UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 2021
OR
2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to________________to .
DOCGO INC.Commission File Number: 001-39618
DocGo Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 85-2515483 | |||
| (State or Other Jurisdiction of | ( | |||
| Identification | ||||
| 35 West 35th Street, Floor 6 | ||||
| New York, New York | 10001 | |||
| (Address of Principal Executive Offices) | (Zip Code) |
35 West 35th Street, Floor 6
New York, New York 10001
(Address of Principal Executive Offices) (Zip Code)
(844) 443-6246
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
N/A
(Former Name, or Former Address ifand Former Fiscal Year, If Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of | Trading Symbol(s) | Name of which registered | ||
| Common Stock, par value $0.0001 per share | DCGO | The Nasdaq Stock Market LLC | ||
| Redeemable warrants, exercisable for shares of Common Stock at an exercise price of $11.50 per share | DCGOW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant 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 registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant 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 | ☐ | Accelerated filer | ☐ | ||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒☐ No ☐☒
As of November 23, 2021, 100,069,438July 29, 2022, 101,025,267 shares of Common Stock, par value $0.0001 per share, were issued and outstanding.
EXPLANATORY NOTE
This Amendment No. 1 (“Amendment No. 1”) on Form 10-Q/A amends the Form 10-Q of DocGo Inc. as of and for the period ended September 20, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021 (the “Original Filing”).
The Company has re-evaluated the Company’s application of ASC 480-10-S99-3A to its accounting classification of the redeemable Class A common stock, par value $0.0001 per share (the “Public Shares”), issued as part of the units sold in the Company’s initial public offering (the “IPO”) on October 19, 2020. Historically, a portion of the Public Shares was classified as permanent equity to maintain stockholders’ equity greater than $5 million on the basis that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as described in the Company’s amended and restated certificate of incorporation as it existed prior to consummation of the Business Combination (the “Charter”). Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Pursuant to such re-evaluation, the Company's management has revised this interpretation to include temporary equity in net tangible assets and determined that the Public Shares include certain provisions that require classification of all of the Public Shares as temporary equity. In addition, in connection with the change in presentation for the Public Shares, the Company determined it should restate its earnings per share calculation to allocate income and losses shared pro rata between the two classes of common stock shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the income and losses of the Company.
Therefore, on November 22, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued: (i) unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 filed with the SEC on June 3, 2021; (ii) unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 filed with the SEC on August 11, 2021; and (iii) unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 filed with the SEC on November 15, 2021 (collectively, the “Affected Quarterly Periods”), should be restated to report all Public Shares as temporary equity and should no longer be relied upon. As such, in this Form 10-Q/A for the period ended September 30, 2021 the Company has restated its unaudited condensed consolidated financial statements for the Affected Quarterly Periods.
The restatement does not have an impact on its cash position and cash held in the trust account established in connection with the IPO (the “Trust Account”).
The Company’s management has concluded that a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in this Form 10-Q/A.
We are filing this Amendment No. 1 to amend and restate the Affected Quarterly Periods. The following items have been amended to reflect the restatements:
Part I, Item 1. Financial Statements
Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I, Item 4. Controls and Procedures
Part II, Item 1A. Risk Factors
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-Q/A (Exhibits 31.1, 31.2, 32.1 and 32.2).
Except as described above, no other information included in this Quarterly Report on Form 10-Q/A of DocGo is being amended or updated by this Amendment No. 1 and, other than as described herein, this Amendment No. 1 does not purport to reflect any information or events subsequent to the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing.
Explanatory Note to the Original Filing
On November 5, 2021 (the “Closing Date”), subsequent to the fiscal quarter ended September 30, 2021, the fiscal quarter to which this Quarterly Report on Form 10-Q relates, Motion Acquisition Corp. (the “Company” or, prior to the closing of the Business Combination (as defined below), sometimes referred to herein as “Motion”) consummated the previously announced business combination following meeting of its stockholders, where the stockholders of the Company considered and approved, among other matters, a proposal to adopt that certain Agreement and Plan of Merger dated March 8, 2021 (the “Merger Agreement”), by and among the Company, Motion Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of the Company, and Ambulnz, Inc., a Delaware corporation (“Ambulnz”).
As contemplated by 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 (the “Prospectus”), Merger Sub was merged with and into Ambulnz, with Ambulnz continuing as the surviving corporation (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). The Merger became effective on November 5, 2021 (the “Closing”). In connection with the Closing, the Company filed a Second Amended and Restated Certificate of Incorporation in Delaware which, among other things, changed its name from Motion Acquisition Corp. to DocGo Inc.
Unless stated otherwise, this report contains information about Motion before the Closing of the Business Combination. This report covers a period prior to the Closing of the Business Combination. References to the “Company,” “our,” “us” or “we” in this report refer to Motion before the Closing of the Business Combination, unless the context suggests otherwise. Except as otherwise expressly provided herein, the information in this Amendment No. 1 does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
DOCGO INC.
