively, which is expected to be recognized over a weighted-average period of approximately 2.5 years.
Performance-based Stock Units
The fair value of performance-based stock units (“PSUs”) is determined on the date of grant. The Company records compensation expenses in the Consolidated Statements of Operations and Comprehensive Income on a straight-line basis over the vesting period based on the grant date fair value of the awards and probability of the achievement of the specified performance target. The vesting period for employees and members of the Board of Directors ranges from one to four years.
Activity under PSUs for the year ended December 31, 2023 was as follows:
| | | | | | | | | | | |
| PSUs | | Weighted-Average Grant Date Fair Value Per PSU |
| Balance as of December 31, 2022 | — | | | $ | — | |
| Granted | 1,085,270 | | 5.16 | |
| Vested | — | | | — | |
| Forfeited | — | | | — | |
| Balance as of December 31, 2023 | 1,085,270 | | 5.16 | |
| Vested and unissued as of December 31, 2023 | — | | | — | |
| Non-vested as of December 31, 2023 | 1,085,270 | | 5.16 | |
The total grant-date fair value of PSUs granted during the year ended December 31, 2023 was $5,599,993.
For the year ended December 31, 2023, the Company recorded stock-based compensation expense related to PSUs of $72,827 which is included in accrued liabilities.
As of December 31, 2023, the Company had $5,527,166 in unrecognized compensation cost related to non-vested PSUs, which is expected to be recognized over a weighted-average period of approximately 4.0 years.
15. Leases
Operating Leases
The Company is obligated to make rental payments under non-cancellable operating leases for office, dispatch station space and transportation equipment, expiring at various dates through 2032. Under the terms of the leases, the Company is also obligated for its proportionate share of real estate taxes, insurance and maintenance costs of the property. The Company is required to hold certain funds in restricted cash and cash equivalents accounts under some of these agreements.
Certain leases for property and transportation equipment contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include in the calculation of the right-of-use asset and lease obligations for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and whether the optional period and payments should be included in the calculation of the associated right-of-use asset and lease obligation. In making the determination of such judgment, the Company considers all relevant economic factors that would require whether to exercise or not exercise the option.
The Company’s lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates, which were used to discount its real estate lease liabilities. The Company used estimated borrowing rates of 6% on January 1, 2019 for all leases that commenced prior to that date for office spaces and transportation equipment.
Lease Costs
The table below comprises lease expenses for the years ended December 31, 2023, 2022 and 2021, respectively:
| | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| Components of total lease cost: | | 2023 | | 2022 | | 2021 |
| | | | | | |
| Operating lease expense | | $ | 3,418,134 | | | $ | 2,294,636 | | | $ | 1,993,984 | |
| Short-term lease expense | | 1,678,487 | | | 1,201,622 | | | 1,012,260 | |
| Total lease cost - operating leases | | $ | 5,096,621 | | | $ | 3,496,258 | | | $ | 3,006,244 | |
| | | | | | |
| | | | | | |
Lease Position as of December 31, 2023
Right-of-use lease assets and lease liabilities for the Company’s operating leases were recorded in the Consolidated Balance Sheets as follows:
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Assets | | | |
| Lease right-of-use assets | $ | 9,580,535 | | | $ | 9,074,277 | |
| Total lease assets | $ | 9,580,535 | | | $ | 9,074,277 | |
| | | |
| Liabilities | | | |
| Current liabilities: | | | |
| Lease liability - current portion | $ | 2,773,020 | | | $ | 2,325,024 | |
| Noncurrent liabilities: | | | |
| Lease liability, net of current portion | 7,223,941 | | | 7,040,982 | |
| Total lease liability | $ | 9,996,961 | | | $ | 9,366,006 | |
Lease Terms and Discount Rate
| | | | | |
| Weighted average remaining lease term (in years) - operating leases | 3.67 |
| Weighted average discount rate - operating leases | 5.71 | % |
Undiscounted Cash Flows
Future minimum lease payments under the operating leases as of December 31, 2023 are as follows:
| | | | | |
| Operating
Leases |
| 2024 | $ | 3,271,821 | |
| 2025 | 3,305,703 | |
| 2026 | 2,429,393 | |
| 2027 | 1,219,709 | |
| 2028 | 597,566 | |
| Thereafter | 318,901 | |
| Total future minimum lease payments | 11,143,093 | |
| Less effects of discounting | (1,146,132) | |
| Present value of future minimum lease payments | $ | 9,996,961 | |
Operating lease expenses approximated $3,418,134, $2,294,636 and $1,993,984 for the years ended December 31, 2023, 2022 and 2021, respectively.
For the years ended December 31, 2023, 2022, 2021, the Company made $3,287,125, $2,294,636, $1,993,984 of fixed cash payments related to operating leases and $4,270,553, $2,985,568, $2,741,784 related to finance leases, respectively.
Finance Leases
The Company leases vehicles under non-cancelable finance lease agreements with a liability of $11,430,465, $8,646,803 and $10,139,410 for the years ended December 31, 2023, 2022 and 2021, respectively (accumulated depreciation of $11,679,823, $7,906,966 and $7,095,242 as of December 31, 2023, 2022 and 2021, respectively).
Depreciation expenses for the vehicles under non-cancelable lease agreements amounted to $6,352,754, $3,236,418 and $2,913,925 for the years ended December 31, 2023, 2022 and 2021, respectively.
Gain on Lease Remeasurement
In June 2022, the Company reassessed its finance lease estimates relating to vehicle mileage and residual value. As a result, the Company determined to purchase the vehicles at the end of the leases, which resulted in a gain of $1.4 million recorded as gains from lease accounting on the Consolidated Statements of Operations and Comprehensive Income.
Lease Payments
The table below comprises lease payments for the years ended December 31, 2023, 2022 and 2021, respectively:
| | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| Components of total lease cost: | | 2023 | 2022 | | 2021 |
| | | | | |
| Finance lease payment | | $ | 4,270,553 | | $ | 2,985,568 | | | $ | 2,741,784 | |
| Short-term lease payment | | — | | — | | | — | |
| Total lease payments | | $ | 4,270,553 | | $ | 2,985,568 | | | $ | 2,741,784 | |
Lease Position as of December 31, 2023
Right-of-use lease assets and lease liabilities for the Company’s finance leases were recorded in the Consolidated Balance Sheets as follows:
| | | | | | | | | | | |
| December 31,
2023 | | December 31,
2022 |
| Assets | | | |
| Lease right-of-use assets | $ | 12,003,919 | | | $ | 9,039,663 | |
| Total lease assets | $ | 12,003,919 | | | $ | 9,039,663 | |
| | | |
| Liabilities | | | |
| Current liabilities: | | | |
| Lease liability - current portion | $ | 3,534,073 | | | $ | 2,732,639 | |
| Noncurrent liabilities: | | | |
| Lease liability, net of current portion | 7,896,392 | | | 5,914,164 | |
| Total lease liability | $ | 11,430,465 | | | $ | 8,646,803 | |
Lease Terms and Discount Rate
The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s finance leases as of December 31, 2023:
| | | | | |
| Weighted average remaining lease term (in years) - finance leases | 3.37 |
| Weighted average discount rate - finance leases | 5.42 | % |
Undiscounted Cash Flows
Future minimum lease payments under the finance leases as of December 31, 2023 are as follows:
| | | | | |
| Finance Leases |
| 2024 | $ | 4,072,021 | |
| 2025 | 3,745,030 | |
| 2026 | 2,868,368 | |
| 2027 | 1,495,766 | |
| 2028 | 352,811 | |
| Thereafter | — | |
| Total future minimum lease payments | 12,533,996 | |
| Less effects of discounting | (1,103,531) | |
| Present value of future minimum lease payments | $ | 11,430,465 | |
16. Other Income
The Company recognized $1,238,313, $950,264 and $4,437,887 of other income for the years ended December 31, 2023, 2022 and 2021, respectively, as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
|
| Other Income | 2023 | | 2022 | | 2021 |
| Interest income (expense), net | $ | 1,684,399 | | | $ | 762,685 | | | $ | (763,030) | |
| Gain on remeasurement of warrant liabilities | — | | | 1,127,388 | | | 5,199,496 | |
| Change in fair value of contingent liability | 1,437,525 | | | — | | | — | |
| (Loss) gain on equity method investments | (343,336) | | | 8,919 | | | (66,818) | |
| (Loss) gain on remeasurement of operating and finance leases | (866) | | | 1,388,273 | | | — | |
| Gain on bargain purchase | — | | | 1,593,612 | | | — | |
| Gain from PPE loan forgiveness | — | | | — | | | 142,667 | |
| (Loss) on disposal of fixed assets | (852,544) | | | (21,173) | | | (34,342) | |
| Goodwill impairment | — | | | (2,921,958) | | | — | |
| ABC litigation | (1,000,000) | | | — | | | — | |
| Other income (expense) | 313,135 | | | (987,482) | | | (40,086) | |
| Total other income | $ | 1,238,313 | | | $ | 950,264 | | | $ | 4,437,887 | |
17. Related Party Transactions
Historically, the Company has been involved in transactions with various related parties.