Form 10-Q/A
For the Quarterly Period Ended September 30, 2021
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOCGO INC.DocGo Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | 59,319 | $ | 878,653 | ||||
| Prepaid expenses and other current assets | 228,257 | 168,877 | ||||||
| Total Current Assets | 287,576 | 1,047,530 | ||||||
| Investments held in Trust Account | 115,000,482 | 115,020,078 | ||||||
| Total Assets | $ | 115,288,058 | $ | 116,067,608 | ||||
| Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 161,067 | $ | 11,658 | ||||
| Franchise tax payable | 103,115 | 78,192 | ||||||
| Other accrued liabilities | 70,000 | 70,000 | ||||||
| Total Current Liabilities | 334,182 | 159,850 | ||||||
| Deferred underwriting commissions in connection with initial public offering | 4,025,000 | 4,025,000 | ||||||
| Warrant liabilities | 8,595,000 | 9,040,670 | ||||||
| Total Liabilities | 12,954,182 | 13,225,520 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock, $0.0001 par value, subject to possible redemption at $10.00 per share ‒ 11,500,000 shares at September 30, 2021 and December 31, 2020 | 115,000,000 | 115,000,000 | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | - | - | ||||||
| Class A common stock, $0.0001 par value; 50,000,000 shares authorized; 2,875,000 and -0- shares issued and outstanding (excluding 11,500,000 and 11,500,000 shares subject to possible redemption) at September 30, 2021 and December 31, 2020, respectively | 288 | - | ||||||
| Class B common stock, $0.0001 par value; 12,500,000 shares authorized; -0- shares and 2,875,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | - | 288 | ||||||
| Additional paid-in capital | - | - | ||||||
| Accumulated deficit | (12,666,412 | ) | (12,158,200 | ) | ||||
| Total Stockholders’ Deficit | (12,666,124 | ) | (12,157,912 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | $ | 115,288,058 | $ | 116,067,608 | ||||
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 198,138,395 | $ | 175,537,221 | ||||
| Accounts receivable, net of allowance of $7,047,958 and $7,377,389 as of June 30, 2022 and December 31, 2021, respectively | 72,253,831 | 78,383,614 | ||||||
| Prepaid expenses and other current assets | 5,285,303 | 2,111,656 | ||||||
| Total current assets | 275,677,529 | 256,032,491 | ||||||
| Property and equipment, net | 12,229,997 | 12,733,889 | ||||||
| Intangibles, net | 10,415,401 | 10,678,049 | ||||||
| Goodwill | 8,686,966 | 8,686,966 | ||||||
| Restricted cash | 10,323,088 | 3,568,509 | ||||||
| Operating lease right-of-use assets | 3,812,085 | 4,195,682 | ||||||
| Finance lease right-of-use assets | 8,408,399 | 9,307,113 | ||||||
| Equity method investment | 619,348 | 589,058 | ||||||
| Other assets | 1,682,575 | 3,810,895 | ||||||
| Total assets | $ | 331,855,388 | $ | 309,602,652 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 12,915,952 | $ | 15,833,970 | ||||
| Accrued liabilities | 38,656,519 | 35,110,877 | ||||||
| Line of credit | 1,025,881 | 25,881 | ||||||
| Notes payable, current | 566,426 | 600,449 | ||||||
| Due to seller | 694,331 | 1,571,419 | ||||||
| Operating lease liability, current | 1,421,036 | 1,461,335 | ||||||
| Finance lease liability, current | 2,655,037 | 3,271,990 | ||||||
| Total current liabilities | 57,935,182 | 57,875,921 | ||||||
| Notes payable, non-current | 1,048,864 | 1,302,839 | ||||||
| Operating lease liability, non-current | 2,651,849 | 2,980,946 | ||||||
| Finance lease liability, non-current | 5,276,312 | 6,867,420 | ||||||
| Warrant liabilities | 10,549,485 | 13,518,502 | ||||||
| Total liabilities | 77,461,692 | 82,545,628 | ||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common stock ($0.0001 par value; 500,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 100,685,290 and 100,133,953 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively) | 10,564 | 10,013 | ||||||
| Additional paid-in-capital | 287,301,467 | 283,161,216 | ||||||
| Accumulated deficit | (40,191,367 | ) | (63,556,714 | ) | ||||
| Accumulated other comprehensive loss | (27,930 | ) | (32,501 | ) | ||||
| Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries | 247,092,734 | 219,582,014 | ||||||
| Noncontrolling interests | 7,300,962 | 7,475,010 | ||||||
| Total stockholders’ equity | 254,393,696 | 227,057,024 | ||||||
| Total liabilities and stockholders’ equity | $ | 331,855,388 | $ | 309,602,652 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue, net | $ | 109,519,304 | $ | 62,185,997 | $ | 227,410,856 | $ | 111,555,391 | ||||||||
| Expenses: | ||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization, which is shown separately below) | 70,176,462 | 41,023,082 | 148,164,035 | 76,883,824 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 24,637,618 | 15,976,151 | 48,498,234 | 27,797,606 | ||||||||||||
| Depreciation and amortization | 2,037,771 | 1,897,051 | 4,238,792 | 3,494,727 | ||||||||||||
| Legal and regulatory | 3,061,276 | 1,176,711 | 4,409,259 | 1,833,369 | ||||||||||||
| Technology and development | 1,148,320 | 664,882 | 2,290,153 | 1,126,282 | ||||||||||||
| Sales, advertising and marketing | 1,000,100 | 1,189,361 | 2,258,061 | 2,034,781 | ||||||||||||
| Total expenses | 102,061,547 | 61,927,238 | 209,858,534 | 113,170,589 | ||||||||||||
| Income (loss) from operations | 7,457,757 | 258,759 | 17,552,322 | (1,615,198 | ) | |||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income (expense), net | 98,276 | (130,129 | ) | (37,330 | ) | (245,138 | ) | |||||||||
| Gain on remeasurement of warrant liabilities | 3,027,766 | - | 2,969,017 | - | ||||||||||||
| Gain on initial equity method investments | 89,810 | - | 6,469 | - | ||||||||||||
| Gain on remeasurement of finance leases | 1,388,273 | - | 1,388,273 | - | ||||||||||||
| Loss on disposal of fixed assets | - | (27,730 | ) | - | (27,730 | ) | ||||||||||
| Other income | 15,640 | - | 11,387 | - | ||||||||||||
| Total other income (expense) | 4,619,765 | (157,859 | ) | 4,337,816 | (272,868 | ) | ||||||||||
| Net income (loss) before income tax benefit (expense) | 12,077,522 | 100,900 | 21,890,138 | (1,888,066 | ) | |||||||||||
| Income tax (expense) benefit | (321,660 | ) | 1,107 | (761,839 | ) | (8,923 | ) | |||||||||
| Net income (loss) | 11,755,862 | 102,007 | 21,128,299 | (1,896,989 | ) | |||||||||||
| Net income (loss) attributable to noncontrolling interests | (979,791 | ) | 1,748,223 | (2,237,048 | ) | 1,427,591 | ||||||||||
| Net income (loss) attributable to stockholders of DocGo Inc. and Subsidiaries | 12,735,653 | (1,646,216 | ) | 23,365,347 | (3,324,580 | ) | ||||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustment | 10,434 | 94,655 | 4,571 | 102,653 | ||||||||||||
| Total comprehensive gain (loss) | $ | 12,746,087 | $ | (1,551,561 | ) | $ | 23,369,918 | $ | (3,221,927 | ) | ||||||
| Net income (loss) per share attributable to DocGo Inc. and Subsidiaries - Basic | 0.13 | $ | (18.19 | ) | $ | 0.23 | $ | (36.73 | ) | |||||||
| Weighted-average shares outstanding - Basic | 99,303,948 | 90,505 | 100,372,146 | 90,505 | ||||||||||||
| Net income (loss) per share attributable to DocGo Inc. and Subsidiaries - Diluted | $ | 0.11 | $ | (18.19 | ) | $ | 0.20 | $ | (36.73 | ) | ||||||
| Weighted-average shares outstanding - Diluted | 115,279,676 | 90,505 | 116,347,874 | 90,505 | ||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Series A Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in- | Accumulated | Accumulated Other Comprehensive | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | Interests | Equity | ||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | 391,534 | - | - | - | 391,534 | |||||||||||||||||||||||||||||||||
| Noncontrolling interest contribution | - | - | - | - | - | - | - | - | - | 333,025 | 333,025 | |||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | 7,998 | - | 7,998 | |||||||||||||||||||||||||||||||||
| Net loss attributable to Noncontrolling interests | - | - | - | - | - | - | - | - | - | (320,632 | ) | (320,632 | ) | |||||||||||||||||||||||||||||||
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | - | - | - | - | - | - | - | (1,678,364 | ) | - | - | (1,678,364 | ) | |||||||||||||||||||||||||||||||
| Balance - March 31, 2021 | - | $ | - | 76,660,813 | $ | 7,666 | - | $ | - | $ | 142,738,386 | $ | (88,978,836 | ) | $ | (40,541 | ) | $ | 11,961,593 | $ | 65,688,268 | |||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | 370,000 | - | - | - | 370,000 | |||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | 94,655 | - | 94,655 | |||||||||||||||||||||||||||||||||
| Net income attributable to Noncontrolling interests | - | - | - | - | - | - | - | - | - | 1,748,223 | 1,748,223 | |||||||||||||||||||||||||||||||||
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | - | - | - | - | - | - | - | (1,646,216 | ) | - | - | (1,646,216 | ) | |||||||||||||||||||||||||||||||
| Balance - June 30, 2021 | - | $ | - | 76,660,813 | $ | 7,666 | - | $ | - | $ | 143,108,386 | $ | (90,625,052 | ) | $ | 54,114 | $ | 13,709,816 | $ | 66,254,930 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Series A Preferred Stock | Class A Common Stock1 | Class B Common Stock | Additional Paid-in- | Accumulated | Accumulated Other Comprehensive | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | Interests | Equity | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | - | $ | - | 100,133,953 | $ | 10,013 | - | $ | - | $ | 283,161,216 | $ | (63,556,714 | ) | $ | (32,501 | ) | $ | 7,475,010 | $ | 227,057,024 | |||||||||||||||||||||||
| Exercise of stock options | - | - | 195,152 | 195 | - | - | 374,149 | - | - | - | 374,344 | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | 1,422,937 | - | - | - | 1,422,937 | |||||||||||||||||||||||||||||||||
| Equity cost | (19,570 | ) | (19,570 | ) | ||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest contribution | - | - | - | - | - | - | - | - | - | 2,063,000 | 2,063,000 | |||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | (5,863 | ) | - | (5,863 | ) | |||||||||||||||||||||||||||||||
| Net loss attributable to Noncontrolling interests | - | - | - | - | - | - | - | - | - | (1,257,257 | ) | (1,257,257 | ) | |||||||||||||||||||||||||||||||
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | - | - | - | - | - | - | - | 10,629,694 | - | - | 10,629,694 | |||||||||||||||||||||||||||||||||
| Balance - March 31, 2022 | - | $ | - | 100,329,105 | $ | 10,208 | - | $ | - | $ | 284,938,732 | $ | (52,927,020 | ) | $ | (38,364 | ) | $ | 8,280,753 | $ | 240,264,309 | |||||||||||||||||||||||
| Common stock repurchased | - | - | (70,000 | ) | (70 | ) | - | - | (497,829 | ) | - | - | - | (497,899 | ) | |||||||||||||||||||||||||||||
| Exercise of stock options | - | - | 417,927 | 418 | - | - | 778,648 | - | - | - | 779,066 | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | 1,999,619 | - | - | - | 1,999,619 | |||||||||||||||||||||||||||||||||
| UK Ltd. Restricted Stock | - | - | 8,258 | 8 | - | - | 82,297 | - | - | - | 82,305 | |||||||||||||||||||||||||||||||||
| Net loss attributable to Noncontrolling interests | - | - | - | - | - | - | - | - | - | (979,791 | ) | (979,791 | ) | |||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | 10,434 | - | 10,434 | |||||||||||||||||||||||||||||||||
| Net income attributable to stockholders of DocGo Inc. and Subsidiaries | - | - | - | - | - | - | - | 12,735,653 | - | - | 12,735,653 | |||||||||||||||||||||||||||||||||