Legal Services
Ely D. Tendler is compensated for his services to the Company as General Counsel and Secretary through payments to Ely D. Tendler Strategic & Legal Services PLLC (“EDTSLS”), a law firm owned by Mr. Tendler. All payments made to EDTSLS by the Company were for Mr. Tendler's services to the Company as General Counsel and Secretary. No other services were provided by EDTSLS to the Company. The Company’s payments to EDTSLS for Mr. Tendler's services totaled $916,370, $960,081 and $702,083 for the years ended December 31, 2023, 2022 and 2021, respectively.
Subcontractor Services
PrideStaff provides subcontractor services for the Company. PrideStaff is owned by a former operations manager of the Company and his spouse, and therefore, a related party. The Company made subcontractor payments to PrideStaff totaling $0, $547,500 and $656,883 for the years ended December 31, 2023, 2022 and 2021, respectively.
Transition Services Agreement
On October 11, 2023, the Company and Anthony Capone, who resigned as Chief Executive Officer of the Company on September 15, 2023, entered into a separation and transition services agreement (the “Transition Agreement”). Pursuant to the Transition Agreement, Mr. Capone will continue to serve as a consultant to the Company until March 15, 2024 (such period, the “Consulting Period”) to advise on matters relating to business continuity and processes and transition his institutional knowledge with respect to operational and other departmental functions.
As compensation for his services during the Consulting Period, and subject to his compliance with the Transition Agreement, including the execution and non-revocation of a general release of claims in favor of the Company, Mr. Capone will receive a monthly consulting fee of $45,000 and subsidized premiums for continued group health plan coverage for the duration of the Consulting Period. Mr. Capone will not receive new equity awards or incentive
compensation under the Company’s equity incentive compensation program during the Consulting Period. The Transition Agreement further acknowledges and affirms that Mr. Capone will be bound by and comply with certain restrictive covenants. The Company made payments to Anthony Capone totaling $90,000, $0, and $0 for the years ended December 31, 2023, 2022, and 2021 respectively.
Included in accounts payable were $45,000 and $86,555 due to related parties as of December 31, 2023, and 2022, respectively.
18. Income Taxes
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate consists of the following:
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2023 | | 2022 | | 2021 |
| Statutory federal income tax benefit | 21.00 | % | | 21.00 | % | | 21.00 | % |
| Permanent items | 26.18 | % | | 0.56 | % | | (2.71) | % |
| State taxes, net of federal tax benefit | 20.67 | % | | 7.77 | % | | 5.99 | % |
| Effects of Rates Different from Statutory | (0.04) | % | | 0.17 | % | | (0.06) | % |
| Rate Change | 0.04 | % | | 0.01 | % | | — | % |
| Other | (29.54) | % | | (3.64) | % | | (0.71) | % |
| Change in valuation allowance | (1.91) | % | | (54.94) | % | | (20.98) | % |
| Income tax provision (benefit) | 36.40 | % | | (29.07) | % | | 2.53 | % |
The components of income tax expense (benefit) are as follows:
| | | | | | | | | | | | | | | | | |
| | For the Years Ended
December 31, |
| | 2023 | | 2022 | | 2021 |
| Current: | | | | | |
| Federal | $ | 2,555,164 | | | $ | 1,493,772 | | | $ | 295,956 | |
| State and local | 5,782,335 | | | 502,872 | | | 319,741 | |
| Foreign | - | | | - | | | - | |
| | $ | 8,337,499 | | | $ | 1,996,644 | | | $ | 615,697 | |
| Deferred: | | | | | |
| Federal | $ | 1,650,695 | | | $ | (7,683,475) | | | $ | - | |
| State and local | (3,256,914) | | | (2,649,791) | | | - | |
| Foreign | (375,300) | | | 375,301 | | | - | |
| | (1,981,519) | | | (9,957,965) | | | - | |
| Total income tax expense (benefit) | $ | 6,355,980 | | | $ | (7,961,321) | | | $ | 615,697 | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows:
| | | | | | | | | | | |
| For the Years Ended
December 31, |
| 2023 | | 2022 |
| Deferred tax assets: | | | |
| Allowance for doubtful accounts | $ | 1,683,119 | | | $ | 893,328 | |
| Accrued expenses | 799,295 | | | 382,649 | |
| Lease liability | 4,674,177 | | | 2,359,566 | |
| Stock compensation | 5,039,590 | | | 2,780,020 | |
| Research and development expense | 865,800 | | | 303,446 | |
| Net operating loss | 4,568,113 | | | 11,523,633 | |
| Other | (471,694) | | | (466,789) | |
| Total deferred tax asset | $ | 17,158,400 | | | $ | 17,775,853 | |
| | | |
| Valuation allowance | (1,207,673) | | | (1,520,345) | |
| Deferred income tax assets, net of allowance | $ | 15,950,727 | | | $ | 16,255,508 | |
| | | |
| Deferred tax liabilities: | | | |
| Prepaid expenses | $ | (780,767) | | | $ | (994,644) | |
| Depreciation | (3,819,069) | | | (2,798,988) | |
| Right-of-use asset | (4,544,024) | | | (2,346,070) | |
| Amortization | 5,081,672 | | | (157,839) | |
| Total deferred tax liability | $ | (4,062,188) | | | $ | (6,297,541) | |
| | | |
| Deferred tax assets, net of allowance | $ | 11,888,539 | | | $ | 9,957,967 | |
The Company has determined, based upon available evidence, that it is dependent uponmore likely than not that all of the generationnet deferred tax asset will not be realized and, accordingly, has provided a partial valuation allowance against its net deferred tax asset as of future taxable income during the period in which those temporary differences become deductible.December 31, 2023 and 2022, respectively. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential and taxingtax planning strategies in making this assessment. Because the future realizationthese assessments.
As of tax benefits is not considered to be more likely than not,December 31, 2023 ,2022 and 2021, the Company providedhad federal net operating loss carryforwards of approximately $0, $35,289,184 and $53,573,046, respectively. As of December 31, 2023, 2022 and 2021, the Company had approximately $10,737,510, $1,520,345 and $202,965 of foreign net operating loss carryforwards, respectively. As of December 31, 2023, 2022 and 2021, the Company had state net operating loss carryforward of approximately $36,422,543, $2,592,560 and $67,229,895, respectively. The federal net operating loss carryforwards generated after December 31, 2017 of $35,298,184 carry forward infinitely. State and foreign net operating loss carryforwards generated in the tax years from 2017 to 2020 will begin to expire, if not utilized, by 2039. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and similar provisions.
The difference between the statutory income taxes on the Company’s pre-tax loss and the Company’s effective income tax rate during the years ended December 31, 2023 and 2022 is primarily due to a fullrecorded valuation allowance. The valuation allowance for deferred tax assets as of December 31, 2023 and 2022 was $1,207,673 and $1,520,345, respectively. The net
change in the total valuation allowance for the
deferred tax assets at December 31, 2020.Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period, excluding shares subject to forfeiture. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of approximately 6,360,000 shares of Class A common stock in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted earnings per share is the same as basic earnings per share for the period presented.
In accordance with FASB ASC 260, “Earnings Per Share” (“ASC 260”), shares of Class A common stock are treated as participating securities because such shares are entitled to a pro rata share of undistributed trust earnings but do not share in the Company’s net losses. Consequently, net income (loss) per share is calculated using the two-class method prescribed by ASC 260. Pursuant to this method, net income per share for Class A common stock is calculated by dividing the undistributed interest income earned on investments held in the Trust Account of $20,078 by the weighted average number of Class A shares outstanding since original issuance, and net loss per share for Class B common stock is calculated by dividing the net loss of $148,751, adjusted for income allocated to the Class A shares of $20,078, by the weighted average number of Class B shares outstanding during the period.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Public Units
On October 19, 2020, the Company consummated its Initial Public Offering of 11,500,000 Units at $10.00 per Unit, generating gross proceeds of $115.0 million, and incurring offering costs of approximately $6.7 million, inclusive of $4.0 million in deferred underwriting commissions. Upon the closing of the Initial Public Offering and the Private Placement, $115.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants in the Private Placement were placed in the Trust Account.