| Balance - June 30, 2022 | - | $ | - | 100,685,290 | $ | 10,564 | - | $ | - | $ | 287,301,467 | $ | (40,191,367 | ) | $ | (27,930 | ) | $ | 7,300,962 | $ | 254,393,696 | |||||||||||||||||||||||
1References to Class A Common Stock after November 5, 2021 refer to common stock of DocGo Inc., par value $0.0001. See Note 1, “Description of Organization and Business Operations” to the Condensed Consolidated Financial Statements for additional information.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | 21,128,299 | $ | (1,896,989 | ) | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation of property and equipment | 1,441,438 | 1,099,192 | ||||||
| Amortization of intangible assets | 1,279,078 | 879,984 | ||||||
| Amortization of finance lease right-of-use assets | 1,518,276 | 1,515,552 | ||||||
| Loss on disposal of assets | - | 27,730 | ||||||
| Gain from equity method investment | (30,290 | ) | - | |||||
| Bad debt expense | 1,818,792 | 1,235,442 | ||||||
| Stock based compensation | 3,504,861 | 761,534 | ||||||
| Gain on remeasurement of finance leases | (1,388,273 | ) | - | |||||
| Gain on remeasurement of warrant liabilities | (2,969,017 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 4,310,990 | (17,442,642 | ) | |||||
| Prepaid expenses and other current assets | (3,173,647 | ) | (2,353,394 | ) | ||||
| Other assets | 2,128,320 | (90,647 | ) | |||||
| Accounts payable | (2,927,492 | ) | 2,791,050 | |||||
| Accrued liabilities | 3,545,642 | 12,327,795 | ||||||
| Net cash provided by (used in) operating activities | 30,186,977 | (1,145,393 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of property and equipment | (941,655 | ) | (2,581,691 | ) | ||||
| Acquisition of intangibles | (1,016,430 | ) | (1,023,643 | ) | ||||
| Proceeds from disposal of property and equipment | - | 6,000 | ||||||
| Net cash used in investing activities | (1,958,085 | ) | (3,599,334 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from revolving credit line | 1,000,000 | 8,000,000 | ||||||
| Repayments of notes payable | (287,998 | ) | (258,863 | ) | ||||
| Due to seller | (877,088 | ) | - | |||||
| Noncontrolling interest contributions | 2,063,000 | 333,025 | ||||||
| Proceeds from exercise of stock options | 1,153,410 | - | ||||||
| Common stock repurchased | (497,899 | ) | - | |||||
| Equity costs | (19,570 | ) | - | |||||
| Payments on obligations under finance lease | (1,411,565 | ) | (968,933 | ) | ||||
| Acquisition of businesses | - | (56,496 | ) | |||||
| Net cash provided by financing activities | 1,122,290 | 7,048,733 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 4,571 | 102,653 | ||||||
| Net increase in cash and restricted cash | 29,355,753 | 2,406,659 | ||||||
| Cash and restricted cash at beginning of period | 179,105,730 | 34,457,273 | ||||||
| Cash and restricted cash at end of period | $ | 208,461,483 | $ | 36,863,932 | ||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Supplemental disclosure of cash and non-cash transactions: | ||||||||
| Cash paid for interest | $ | 129,363 | $ | 28,816 | ||||
| Cash paid for interest on finance lease liabilities | $ | 222,649 | $ | 245,339 | ||||
| Cash paid for income taxes | $ | 761,839 | $ | 8,923 | ||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | 2,192,946 | $ | 2,111,516 | ||||
| Fixed assets acquired in exchange for notes payable | $ | - | $ | 256,237 | ||||
| Reconciliation of cash and restricted cash | ||||||||
| Cash | $ | 198,138,395 | $ | 33,146,205 | ||||
| Restricted Cash | 10,323,088 | 3,717,727 | ||||||
| Total cash and restricted cash shown in statement of cash flows | $ | 208,461,483 | $ | 36,863,932 | ||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
DOCGO INC.DocGo Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | Period from August 11, 2020 (Inception) Through September 30, 2020 | ||||||||||
| General and administrative expenses | $ | 348,325 | $ | 976,486 | $ | 2,065 | ||||||
| Loss from operations | (348,325 | ) | (976,486 | ) | (2,065 | ) | ||||||
| Other income | ||||||||||||
| Interest earned on investments held in Trust Account | 1,480 | 22,604 | - | |||||||||
| Change in fair value of warrant liabilities | 891,332 | 445,670 | - | |||||||||
| Total other income | 892,812 | 468,274 | - | |||||||||
| Net income (loss) | $ | 544,487 | $ | (508,212 | ) | $ | (2,065 | ) | ||||
| Weighted average number of Class A common shares outstanding, basic and diluted | 12,656,250 | 11,889,652 | - | |||||||||
| Basic and diluted net income (loss) per Class A common share | $ | 0.04 | $ | (0.04 | ) | $ | - | |||||
| Weighted average number of Class B common shares outstanding, basic and diluted | 1,718,750 | 2,485,348 | 3,306,250 | |||||||||
| Basic and diluted net income (loss) per Class B common share | $ | 0.04 | $ | (0.04 | ) | $ | - | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DOCGO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Three and Nine Months Ended September 30, 2021
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2020 | - | $ | - | 2,875,000 | $ | 288 | $ | - | $ | (12,158,200 | ) | $ | (12,157,912 | ) | ||||||||||||||
| Net income | - | - | - | - | - | 1,989,868 | 1,989,868 | |||||||||||||||||||||
| Balance – March 31, 2021 (unaudited) | - | - | 2,875,000 | 288 | - | (10,168,332 | ) | (10,168,044 | ) | |||||||||||||||||||
| Net loss | - | - | - | (3,042,567 | ) | (3,042,567 | ) | |||||||||||||||||||||
| Balance – June 30, 2021 (unaudited) | - | - | 2,875,000 | 288 | - | (13,210,899 | ) | (13,210,611 | ) | |||||||||||||||||||
| Conversion of Class B shares to Class A shares(1) | 2,875,000 | 288 | (2,875,000 | ) | (288 | ) | - | - | - | |||||||||||||||||||