Each Unit consists of one of the Company’s shares of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant (the “Public Warrants” and, collectively with the Private Placement Warrants, the “Warrants”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment under certain circumstances.
Underwriting Agreement
The Company granted the underwriter a 45-day option to purchase up to 1,725,000 additional Units to cover any over-allotments, at the Initial Public Offering price less the underwriting discounts and commissions. On November 16, 2020, the underwriter advised the Company that it would not exercise the over-allotment option, and consequently 431,250 Class B common shares were forfeited, resulting in a decrease in the total number of Class B common shares outstanding from 3,306,250 to 2,875,000, such that the Founder Shares (as defined below) will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $4.0 million in the aggregate, will be payable to the underwriter for deferred underwriting commissions from the amounts held in the Trust Account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On August 12, 2020, the Company’s Chief Executive Officer paid for certain offering costs for an aggregate price of $25,000 in exchange for issuance of 3,737,500 shares of Class B common stock, par value $0.0001 per share (the “Founder Shares”), issued to the Sponsor. On October 14, 2020, the Sponsor effected a surrender of 431,250 Class B common shares to the Company for no consideration, resulting in a decrease in the total number of Class B common shares outstanding from 3,737,500 to 3,306,250. On November 16, 2020, the underwriter advised the Company that it would not exercise its over-allotment option to purchase additional shares, and consequently 431,250 Class B common shares were forfeited, resulting in a decrease in the total number of Class B common shares outstanding from 3,306,250 to 2,875,000 such that the Founder Shares represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The Class B common stock shares were allocated among the Company’s officers, certain directors as well as to certain third parties.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial business combination and (B) subsequent to the initial business combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 2,533,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrants, generating gross proceeds of $3.8 million in the Private Placement. Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the sale of the Private Placement Warrants was added to the net proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a business combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash (subject to certain exceptions) and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Private Placement Warrants (and the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination (subject to certain exceptions).
Related Party Loans
On August 18, 2020, the Sponsor agreed to loan the Company up to an aggregate of $150,000 pursuant to an unsecured Note Payable to cover expenses related to the Initial Public Offering. This loan was payable without interest upon the completion of the Initial Public Offering. The Company borrowed approximately $71,000 under the Note Payable and fully repaid the borrowings on October 19, 2020.
Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, the Company’s officers, directors and their affiliates may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans to date. The Company had no borrowings under the Working Capital Loans at December 31, 2020.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
The Sponsor is entitled to registration rights with respect to the Founder Shares, Private Placement Warrants and any additional warrants that may be issued upon conversion of working capital loans pursuant to a registration rights agreement. The Sponsor will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, Sponsor will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
NOTE 6. STOCKHOLDERS’ EQUITY
Class A Common Stock—The Company is authorized to issue 50,000,000 shares of Class A common stock with a par shares value of $0.0001 per share. At December 31, 2021, there were 811,725 shares of Class A common stock issued and outstanding, excluding 10,688,275 shares of Class A common stock subject to possible redemption.
Class B Common Stock—The Company is authorized to issue 12,500,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each share. At December 31, 2020, there were 2,875,000 shares of Class B common stock issued and outstanding.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial business combination, or earlier at the option of the holder, on a one-for-one basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as described herein). In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of the initial business combination (including pursuant to a specified future issuance), the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including pursuant to a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Company’s initial business combination (excluding any shares or equity-linked securities issued or issuable to any seller in the initial business combination).
Preferred stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. At December 31, 2020, there were no shares of preferred stock issued or outstanding.
Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. After giving effect to the separation of all Units into the constituent Class A common shares and fractional warrants, there would be 3,833,333 Public Warrants outstanding before giving effect to the reduction resulting from not issuing fractional warrants upon separation of Units. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a business combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their Public Warrants on a cashless basis under certain circumstances). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial business combination, the Company will use its reasonable best efforts to file, and within 60 business days following the initial business combination to have declared effective, a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Warrants and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the Warrants expire or are redeemed; provided that, if the Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but it will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Warrants will have an exercise price of $11.50 per share, subject to adjustment, and will expire five years after the completion of a business combination or earlier upon redemption or liquidation.
In addition, if (x) the Company issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the initial business combination at an issue price or effective issue price of less than $9.20 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Company’s Sponsor or to its officers, directors or their affiliates, without taking into account any Founder Shares held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of each Warrant will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $18.00 per-share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 180% of the higher of (i) the Market Value and (ii) the Newly Issued Price.
The 2,533,333 Private Placement Warrants are identical to the Public Warrants, except that (1) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a business combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be non-redeemable (subject to certain exceptions) and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees and (3) the Sponsor and its permitted transferees will also have certain registration rights related to the Private Placement Warrants (including the shares of Class A common stock issuable upon exercise of the Private Placement Warrants). If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Once the Warrants become exercisable, the Company may redeem the outstanding Warrants (except for the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the Warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
Commencing ninety days after the Warrants become exercisable, the Company may redeem the outstanding Warrants:
| ● | in whole and not in part; |
| ● | at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock to be determined by reference to an agreed table based on the redemption date and the “fair market value” of the Company’s Class A common stock; |
| ● | if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders; |
| ● | if, and only if, the Private Placement Warrants are also concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above; and |
| ● | if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock (or a security other than the Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company is not the surviving company in the initial business combination) issuable upon exercise of the Warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given. |
The “fair market value” of the Class A common stock for this purpose shall mean the average last reported sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.
In no event will the Company be required to net cash settle any Warrant. If the Company is unable to complete a business combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
NOTE 7. FAIR VALUE MEASUREMENTS
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC 320 “Investments ‒ Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
At December 31, 2020, assets held in the Trust Account were comprised of $743 in cash and $115,019,335 in U.S. Treasury Bills. During the period ended December 31, 2020, the Company did not withdraw any interest income from the Trust Account to pay its franchise taxes2023, and income taxes.
The fair value2022 was a decrease of the Company’s financial assets$312,672 and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| | |
| Level 3: | Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
The gross holding gains and fair value of held-to-maturity securities at December 31, 2020 are as follows:
| Held-To-Maturity Securities | | Carrying Value at December 31,
2020
(Amortized Cost) | | | Gross Unrealized
Holding Gain | | | Fair Value - Quoted Prices in Active Markets
(Level 1) | |
| U.S. Treasury Bills (mature on February 18, 2021) | | $ | 115,019,335 | | | $ | 4,462 | | | $ | 115,024,797 | |
NOTE 8. INCOME TAXES
The income tax provision (benefit) for the year ended December 31, 2020 consists of the following:
| Current | | | |
| Federal | | $ | (12,204 | ) |
| State | | | — | |
| Deferred | | | | |
| Federal | | | (19,009 | ) |
| State | | | — | |
| Change in valuation allowance | | | 31,213 | |
| | | | | |
| Income tax provision (benefit) | | $ | — | |
The Company’s net deferred tax assets are as follows:
| Deferred tax asset | | | |
| Net operating loss carryforward | | $ | 12,204 | |
| Startup/organizational costs | | | 19,009 | |
| Total deferred tax assets | | | 31,213 | |
| Valuation allowance | | | (31,213 | ) |
| Deferred tax assets, net of allowance | | $ | — | |
In assessing the realizationrealizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxabletable income during the periods in which those temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversalreversals of deferred tax assets,liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all
The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued no penalties or interest during the years ended December 31, 2023, 2022, and 2021.
The Company files tax returns as prescribed by the tax laws of the
information available, management believesjurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that
significant uncertainty existsapply in each jurisdiction. As of December 31, 2023, open years related to all jurisdictions are 2022, 2021 and 2020. The Company has no open tax audits with
respect to future realization of the deferred tax assets and has therefore established a full valuation allowanceany taxing authority as of December 31,
2020.A reconciliation2023.