| Net income | - | - | - | - | - | 544,487 | 544,487 | |||||||||||||||||||||
| Balance – September 30, 2021 (unaudited) | 2,875,000 | $ | 288 | - | $ | - | $ | - | $ | (12,666,412 | ) | $ | (12,666,124 | ) | ||||||||||||||
For the Period from August 11, 2020 (Inception) Through September 30, 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 stock to related party (2) | - | - | 3,306,250 | 331 | 24,669 | - | 25,000 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (2,065 | ) | (2,065 | ) | |||||||||||||||||||
| Balance – September 30, 2020 (unaudited) | - | $ | - | 3,306,250 | $ | 331 | $ | 24,669 | $ | (2,065 | ) | $ | 22,935 | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DOCGO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, 2021 | August 11, | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (508,212 | ) | $ | (2,065 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest earned on investments held in Trust Account | (22,604 | ) | - | |||||
| Change in fair value of warrant liabilities | (445,670 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | (56,390 | ) | - | |||||
| Other current assets | (2,990 | ) | - | |||||
| Accounts payable | 149,410 | - | ||||||
| Franchise taxes payable | 24,923 | - | ||||||
| Net cash used in operating activities | (861,533 | ) | (2,065 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Interest released from Trust Account | 42,199 | - | ||||||
| Net cash provided by investing activities | 42,199 | - | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from note payable to related party | - | 71,163 | ||||||
| Payment of deferred offering costs | - | (67,566 | ) | |||||
| Net cash provided by financing activities | - | 3,597 | ||||||
| Net increase (decrease) in cash | (819,334 | ) | 1,532 | |||||
| Cash - beginning of the period | 878,653 | - | ||||||
| Cash - end of the period | $ | 59,319 | $ | 1,532 | ||||
| Supplemental disclosure of noncash activities: | ||||||||
| Deferred offering costs paid by related party in exchange for issuance of Class B common stock | $ | - | $ | 25,000 | ||||
| Deferred offering costs included in accounts payable | $ | - | $ | 20,450 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DOCGO INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(as restated)
Note 1 –1. Description of Organization and Business Operations
The Business Combination
On November 5, 2021 (the “Closing Date”), subsequentDocGo Inc., a Delaware corporation (formerly known as Motion Acquisition Corp) (prior to the fiscal quarter ended September 30, 2021,Closing Date, “Motion” and after the fiscal quarter to which this Quarterly Report on Form 10-Q relates, Motion Acquisition Corp. (the “Company” or, prior to the closing of the Business Combination (as defined below)Closing Date, “DocGo”), sometimes referred to herein as “Motion”) consummated the previously announced Business Combination following meeting of its stockholders, where the stockholders of the Company considered and approved, among other matters, a proposalbusiness combination (the “Closing”) pursuant to adopt that certain Agreement and Plan of Merger dated March 8, 2021 (the “Merger Agreement”), by and among the Company,Motion Acquisition Corp., a Delaware corporation (“Motion”), Motion Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of the Company,Motion (“Merger Sub”), and Ambulnz, Inc., a Delaware corporation (“Ambulnz”). In connection with the consummation of the Business Combination,Closing, the registrant changed its name from Motion Acquisition Corp. to DocGo Inc.
As contemplated by the Merger Agreement and as described in Motion’s definitive proxy statement/consent solicitation/prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 14, 2021 (the “Prospectus”), Merger Sub was merged with and into Ambulnz, with Ambulnz continuing as the surviving corporation (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). As a result of the Merger, Ambulnz is a wholly-owned subsidiary of DocGo and each share of Series A preferred stock of Ambulnz, no par value (“Ambulnz Preferred Stock”), Class A common stock of Ambulnz, no par value (“Ambulnz Class A Common Stock”), and Class B common stock of Ambulnz, no par value (“Ambulnz Class B Common Stock”,Stock,” together with Ambulnz Class A Common Stock, “Ambulnz Common Stock”) was cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo, par value $0.0001 (“Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement.
In connection with the Business Combination, DocGo raised $158.0 million of net proceeds. This amount was comprised of $43.4 million of cash held in Motion’s trust account from its initial public offering, net of DocGo’s transaction costs and underwriters’ fees of $9.6 million, and $114.6 million of cash in connection with the PIPE Financing. The transaction costs consisted of banking, legal, and other professional fees, which were recorded as a reduction to additional paid-in capital.
The Business
DocGo Inc. and its Subsidiaries (collectively, the “Company”) is a healthcare transportation and mobile health services (“Mobile Health”) company that uses proprietary dispatch and communication technology to provide quality healthcare transportation and healthcare services in major metropolitan cities in the United States (“U.S.”) and the United Kingdom (“U.K.”). Mobile Health performs in-person care directly to patients in the comfort of their homes, workplaces and other non-traditional locations.
The material provisions of the Merger Agreement are describedAmbulnz, LLC was originally formed in the Prospectus in the section entitled “Proposal No.1—The Business Combination Proposal—The Merger Agreement” beginningDelaware on page 97.