19. 401(k) Plan
The Company established a 401(k) plan in January 2022 that qualifies as a deferred compensation arrangement under Section 401 of the
statutory income tax rateInternal Revenue Code. All U.S. employees that complete two months of service with the Company are eligible to
participate in the
Company’s effective tax rate for the period from August 11, 2020 (inception)plan. The Company did not make any employer contributions to
this plan as of December 31,
2020 is as follows: | | | |
Tax benefit at statutory federal income tax rate | | | (21.00 | %) |
Permanent book/tax difference | | | 0.02 | % |
Valuation allowance | | | 20.98 | % |
Income tax provision (benefit) | | | 0.00 | % |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up2023.
20. Legal Proceedings
From time to
the date the audited financial statements were issued. Based upon this review,time, the Company
determinedmay be involved as a defendant in legal actions that
except as follows, there have been no events that have occurred that would require adjustment to or disclosurearise in the
financial statements.Proposed Business Combination
On March 8, 2021,normal course of its business. In the opinion of management, the Company entered into a merger agreement (the “Merger Agreement”) with Ambulnz, Inc. dba DocGo (“DocGo”) pursuant to which DocGohas adequate legal defense on all legal actions, and the results of any such proceedings would merge with a newly incorporated subsidiary ofnot materially impact the Company (the “Merger”), with DocGo being the surviving entity of the Merger and becoming a wholly-owned subsidiaryConsolidated Financial Statements of the Company. The MergerCompany provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is expected toreasonably possible and the loss or range of loss can be consummatedestimated, the Company discloses the possible loss in its Consolidated Financial Statements.
As of December 31, 2022, the Company recorded a liability of $1,000,000, which represents an amount for an agreed-upon settlement of various class-based claims, both actual and potential, under California state law, as described below.
Stephanie Zamora, Jascha Dlugatch, et al. v. Ambulnz Health, LLC, et al. was filed in the second quarterLos Angeles Superior Court on October 11, 2018, and the complaint alleged wage and hour violations pursuant to California’s Private Attorneys’ General Act of 2004 (“PAGA”). On February 24, 2020, this case was consolidated with Jascha Dlugatch, et. al. v. Ambulnz Health, LLC (the “Consolidated Compliant”), another lawsuit filed in the Los Angeles Superior Court. On May 6, 2021, following the receipt of required approvalparties attended mediation and settled the claims pled in the Consolidated Complaint on a class-wide and PAGA basis in exchange for a proposed $1,000,000 payment by the stockholdersdefendant parties, inclusive of administrative costs and fees. On September 9, 2022, the Los Angeles Superior Court preliminarily approved the proposed settlement, and on May 2, 2023, the Los Angeles Superior Court issued a final approval of the proposed settlement, which was paid in July 2023.
In addition, on October 27, 2023, Joe Naclerio, individually and purportedly on behalf of all others similarly situated, filed a putative class action complaint for violation of federal securities laws in the U.S. District Court for the Southern District of New York against the Company, its Chairman, current and DocGo, required regulatory approvals,former Chief Executive Officers, and current and former Chief Financial Officers. The complaint alleges that the Company violated various securities laws, and seeks class certification, damages, interest, attorneys’ fees, and other relief. On January 17, 2024, the Court appointed the Genesee County Employees’ Retirement System as lead plaintiff. Due to the early stage of this proceeding, we cannot reasonably estimate the potential range of loss, if any. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
21. Risk and Uncertainties
COVID-19 Risks, Impacts and Uncertainties
The spread of COVID-19 and the
fulfillment ofrelated country-wide shutdowns and restrictions had a mixed impact on the Company’s business. In the ambulance transportation business, which predominantly comprises non-emergency medical transportation, the Company saw a decline in volumes from historical and expected levels, as elective surgeries and other
conditions.Consideration
Upon consummation of the Merger, DocGo stockholders will receive 83,600,000 sharesprocedures were postponed. In some of the Company’s Class A common stocklarger markets, such as considerationNew York and upCalifornia, there were declines in trip volume. In addition, the Company experienced lost revenues associated with sporting, concerts and other events, as those events were cancelled or significantly restricted (or entirely eliminated) the number of permitted attendees. Ambulance transports and event-related revenues have both since recovered to 5,000,000 additional sharespre-COVID levels or higher.
There are two areas where the Company has experienced positive business impacts from COVID-19. In April and May 2020, the Company participated in an emergency project with Federal Emergency Management Agency in the New York City area. This engagement resulted in incremental transportation revenue. In addition, in response to the need for widespread COVID-19 testing and available EMTs and paramedics, the Company formed a new subsidiary, RRT, with the goal to perform COVID-19 tests at nursing homes, municipal sites, businesses, schools and other venues. RRT is part of the Mobile Health Services segment. As COVID-19 testing activity slowed to account for a minor portion of the Company’s
Class A common stock as earn-out consideration issuable in the future upon attainmentrevenues, RRT expanded its services beyond COVID-19 testing to a wide variety of
the following stock price conditions: (i) 1,250,000 shares if the closing stock price equals or exceeds $12.50 per share on any 20 trading days in a 30-trading-day period at any time until the first anniversary of the closing date; (ii) 1,250,000 shares if the closing stock price equals or exceeds $15.00 per share on any 20 trading days in a 30-trading-day period at any time until the third anniversary of the closing date; (iii) 1,250,000 shares if the closing stock price equals or exceeds $15.00 per share on any 20 trading days in a 30-trading-day period at any time until the third anniversary of the closing date;tests, vaccinations and
(iv) 1,250,000 shares if the closing stock price stock equals or exceeds $15.00 per share on any 20 trading days in a 30-trading-day period at any time until the fifth anniversary of the closing date.Sponsor Escrow Agreement
Pursuant to the Merger Agreement, theother procedures.
The Company’s
Sponsor will enter into an escrow agreement (the “Sponsor Escrow Agreement”) with the Company and Continental Stock Transfer & Trust Company, as escrow agent, providing that, immediately following the closing of the Merger, the Sponsor shall deposit 575,000 shares of the Company’s Class A common stock (the “Sponsor Earnout Shares”) into escrow. The Sponsor Escrow Agreement will provide thatcurrent business plan assumes increased demand for Mobile Health Services. Demand for such
Sponsor Earnout Shares will either be released to the Sponsor or terminated and canceledservices was accelerated by the
Company if certain stock price conditions are met or not,pandemic, but is also being driven by longer-term secular factors, such as
follows: (i) with respect to 287,500 Sponsor Earnout Shares, the
closing stock price equals or exceeds $12.50 per share on any 20 trading days in a 30-trading-day period at any time until the third anniversary of the closing date, and (ii) with respect to 287,500 Sponsor Earnout Shares, the closing stock price equals or exceeds $15.00 per share on any 20 trading days in a 30-trading-day period at any time at any time until the fifth anniversary of the closing date.
Lock-Up Agreements
Concurrently with the execution of the Merger Agreement, the Company, DocGo and Doc stockholders who will hold 72.19% of the fully-diluted equity of Company following the consummation of the Merger entered into lock-up agreements providing that such Company stockholders will not transfer the consideration shares for earn-out shares received by such stockholders for a period of six months following the consummation of the Merger, in each caseincreasing desire on the termspart of patients to receive treatments outside of traditional settings, such as doctor’s offices and subject tohospitals.
22. Subsequent Events
Share Repurchase Program
On January 31, 2024, the
provisions set forth therein.Sponsor Waiver Agreement
Concurrently with the executionBoard of the Merger Agreement, the Company, the Sponsor and DocGo entered into an agreement providing for the Sponsor’s waiver of the anti-dilution and conversion price adjustments set forth in the Company’s Amended and Restated Certificate of Incorporation. AsDirectors authorized a result of such waiver, all outstanding Class B common stock of the Company will convert on a one-to-one basis into the Company’s Class A Common Stock concurrently with the closing of the Merger Agreement.
Other Agreements
The Merger Agreement also calls for additional agreements, including, among others, non-competition agreements, employment agreements, voting support agreements, and a registration rights agreement.
PIPE Subscription Agreements
The Company engaged Barclays Capital Inc. and Deutsche Bank Securities Inc. as co-lead private placement agents, and engaged Canaccord Genuity LLC as co-placement agent for a private placement of the Company’s Class A common stock.
Concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements (“Subscription Agreements”) with certain qualified institutional buyers and institutional accredited investors (collectively, the “Investors”),new share repurchase program pursuant to which the Company will, substantially concurrently with,may purchase up to $36,000,000 in shares of Common Stock during a six-month period ending July 30, 2024 (the “Repurchase Program”) and contingent upon,may be suspended, extended, modified or discontinued at any time.