Organization and General
Motion was incorporatedJune 17, 2015, as a Delaware corporation on August 11, 2020. The Company was formed for the purposelimited liability company. On November 1, 2017, with an effective date of entering intoJanuary 1, 2017, Ambulnz converted its legal structure from a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. The Company was not limited to a particular industry or geographic region for purposes of consummating a business combination. Prior to consummating the Business Combination, the Company had neither engaged in any operations nor generated any revenues.
The Company’s management had 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 were intended to be generally applied toward completing a business combination.
Sponsor and Financing
The Company’s sponsor is Motion Acquisition LLC, a Delaware limited liability company (the “Sponsor”). The registration statement forto a C-corporation and changed its name to Ambulnz, Inc. Ambulnz is the Company’s Initial Public Offeringsole owner of Ambulnz Holdings, LLC (“Holdings”) which 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” and, with respect to the Class A common stock includedformed in the Units,state of Delaware on August 5, 2015, as a limited liability company. Holdings is the “Public Shares” and with respect to the warrants includedowner of multiple operating entities incorporated in various states in the Units, the “Public Warrants”) at $10.00 per Unit, generating gross proceeds of $115.0 million,U.S. as well as within England and incurring offering costs of approximately $6.7 million, inclusive of $4.0 million in deferred underwriting commissions (Note 3).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 2,533,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $3.8 million (Note 4).
Wales, U.K.
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 Units in the Initial Public Offering and Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee. The proceeds held in the Trust Account were invested only 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 was required to 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 held in the Trust Account (as defined below) (excluding the deferred underwriting commissions 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 could only complete a business combination if the post-transaction company owned or acquired 50% or more of the outstanding voting securities of the target or otherwise acquired 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”).
The Company’s amended and restated certificate of incorporation provided 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 would 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 provisions of the Company’s amended and restated certificate of incorporation prior to an initial business combination and (iii) the redemption of 100% of the Public Shares if the Company did not complete a business combination within 24 months from the closing of the Initial Public Offering (such 24 month period, the “Combination Period”).
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements were prepared assuming the Company would continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2021, the Company had approximately $59,000 of cash in its operating account and approximately $47,000 of negative working capital.
From inception on August 11, 2020 through the time of the Company’s Initial Public Offering on October 19, 2020, the Company’s liquidity needs were satisfied through a payment of $25,000 from the Company’s Chief Executive Officer to fund certain offering costs in exchange for the issuance of the Founder Shares (as defined below) to the Sponsor, and advances to the Company from the Sponsor of approximately $71,000 under a related party note payable (the “Note Payable”) (see Note 4) to pay for other offering costs in connection with the Initial Public Offering. Subsequent to October 19, 2020 through September 30, 2021, the liquidity needs have been satisfied from the net proceeds of the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note Payable on October 19, 2020. In addition, in order to finance transaction costs in connection with a business combination, the Company’s officers, directors and initial stockholders could have provided the Company Working Capital Loans (as defined in Note 4), although they were not required to do so. At September 30, 2021 and as of the closing of the Business Combination, there were no Working Capital Loans outstanding.
Note 2 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the three and nine month periods ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A filed with the SEC on November 23, 2021.
Restatement of Previously Issued Financial Statements
In light of recent comment letters issued by the SEC, the management of the Company has re-evaluated the Company’s application of ASC 480-10-S99-3A to its accounting classification of the Public Shares issued as part of the units sold in the Initial Public Offering that, prior to consummation of the Business Combination, were subject to redemption provisions. Historically, a portion of the Public Shares was classified as permanent equity to maintain stockholders’ equity greater than $5 million on the basis that the Company would not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as described in the Company’s amended and restated certificate of incorporation as it existed prior to consummation of the Business Combination (the “Charter”). Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Pursuant to such re-evaluation, the Company's management has revised this interpretation to include temporary equity in net tangible assets and determined that the Public Shares include certain provisions that require classification of all of the Public Shares as temporary equity. In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has changed its earnings per share methodology to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form 10-Qs for the quarterly periods ended March 31, 2021, and June 30, 2021 (the “Affected Quarterly Periods”). Therefore, the Company, in consultation with its Audit Committee, concluded that the Affected Quarterly Periods should be restated to present all Class A common stock subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering. As such, the Company is reporting these restatements to those periods in this quarterly report.
The impact of the restatement on the financial statements for the Affected Quarterly Periods is presented below.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of March 31, 2021:
| Balance sheet as of March 31, 2021 (unaudited) | As Previously Reported |
Adjustments |
As Restated | |||||||||
| Total assets | $ | 115,725,964 | $ | 115,725,964 | ||||||||
| Total liabilities | $ | 10,894,008 | $ | 10,894,008 | ||||||||
| Class A common stock subject to possible redemption | 99,831,950 | 15,168,050 | 115,000,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 152 | (152 | ) | - | ||||||||
| Class B common stock | 288 | - | 288 | |||||||||
| Additional paid-in capital | 7,233,231 | (7,233,231 | ) | - | ||||||||
| Accumulated deficit | (2,233,665 | ) | (7,934,667 | ) | (10,168,332 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | 5,000,006 | $ | (15,168,050 | ) | $ | (10,168,044 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 115,725,964 | $ | - | $ | 115,725,964 | ||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the three months ended March 31, 2021:
Three Months Ended March 31, 2021 (Unaudited)
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Change in value of Class A common stock subject to possible redemption | $ | 1,989,870 | $ | (1,989,870 | ) | $ | - | |||||
The table below presents the effectDocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of June 30, 2021:Significant Accounting Policies
| Balance sheet as of June 30, 2021 (unaudited) | As Previously Reported |
Adjustments |
As Restated | |||||||||
| Total assets | $ | 115,464,516 | $ | 115,464,516 | ||||||||
| Total liabilities | $ | 13,675,127 | $ | 13,675,127 | ||||||||
| Class A common stock subject to possible redemption | 96,789,380 | 18,210,620 | 115,000,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 182 | (182 | ) | - | ||||||||
| Class B common stock | 288 | - | 288 | |||||||||
| Additional paid-in capital | 10,275,771 | (10,275,771 | ) | - | ||||||||
| Accumulated deficit | (5,276,232 | ) | (7,934,667 | ) | (13,210,899 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | 5,000,009 | $ | (18,210,620 | ) | $ | (13,210,611 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 115,464,516 | $ | - | $ | 115,464,516 | ||||||
The table below presents the effectBasis of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the six months ended June 30, 2021:Presentation
Six MonthsThe accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2021 (Unaudited)December 31, 2021.