Under the consummationterms of the Merger, issue an aggregate of 12,500,000Repurchase Program, the Company may purchase shares of Common Stock on a discretionary basis from time to time through open market repurchases or privately negotiated transactions or through other means, including by entering into Rule 10b5-1 trading plans or accelerated share repurchase programs, in each case, during an “open window” and when the Company does not possess material non-public information.
The timing, manner, price and amount of shares repurchased under the Repurchase Program will depend on a variety of factors, including stock price, trading volume, market conditions, corporate and regulatory requirements and other general business considerations. The Repurchase Program may be modified, suspended or discontinued at any time without prior notice.
Repurchases under the Repurchase Program may be funded from the Company’s Class A Common Stock to the Investors at a priceexisting cash and cash equivalents, future cash flow or proceeds of $10.00 per share, for aggregate gross proceeds toborrowings or debt offerings.
Line of Credit
On February 8, 2024, the Company made a draw of $125,000,000 (the “PIPE”). The closing$15,000,000 under its Revolving Facility.
On February 27, 2024, the Company repaid all amounts outstanding under the Revolving Facility, and no amounts are outstanding as of the
Subscription Agreements is conditioned upon, among other things, (i) the substantially concurrent consummation of the Merger, (ii) the accuracy of all representations and warranties of the Company and the Investors in the Subscription Agreements, and (iii) the Merger Agreement shall not have been amended or modified, and no waiver shall have occurred thereunder, that would reasonably be expected to materially and adversely affect the economic benefits that the Investor would reasonably expect to receive under the Subscription Agreement without having received the Investor’s prior written consent.The Company has agreed that, as soon as reasonably practicable, but in no event later than 30 calendar days following the closing date of the Merger, it shall file a registration statement with the SEC covering the resale by the Investorsthis Annual Report.
Conditions to Closing
Consummation of the Merger is subject to the satisfaction or waiver by the respective parties of a number of conditions, including the approval of the Merger Agreement and the transactions contemplated thereby by the Company’s and DocGo’s respective stockholders. Other closing conditions include, among others: (i) the respective
representations of the parties to each other being true and correct; (ii) performance and compliance with in all material respects of the respective covenants and agreements of each party; (iii) the applicable waiting periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or terminated; (iv) obtaining the approval of the New York Department of Health with respect to the Merger and other transactions contemplated by the Merger Agreement; (v) DocGo having delivered financial statements with an unqualified audit opinion rendered by an auditing firm qualified by the Public Company Accounting Oversight Board (PCAOB); (vi) the aggregate amount of cash remaining in the Company’s Trust Account after taking into consideration redemptions by the Company’s public stockholders and other permitted disbursements, together with the proceeds of the PIPE (defined below), equaling or exceeding $175,000,000 (the “Minimum Cash Condition”); and (vii) the Company having at least $5,000,001 of net tangible assets remaining after the closing of the contemplated transactions.
Termination
The Merger Agreement may be terminated: (i) by mutual written consent of the parties; (ii) by either party if the Merger has not been consummated by November 8, 2021 (the Outside Date”); (iii) by either party if the Company or DocGo do not obtain the required approval of their respective stockholders; (iv) by either party in in the event of the breach of any covenant, representation or warranty by the other party that is not cured by the Outside Date; or (v) by the Company if DocGo has not delivered financial statements with an unqualified audit opinion rendered by a PCAOB-qualified auditing firm by June 30, 2021.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Disclosure.
Item 9A. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Disclosure
The term “disclosure controls and procedures,
are” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures
of a company that are designed to ensure that information required to be disclosed
by a company in
ourthe reports
filedthat it files or
submittedsubmits under the Exchange Act
isare recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by us in
companythe reports
filedwe file or
submittedsubmit under the Exchange Act is accumulated and communicated to
our management, including our
ChiefPrincipal Executive Officer
(who serves as our principal executive officer) and
ChiefPrincipal Financial Officer,
(who serves as
our principal financial and accounting officer),appropriate, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under
Our management, with the Exchange Act,participation of our ChiefPrincipal Executive Officer and Chiefour Principal Financial Officer, carried out an evaluationevaluated, as of the end of the period covered by this Annual Report, the effectiveness of the designour disclosure controls and operationprocedures. Based on this evaluation of our disclosure controls and procedures as of December 31, 2020. Based upon their evaluation,2023, our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e)as of such date are effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and
15d-15(e) under the Exchange Act) were effective.Management’s report onmaintaining adequate internal control over financial reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting or an attestation reportincludes policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Attestation Report of Registered Public Accounting Firm
Urish Popeck & Co., LLC, the independent registered public accounting firm
due to a transition period established by rules ofthat audited the
SEC for newly public companies.Changesfinancial statements included in this Annual Report, has issued an attestation report on our internal control over financial reporting
There was no changereporting. Such report is included in Item 8 of this Annual Report and incorporated by reference herein.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting
that(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31,
20202023 that
hashave materially affected, or
is reasonableare reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other
InformationInformation.
In the fourth quarter of 2023, other than as disclosed below, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act) adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 105b-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K).
| | | | | | | | | | | | | | | | | |
| Name | Title | Date Plan Adopted / Terminated | Original Duration of Plan | Shares to be Purchased or Sold | Intended to Satisfy Rule 10b5-1(c)? |
| Lee Bienstock | Chief Executive Officer | Adopted May 17, 2023 and terminated November 10, 2023 | August 16, 2023 to July 19, 2024 | Sell 20,000 | Yes |
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Item 10. Directors, Executive Officers and Corporate
GovernanceDirectors and Executive Officers
Our officers and directors areGovernance.
Except as
follows:Name | | Age | | Position |
James M. Travers | | 69 | | Chairman of the Board |
Michael Burdiek | | 61 | | Chief Executive Officer and Director |
Richard Vitelle | | 67 | | Chief Financial Officer and Secretary |
Garo Sarkissian | | 53 | | Executive Vice President, Corporate Development |
Andrew G. Flett | | 47 | | Director |
Mark Licht | | 67 | | Director |
Kyle Messman | | 45 | | Director |
James M. Travers has served asindicated below, the information required under this Item 10 of Form 10-K is incorporated herein by reference to our Chairmandefinitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the Board since our formation. Mr. Travers has over 30 years of industry experience leading multi-national companies selling and marketing high technology products and services. In addition, he has diverse experience successfully building high growth companies in the public and private sectors. Mr. Travers served as the Chairman of the Board of Fleetmatics Group plc (NYSE: FLTX), a global provider of mobile workforce solutions for service-based businesses of all sizes delivered as software-as-a-service (SaaS), from 2013 to 2016 and served as its Chief Executive Officer from 2006 to 2016. While Chief Executive Officer of Fleetmatics, Mr. Travers had responsibility for the company’s global operations and strategic direction. Prior to joining Fleetmatics, he served as Senior Vice President of the Americas of GEAC Computer Corporation Limited (Nasdaq: GEAC) where he helped grow the company through a series of successful acquisitions in addition to delivering strong organic revenue growth. Prior to GEAC, Mr. Travers was Chief Executive Officer and Chief Operating Officer of Harbinger Corporation (Nasdaq: HRBC), a leading provider of e-commerce software and services. Mr. Travers previously held senior level positions in sales, marketing and general management with Texas Instruments Inc. Mr. Travers holds a Business Administration degree from East Stroudsburg University of Pennsylvania and an Executive MBA studies at the McCombs School of Business at the University of Texas in Austin, Texas. We believe Mr. Travers is well-qualified to serve as a member of our board of directors due to his business experience, contacts and relationships.
Michael Burdiek has served as our Chief Executive Officer and a member of our board of directors since our formation. Mr. Burdiek served as President, Chief Executive Officer and a director of CalAmp Corp. (Nasdaq: CAMP), a SaaS technology company providing wireless communications solutions, from June 2006 to March 2020, and since March 2020, Mr. Burdiek has served as an advisor to CalAmp. He joined CalAmp as Executive Vice President in 2006, was appointed President of its Wireless DataCom segment in 2007, and was named Chief Operating Officer in 2008. In 2010, his responsibilities were expanded further, and he was given the additional title of President. He was promoted to Chief Executive Officer and director in 2011. Prior to joining CalAmp, Mr. Burdiek was the President and Chief Executive Officer of Telenetics Corporation, a manufacturer of data communications products, from 2003 to 2006. From 1987 to 2003, Mr. Burdiek held a variety of technical and executive management roles with Comarco, Inc., a provider of test solutions to the wireless industry. Mr. Burdiek began his career as a design engineer with Hughes Aircraft Company. He currently serves as a member of the Board of Directors of Five9, Inc. (Nasdaq: FIVN), a SaaS cloud-based contact center software company. He holds MBA and MSEE degrees from California State University–Fullerton, and a B.S. degree in Electrical Engineering from Kansas State University. We believe Mr. Burdiek is well-qualified to serve as a member of our board of directors due to his business experience, contacts and relationships.
Richard Vitelle has served as our Chief Financial Officer and Secretary since our formation. Mr. Vitelle has over 30 years of experience in senior financial management roles with publicly held companies. Since August 2018, Mr. Vitelle has served as a financial consultant for several companies including CalAmp, Dune Labs Inc., a technology startup in the water metering space, and Ganna Walska Lotusland, a non-profit organization. From 2001 to August 2018, Mr. Vitelle served as Executive Vice President, Chief Financial Officer and Secretary/Treasurer of CalAmp. Prior to joining CalAmp, he served as Vice President of Finance and Administration, Chief Financial Officer and Treasurer of SMTEK International, Inc. (Nasdaq: SMTI), an electronics manufacturing services provider acquired by CTS Corporation (NYSE: CTS), from 1996 to 2001. Earlier in his career, Mr. Vitelle served as a senior manager with Price Waterhouse (now PricewaterhouseCoopers). Mr. Vitelle currently serves on the Board of Trustees of Ganna Walska Lotusland in Montecito, California, where he chairs the Audit Committee. He is a licensed CPA in the State of California. Mr. Vitelle holds an MBA degree from University of California, Los Angeles, and graduated summa cum laude from California State Polytechnic University, Pomona with a B.S. degree in Business Administration.
Garo Sarkissian has served as our Executive Vice President, Corporate Development since our formation. Since August 2019, Mr. Sarkissian has served as Chief Executive Officer and founder of Dune Labs Inc. From 2005 to March 2019, Mr. Sarkissian served as Senior Vice President, Corporate Development and Executive Officer of CalAmp. From 2003 to 2005, he served as Principal and Vice President of Business Development for Global Technology Investments, a private equity firm. From 1999 to 2003, Mr. Sarkissian held senior management and business development roles at California Eastern Laboratories, a private company developing and marketing radio frequency (RF), microwave and optical components. Mr. Sarkissian began his career as an RF engineer over a span of 10 years for MACom Technology Solutions and NEC Corporation. Mr. Sarkissian is currently a member of the board of directors of Smartwitness Holdings Inc., a video telematics company. He holds an MBA degree from INSEAD, an M.S. degree in Electrical Engineering from University of California, Irvine and a B.S. degree in Electrical and Computer Engineering from California State Polytechnic University, Pomona.
Andrew G. Flett has served as a member of our board of directors since our formation. Mr. Flett has spent the last two decades investing in the technology industry, specializing in mobility, communications, security, software, and data analytics. Since 2018, he has served as a General Partner at Mobility Impact Partners, a private equity platform focused on transportation mobility technologies. Since 2015, he has also served as Managing Principal at Growth Control Capital, where he has focused on growth equity transactions in the mobility space. He also currently sits on the boards of Truce Software, Avrios and EDriving. Mr. Flett was formerly a Partner with Investcorp Technology Partners from 1998 to 2013. He also served as a director of Fleetmatics from 2008 through its 2012 initial public offering and subsequent sale to Verizon in 2016 and was a member of its Audit Committee. He holds a Mechanical Engineering degree from the University of Victoria and an MBA from the Wharton School of the University of Pennsylvania. We believe Mr. Flett is well-qualified to serve as a member of our board of directors due to his business experience, contacts and relationships.
Mark Licht has served as a member of our board of directors since our formation. Mr. Licht is an entrepreneur with over 30 years of experience in the formation, financing and operations of connected car services and technology companies. Mr. Licht has served as President of Licht & Associates, a strategic consulting services firm that conducts strategic business analysis, develops business and operating plans, evaluates market opportunities and technology trends, assists with financing and proposes alternative business strategies for chief executive officers and their executive teams in the telematics, IoT and location-based services industries, since 2007. In that capacity, Mr. Licht has worked with investment bankers and private equity funds, as well as directly with boards of directors and management teams of companies in the US, Latin America and Europe. Mr. Licht has also served as Senior Advisor of C.J. Driscoll & Associates since 2010 and as an Advisor at Motus Ventures since 2016. Mr. Licht co-founded North American Teletrac in 1985 and served as its President until 2001. He also served as the Executive Vice President for Strategy at AirTouch Teletrac from 1991 until 1996. He co-founded Ituran Location and Control Ltd. (Nasdaq: ITRN) in 1994. Mr. Licht also co-founded SigmaOne Communications in 1998 and served as its President until 2001. Mr. Licht currently serves on the boards of directors or advisory boards of a number of fleet management, insurance telematics, traffic information, UBI, cybersecurity, data mining, EV and OEM focused technology companies, including Preteckt, Roadz, EDriving and GPS Dashboard. He previously served on the board of directors of Inseego Corp. (Nasdaq: INSG) and Advisory Board of Lytx, Inc. Mr. Licht holds a M.S. in International Relations from The London School of Economics and a B.A. in Political Science from the University of California, Los Angeles. We believe Mr. Licht is well-qualified to serve as a member of our board of directors due to his business experience, contacts and relationships.
Kyle Messman has served as a member of our board of directors since our formation. Mr. Messman is the Managing Director of South Bay Ventures, a venture capital firm he founded in 2018 to make early-stage investments in cloud technology companies. He has also served as Special Venture Partner with Fontinalis Partners, LLC a venture capital firm that invests in next generation mobility, since 2018. Investment areas of Fontinalis Partners and South Bay Ventures include autonomous vehicles, connected cars and fleets, supply chain and logistics, mobility services, and several others. He was formerly Chief Financial Officer of Velocify, Inc., a SaaS based sales acceleration platform acquired by Ellie Mae (NYSE: ELLI) in November 2017. Prior to that, he was the Chief Financial Officer of Telogis, a SaaS provider of fleet and mobile resource management solutions to large enterprises, until its acquisition by Verizon (NYSE: VZ) in August 2016. While at Telogis, he led the process of raising over $200 million in equity and debt capital to fund growth and completed six acquisitions prior to the company’s sale. Prior to Telogis, he led corporate financial planning for International Rectifier, a semiconductor manufacturer, with responsibilities that included SEC and financial reporting, capital transactions and financial planning and analysis. He previously spent several years as an investment banker focused on mergers and financings in the technology services and software sectors. Mr. Messman holds a B.S. in Economics from the Wharton School at the University of Pennsylvania and an MBA in Finance from the Graziadio School of Business at Pepperdine University. We believe Mr. Messman is well-qualified to serve as a member of our board of directors due to his industry, operational and transactional experience.
Number and Terms of Office of Officers and Directors
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. The term of office of the first class of directors, consisting of Mr. Messman, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Messrs. Flett and Licht, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Messrs. Travers and Burdiek, will expire at the third annual meeting of stockholders.
Our officers are appointedcovered by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman or Co-Chairmen of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board has three standing committees: an audit committee, a compensation committee and a nominating committee. Subject to phase-in rules and a limited exception, which we are not taking advantage of, Nasdaq rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors.
An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have determined that Messrs. Flett, Licht, and Messman are independent directors under the Nasdaq rules and Rule 10A-3 of the Exchange Act. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Audit Committee
Effective as of October 14, 2020, we established an audit committee of our board of directors. Messrs. Flett, Licht and Messman serve as members of our audit committee, and Mr. Messman chairs the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent, subject to certain phase-in provisions which we are not utilizing. Each of Messrs. Flett, Licht and Messman meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board has determined that Mr. Messman qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
The principal functions of the audit committee, include:
| ● | the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; |
| ● | pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| ● | reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence; |
| ● | setting clear hiring policies for employees or former employees of the independent auditors; |
| ● | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| ● | obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| ● | reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
During the period from August 11, 2020 (inception) through December 30, 2020, our Audit Committee held one meeting.