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Change in value of Class A common stock subject to possible redemption | $ | (1,052,700 | ) | $ | 1,052,700 | $ | - | |||||
The impact toConsolidated Balance Sheet as of December 31, 2021 included herein was derived from the reported amountsaudited financial statements as of weighted average shares outstanding and basic and diluted net income (loss) per common share is presented below for the Affected Periods:that date, but does not include all disclosures including notes required by U.S. GAAP.
| Net Income Per Share | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| Net income | $ | 1,989,868 | $ | - | $ | 1,989,868 | ||||||
| Weighted average shares outstanding - Class A common stock | 11,500,000 | - | 11,500,000 | |||||||||
| Basic and diluted net income per share - Class A common stock | $ | 0.00 | $ | 0.14 | $ | 0.14 | ||||||
| Weighted average shares outstanding - Class B common stock | 2,875,000 | - | 2,875,000 | |||||||||
| Basic and diluted net income per share - Class B common stock | $ | 0.69 | $ | (0.55 | ) | $ | 0.14 | |||||
| Net Loss Per Share | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Three Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Net loss | $ | (3,042,567 | ) | $ | - | $ | (3,042,567 | ) | ||||
| Weighted average shares outstanding - Class A common stock | 11,500,000 | - | 11,500,000 | |||||||||
| Basic and diluted net loss per share - Class A common stock | $ | 0.00 | $ | (0.21 | ) | $ | (0.21 | ) | ||||
| Weighted average shares outstanding - Class B common stock | 2,875,000 | - | 2,875,000 | |||||||||
| Basic and diluted net loss per share - Class B common stock | $ | (1.06 | ) | $ | 0.85 | $ | (0.21 | ) | ||||
| Net Loss Per Share | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Six Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Net loss | $ | (1,052,699 | ) | $ | - | $ | (1,052,699 | ) | ||||
| Weighted average shares outstanding - Class A common stock | 11,500,000 | - | 11,500,000 | |||||||||
| Basic and diluted net loss per share - Class A common stock | $ | 0.00 | $ | (0.07 | ) | $ | (0.07 | ) | ||||
| Weighted average shares outstanding - Class B common stock | 2,875,000 | - | 2,875,000 | |||||||||
| Basic and diluted net loss per share - Class B common stock | $ | (0.37 | ) | $ | 0.30 | $ | (0.07 | ) | ||||
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affectCondensed Consolidated Financial Statements include the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the derivative warrant liabilities. Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts 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.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accountsoperations of the Company and its wholly owned subsidiary, Merger Sub,subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests (“NCI”) on the Condensed 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. Accounts and transactions between consolidated entities have been eliminated. 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.
Pursuant to the Business Combination, the merger between Motion and Ambulnz, Inc. was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, Motion was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Ambulnz, Inc. stock for the net assets of Motion, accompanied by a recapitalization. The net assets of Motion are stated at September 30, 2021. Merger Sub hadhistorical cost, with no goodwill or other intangible assets orrecorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Ambulnz, Inc. 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, Inc. was determined to be the accounting acquirer in the transaction, as such, the acquisition is considered a business combination under Accounting Standards Codification (“ASC”), Topic 805, Business Combinations, (“ASC 805”) and was accounted for using the acquisition method of September 30, 2021.accounting.
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements include the accounts of DocGo Inc. and its subsidiaries. All significant inter-companyintercompany transactions and balances have been eliminated in consolidation.these Condensed Consolidated Financial Statements.
Investments HeldThe Company holds a variable interest in MD1 Medical Care P.C. (“MD1”) which contracts with physicians and other health professionals in order to provide services to the Trust AccountCompany. MD1 is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a 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 MD1 and funds and absorbs all losses of the VIE and appropriately consolidates MD1.
At all times prior toNet loss for the consummationVIE was $163,178 as of the Business Combination, the Company’s portfolio of investments held in the Trust Account was comprised of 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 investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account were comprised of U.S. government securities, the investments were classified as trading securities. When the Company’s investments held in the Trust Account were comprised of money market funds, the investments were carried at fair value. Trading securities and investments in money market funds are presented on the condensed consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income on investments held in Trust Account in the accompanying unaudited condensed consolidated statement of operations.June 30, 2022. The estimated fair values of investments held in the Trust Account are determined using available market information.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluatesVIE’s total assets, all of its financial instruments, including issued stock purchase warrants,which were current, amounted to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification$324,866 on June 30, 2022. Total liabilities, all of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
The Company accounts for its 6,366,666 warrants issued in connection with its Initial Public Offering (3,833,333 Public Warrants) and Private Placement (2,533,333 Private Placement Warrants) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
As of September 30, 2021 and December 31, 2020, the carrying values of cash, accounts payable, accrued expenses and franchise tax payable approximate their fair values due to the short-term nature of the instruments. The Company’s investments held in Trust Account are comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in money market funds that comprise only U.S. treasury securities and are recognized at fair value. The fair value of investments held in Trust Account is determined using quoted prices in active markets.