Compensation Committee
Effective as of October 14, 2020, we established a compensation committee of our board of directors, and Messrs. Flett, Licht and Messman have been appointed to serve as members of this committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, both of whom must be independent, subject to certain phase-in provisions which we are not taking advantage of. Messrs. Flett, Licht and Messman all meet the independent director standard under Nasdaq listing standards applicable to members of the compensation committee.
The principal functions of the compensation committee, as set forth in the committee’s charter, include:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing and approving on an annual basis the compensation of all of our other officers; |
Annual Report (our “Proxy Statement”).
| ● | reviewing on an annual basis our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as indicated above, other than reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our officers, directors or any of their respective affiliates for services rendered prior to or in connection with the completion of our initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
During the period from August 11, 2020 (inception) through December 31, 2020, our Compensation Committee did not hold any meetings.
Nominating Committee
Effective as of October 14, 2020, we established a nominating committee of our board of directors, and Messrs. Flett, Licht and Messman have been appointed to serve as members of this committee, all of whom are independent in accordance with Nasdaq regulations. The primary purpose of our nominating committee is to assist the board in identifying, screening and reviewing individuals qualified to serve as directors and recommending to the board of directors candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the board of directors. The nominating governance committee is governed by a charter that complies with Nasdaq rules.
During the period from August 11, 2020 (inception) through December 31, 2020, our Nominating Committee did not hold any meetings.
Director Nominations
In addition to director candidates recommended by our nominating committee, the board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, our board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics applicable(the “Code of Ethics”) that applies to all of our directors, officers and employees. We have previously filed a copy ofemployees, including our principal executive, principal financial and principal accounting officers, or persons performing similar functions. Our Code of Ethics andis posted on our audit, compensation and nominating committee charters as exhibitswebsite located at www.DocGo.com. We intend to the registration statement in connection with our Initial Public Offering. You may review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copydisclose any future amendments to certain provisions of the Code of Ethics will be provided without charge by us upon request.
and waivers of the Code of Ethics granted to executive officers and directors on our website within four business days following the date of the amendment or waiver, as and to the extent required under the SEC and Nasdaq rules.Item 11. Executive
CompensationNoneCompensation.
The information required by this Item 11 of
our officers or directors has received any cash compensation for services rendered to us, and no compensation of any kind, including finder’s and consulting fees,Form 10-K will be
paidincluded in our Proxy Statement and is incorporated herein by
us to our officers, directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of our initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf.After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer documents furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
Since our formation, we have not granted any stock options or stock appreciation rights or any other awards under long-term incentive plans to any of our executive officers or directors.
Following our initial business combination, to the extent we deem it necessary, we may seek to recruit additional managers to supplement the incumbent management team of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the target’s incumbent management team.
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
MattersEquity Compensation Plan Information
We have no compensation plans under which equity securities are authorized for issuance.
Beneficial OwnershipMatters.
The information required by this Item 12 of
SecuritiesThe following table sets forth information regarding the beneficial ownership ofForm 10-K will be included in our common stock as of March 29, 2021, by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
| ● | each of our executive officers, directors and director nominees that beneficially owns shares of our common stock; and |
| ● | all our executive officers, directors and director nominees as a group. |
Unless otherwise indicated, we believe that all persons named in the table have sole votingProxy Statement and investment power with respect to all shares of common stock beneficially ownedis incorporated herein by them. The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these warrants are not exercisable within 60 days of the date of this report.
Name and Address of Beneficial Owner (1) | | Number of Shares Beneficially Owned | | | Percentage of Outstanding Common Stock | |
| Directors and Executive Officers | | | | | | | | |
| James Travers (2) | | | 2,875,000 | | | | 20.0 | % |
| Michael Burdiek (2) | | | 2,875,000 | | | | 20.0 | % |
| Richard Vitelle (2) | | | 2,875,000 | | | | 20.0 | % |
| Garo Sarkissian (2) | | | 2,875,000 | | | | 20.0 | % |
| Andrew Flett (3) | | | - | | | | - | |
| Mark Licht (3) | | | - | | | | - | |
| Kyle Messman (3) | | | - | | | | - | |
| All officers and directors as a group (seven individuals) | | | 2,875,000 | | | | 20.0 | % |
| Five Percent Holders | | | | | | | | |
| Motion Acquisition LLC (2) | | | 2,875,000 | | | | 20.0 | % |
| Adage Capital Partners, L.P. (4) | | | 1,000,000 | | | | 7.0 | % |
| (1) | This table is based on 14,375,000 shares of common stock outstanding at March 29, 2021, of which 11,500,000 were Class A common stock and 2,875,000 were Founder Shares. Unless otherwise noted, the business address of each of the beneficial owners listed above is c/o Graubard Miller, 405 Lexington Avenue, New York, New York 10174. |
| (2) | James Travers, Michael Burdiek, Richard Vitelle, and Garo Sarkissian are each managing members of Motion Acquisition LLC and, accordingly, each may be deemed to be the beneficial owner of the securities held by Motion Acquisition LLC. Each such individual disclaims beneficial ownership over any securities held by Motion Acquisition LLC except to the extent of his pecuniary interest therein. |
| (3) | Does not include securities held by Motion Acquisition LLC, of which such person is a member. Each such individual disclaims beneficial ownership over any securities held by Motion Acquisition LLC except to the extent of his pecuniary interest therein. |
| (4) | According to a Schedule 13G filed with the SEC on October 29, 2020 on behalf of Adage Capital Partners, L.P., Adage Capital Partners GP, L.L.C., Adage Capital Advisors, L.L.C., Robert Atchinson and Phillip Gross, the shares reported herein are directly owned by Adage Capital Partners, L.P. Adage Capital Partners GP, L.L.C. is the general partner of Adage Capital Partners, L.P., Adage Capital Advisors, L.L.C. is the managing member of Adage Capital Partners GP, L.L.C., and Messrs. Atchinson and Gross are managing members of Adage Capital Advisors, L.L.C. Adage Capital Partners, L.P. has the power to dispose of and the power to vote the shares of common stock beneficially owned by it, which power may be exercised by its general partner, Adage Capital Partners GP, L.L.C. Adage Capital Advisors, L.L.C., as managing member of Adage Capital Partners GP, L.L.C., directs Adage Capital Partners GP, L.L.C.’s operations. Messrs. Atchinson and Gross, as managing members of Adage Capital Advisors, L.L.C., have shared power to vote the shares of common stock. The address of Adage Capital Partners, L.P. is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116. |
Item 13. Certain Relationships and Related Transactions and Director Independence
Founder Shares
In August 2020, 3,737,500 Founder Shares were issued to our Sponsor, Motion Acquisition LLC, in exchange for a capital contributionIndependence.
The information required by this Item 13 of
$25,000, or approximately $0.007 per share. In October 2020, our Sponsor surrendered 431,250 Founders Shares for no consideration, which resulted in the total number of Founders Shares outstanding decreasing to 3,306,250. In November 2020, an additional 431,250 Founders Shares were forfeited by the Sponsor and were canceled by the Company as a result of the underwriter waiving its over-allotment option for our Initial Public Offering. As a result of this forfeiture and cancellation, there are 2,875,000 Founders Shares currently outstanding, which represent 20.0% of the total number of common shares issued and outstanding.Private Placement Warrants
Concurrent with the closing of our Initial Public Offering on October 19, 2020, the Sponsor purchased a total of 2,533,333 Private Placement Warrants for a purchase price of $1.50 per warrant, of $3,800,000 in the aggregate, in a private placement. Each Private Placement Warrant entitles the holder to purchase one share of our Class A common stock at $11.50 per share. The Private Placement Warrants (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of our initial business combination.
Related Party Loans and Advances
Until the consummation of our Initial Public Offering, our only sources of liquidity were the $25,000 proceeds from the sale of Founder Shares to our Sponsor and a loan from our Sponsor of approximately $71,000 to cover certain Initial Public Offering costs and operating expenses. On October 19, 2020, we repaid the loan from our Sponsor in full.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Except as may be precluded by the terms of a business combination definitive agreement, up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. Except as set forth above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third partiesForm 10-K will be willing to loan such funds and provide a waiver against any and all rights to seek access to fundsincluded in our Trust Account.
Limitation on LiabilityProxy Statement and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation provides that our officers and directors will be indemnifiedis incorporated herein by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors. Except with respect to any Public Shares they acquired in our Initial Public Offering or thereafter (in the event we do not consummate an initial business combination), our officers and directors have agreed to waive (and any other persons who may become an officer or director prior to the initial business combination will also be required to waive) any right, title, interest or claim of any kind in or to any monies in the Trust Account, and not to seek recourse against the Trust Account for any reason whatsoever, including with respect to such indemnification.
reference.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Related Party Transaction Policy
Prior to the consummation of our Initial Public Offering, we adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the Company.
In addition, our audit committee, pursuant to a written charter that we adopted prior to the consummation of our Initial Public Offering, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present is required in order to approve a related party transaction. A majority of the members of the entire audit committee constitutes a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee is required to approve a related party transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement, dated October 14, 2020, requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of these securities, having a value of at least $25 million in the aggregate, are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period, which occurs (a) in the case of the Founder Shares, on the earlier of (A) one year after the completion of our initial business combination or (B) subsequent to our business combination, (i) if the last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination or (ii) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property and (b) in the case of the Private Placement Warrants and the respective Class A common stock underlying such warrants, 30 days after the completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Andrew Flett, Mark Licht and Kyle Messman, who constitute a majority of board, are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules.
Item 14. Principal AccountingAccountant Fees and Services
Services.
The firminformation required by this Item 14 of WithumSmith+Brown, PC (“Withum”) acts asForm 10-K will be included in our independent registered public accounting firm. Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
The following
is a summarydocuments are filed as part of
Withum’s fees for the period from August 11, 2020 (inception) through December 31, 2020 (“Fiscal 2020”).Audit Fees. Withumn’s fees for services performed in connection with our Initial Public Offering, the reviewthis Annual Report:
1.Financial Statements
The Consolidated Financial Statements filed as part of
our Form 10-Q for the quarter ended September 30, 2020, and the audit of our Fiscal 2020 financial statements included in this Annual Report
are listed on
Form 10-K were approximately $68,900.Audit-Related Fees. Withum did not render any assurance and related services relatedpage F-1 in the accompanying index to the performance ofConsolidated Financial Statements.
2.Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable, or the
audit or review of financial statements in Fiscal 2020.Tax Fees. For Fiscal 2020, Withum did not render services for tax compliance, tax advice or tax planning in Fiscal 2020.
All Other Fees. For Fiscal 2020, there were no fees billed for products and services provided by Withum other than those set forth above.
Policy on Board Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditors
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services describedrequired information is shown in the Exchange Act whichConsolidated Financial Statements or notes thereto.
3.Exhibit Index
The following exhibits are
approvedfiled (or incorporated by
the audit committee prior to the completionreference herein) as part of
the audit).this Annual Report:
PART IV
Item 15.Exhibits, Financial Statement Schedules
| | | | | | | | |
Exhibit
Number | | (a)The following documents are filed as part of this Annual Report on Form 10-K: |
| 1. | Financial Statements: See “Index to Financial Statements” in “Item 8. Financial Statements and Supplementary Data” herein. |
| (b) | Financial Statement Schedules. All schedules are omitted for the reason that the information is included in the financial statements or the notes thereto or that they are not required or are not applicable. |
| (c) | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K. |
Number | | Exhibit Description |
| 2.1 | | |
| 3.1 | | |
3.1 | | |
| 3.2 | | |
| 4.1 | | |
| 4.2* | | |
| 10.1# | | |
| 10.2 | | |
| 10.3# | | |
| 10.4# | | |
| 10.5# | | |
| 10.6# | | |
| 10.7#* | | |
| 10.8# | | |
| 10.9# | | |
| 10.10# | | |
3.2 | | |
| 10.11 | | |
4.1 | | |
| 10.12# | | |
4.2 | | |
| 10.13# | | |
| | | | | | | | |
| 10.14# | | |
4.310.15# | | |
| 10.16# | | |
| 10.17#* | | |
4.410.18 | | |
| 10.19 | | |
4.5* | | |
| | |
10.1 | | Form of LetterCredit Agreement, dated January 30, 2024, by and between the RegistrantCompany and each of the Company’s Sponsor, officers and directorsCitibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Amendment No. 1 toof the Registrant’s Registration Statement on Form S-1 (File No. 333-249061) filed on October 5, 2020).Company |
| | |
10.2 | | Investment Management Trust Agreement between the Registrant and Continental Stock Transfer & Trust Company dated October 14, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s’s Current Report on FormForm 8-K filed with the SEC on October 16, 2020)January 31, 2024). |
| 21.1* | | |
10.323.1* | | |
| 31.1* | | |
10.4 | | |
10.5 | | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 16, 2020). |
| | |
10.6 | | Administrative Services Agreement between the Registrant and Graubard Miller dated October 14, 2020 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 16, 2020). |
| | |
10.7 | | Form of Subscription Agreement for PIPE investments (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on March 9, 2021). |
| | |
10.8 | | Form of Support Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on March 9, 2021). |
| | |
10.9 | | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on March 9, 2021). |
| | |
10.10 | | Sponsor Agreement, dated as of March 8, 2021, by and among the Registrant, Ambulnz, Inc., and Motion Acquisition LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed on March 9, 2021). |
| | |
14.1 | | Code of Ethics (incorporated by reference to Exhibit 14.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-249061) filed on October 5, 2020). |
| | |
24 | | Power of Attorney (included in signature page). |
| | |
31.1* | | Certificate of the Principal Executive Officer required by RulePursuant to Rules 13a-14(a) or Ruleand 15d-14(a). under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2* | | |
31.2* | | Certificate of the Principal Financial and Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
| | |
32.1** | | |
| 32.1** | | |
| 32.2** | | |
32.2** | | |
| 97.1* | | |
101.INS101.INS* | | Inline XBRL Instance Document. |
| 101.SCH* | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* | | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* | | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith.
**Furnished herewith.
#Indicates management contract or compensatory plan or arrangement.
Item 16.
Form 10-K Summary
SIGNATURES
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.authorized. | | MOTION ACQUISITION CORP. | | | | | | |
| DOCGO INC. |
| | |
| Date: February 28, 2024 | By: | /s/ Lee Bienstock |
| | BY:/s/ Michael BurdiekLee Bienstock |
| | Name: | Michael Burdiek |
| | Title: | Chief Executive Officer |
| | |
| BY: | /s/ Richard Vitelle |
| | Name: | Richard Vitelle |
| | Title: | Chief Financial Officer |
Dated March 30, 2021
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Michael Burdiek and Richard Vitelle his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Exchange Act of
1933,1934, as amended, this
Registration StatementReport has been signed
below by the following persons
on behalf of the Registrant in the capacities and on the dates indicated.
| Name | | | | | | | | | | | | | |
| Signature | | Title | | PositionDate |
| | | | |
| /s/ Lee Bienstock | | Chief Executive Officer | | DateFebruary 28, 2024 |
| Lee Bienstock | | (principal executive officer) | | |
| | | | |
| /s/ Norman Rosenberg | | Chief Financial Officer | | February 28, 2024 |
| Norman Rosenberg | | (principal financial and accounting officer) | | |
| | | | |
| /s/ Stanley Vashovsky | | Chairman | | February 28, 2024 |
| Stanley Vashovsky | | | | |
| | | | |
| /s/ Michael Burdiek | | Director | | February 28, 2024 |
| Michael Burdiek | | | | |
| | | | |
| /s/ Steven Katz | | Director | | February 28, 2024 |
| Steven Katz | | | | |
| | | | |
| /s/ Vina Leite | | Director | | February 28, 2024 |
| Vina Leite | | | | |
| | | | |
| /s/ Ira Smedra | | Director | | February 28, 2024 |
| Ira Smedra | | | | |
| | | | |
| /s/ Ely D. Tendler | | Director | | February 28, 2024 |
| Ely D. Tendler | | | | |
| | | | |
| /s/ James M. Travers | | Director | | Chairman | March 30, 2021February 28, 2024 |
| James M. Travers | | | | |
| | | | |
/s/ Michael Burdiek | | Chief Executive Officer | | March 30, 2021 |
Michael Burdiek | | (Principal Executive Officer) | | |
| | | | |
/s/ Richard Vitelle | | Chief Financial Officer | | March 30, 2021 |
Richard Vitelle | | (Principal Financial and Accounting Officer) and Secretary | | |
| | | | |
/s/ Andrew Flett | | Director | | March 30, 2021 |
Andrew Flett | | | | |
| | | | |
/s/ Mark Licht | | Director | | March 30, 2021 |
Mark Licht | | | | |
| | | | |
/s/ Kyle Messman | | Director | | March 30, 2021 |
Kyle Messman | | | | |