The fair value of Public Warrants and Private Placement Warrants at December 31, 2020 was determined using a Monte Carlo simulation, and at September 30, 2021 was determined by reference to the quoted price of the Public Warrants on the Nasdaq Stock Market.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred and presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering. The Company classified deferred underwriting commissions as non-current liabilities as their liquidation was not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021 and December 31, 2020, 11,500,000 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value of conditionally redeemable Class A common stock (see Note 7). This change in the carrying value of redeemable shares of Class A common stock resulted in charges to additional paid-in capital and accumulated deficit.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts 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 the years in which those temporary differences are expected to be recovered or settled.VIE, was $913,150 on June 30, 2022. The effectVIE’s total stockholders’ deficit was $588,284 on deferred tax assets and liabilities of a change in tax rates is recognized in income during the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. Because the future realization of tax benefits is not considered to be more likely than not, the Company provided a full valuation allowance for the deferred tax assets at SeptemberJune 30, 2021 and December 31, 2020.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2021 or December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 6,366,666 shares of common stock since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and nine months ended September 30, 2021.
The following table reflects the calculation of basic and diluted net income (loss) per common share with net income (loss) allocated pro rata between the two classes of common shares as follows:
| For the Three Months Ended | For the Nine Months Ended | For the Period from August 11 (Inception) to September 30, | ||||||||||||||||||
| September 30, 2021 | September 30, 2021 | 2020 | ||||||||||||||||||
| Class A | Class B | Class A | Class B | Class B | ||||||||||||||||
| Basic and diluted net income (loss) per common share: | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Allocation of net income (loss) | $ | 479,385 | $ | 65,102 | $ | (420,345 | ) | $ | (87,867 | ) | $ | (2,065 | ) | |||||||
| Denominator: | ||||||||||||||||||||
| Basic and diluted weighted average common shares outstanding | 27,600,000 | 3,066,666 | 26,184,615 | 3,046,153 | ||||||||||||||||
| Basic and diluted net income (loss) per common share | $ | 0.04 | $ | 0.04 | $ | (0.04 | ) | $ | (0.04 | ) | $ | — | ||||||||
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. This ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements.
Note 3 – Initial Public Offering
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 Public Warrant. 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.
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 Founder Shares to the Company for no consideration, resulting in a decrease in the total number of shares of Class B common stock outstanding from 3,737,500 to 3,306,2502022.. All shares and associated amounts were retroactively restated to reflect the share surrender. 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 Founder Shares were forfeited, resulting in a decrease in the total number of shares of Class B common stock outstanding from 3,306,250 to 2,875,000 such that the Founder Shares represented 20.0% of the Company’s issued and outstanding Public Shares after the Initial Public Offering and prior to the consummation of the Business Combination. Effective August 24, 2021, pursuant to an election made by the Sponsor the 2,875,000 Founder Shares were converted from Class B common shares on a one-for-one basis into Class A common shares.
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 Warrant, 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 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 are 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) are not 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 $150,000 pursuant to an unsecured Note Payable to cover expenses related to the Initial Public Offering, pursuant to which the Company borrowed approximately $71,000. This loan was payable without interest upon the completion of the Initial Public Offering. The Company fully repaid the Note Payable on October 19, 2020, and this credit facility is no longer in effect. There were no related party loans outstanding at September 30, 2021 or December 31, 2020.
Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, the initial stockholders, officers and directors and their affiliates could, but were not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). No Working Capital Loans were outstanding at September 30, 2021 or December 31, 2020.
Note 5 – Commitments and Contingencies
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the healthcare industry, which its target company operates in, and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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.
Underwriting Agreement
Pursuant to the underwriting agreement for the Initial Public Offering, $0.35 per unit, or $4.0 million in the aggregate, was payable to the underwriter for deferred underwriting commissions. The deferred fee became payable to the underwriter from the amounts held in the Trust Account upon consummation of the Business Combination.
Other Commitments and Obligations
As of September 30, 2021, the Company did not have any lease obligations or purchase commitments, and it had no long-term liabilities other than the warrant liabilities of $8.6 million and the deferred underwriting commission of $4.0 million payable from the Trust Account upon consummating the initial business combination. In addition, upon consummation of the Merger described herein, the Company was obligated to pay an M&A advisory fee to Barclays Capital Inc. from the Trust Account in the amount of approximately $3.0 million.
Note 6 – Derivative Warrant Liabilities
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. 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 have an exercise price of $11.50 per share, subject to adjustment,DocGo Inc. and will expire five years after the completion of a business combination or earlier upon redemption or liquidation.Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Foreign Currency
In addition, if (x)The Company’s functional currency is the Company issues additional shares or equity-linked securitiesU.S. dollar. The functional currency of our foreign operation is the respective local currency. 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 capital raising purposes in connection withequity accounts which are translated at historical rates. The Condensed Consolidated Statements of Operations and Comprehensive Income are translated at the closingweighted average rate of exchange during the initial business combination at an issue price or effective issue priceapplicable period. The resulting unrealized cumulative translation adjustment is not material to the financial statements.
Use of less than $9.20 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizationsEstimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the like) (with such issue price or effective issue pricedisclosure of contingent assets and liabilities in its financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’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 determined in good faith byreasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily 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 boardfuture results of directors,operations will be affected.
Concentration of Credit Risk and in the caseOff-Balance Sheet Risk
The Company is potentially subject to concentration of any such issuancecredit risk with respect to the Company’s initial stockholders, 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,its cash, cash equivalents 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 onrestricted cash, which the Company consummates its initial business combination (such price,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 “Market Value”Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is below $9.20 per share,not exposed to significant credit risk due to 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%financial strength of the higherdepository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk 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.loss.
The 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 are not transferable, assignable or salable until 30 days after the completion of a business combination, subject to certain limited exceptions, (2) the Private Placement Warrants are 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 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.Major Customers
Once the warrants become exercisable, theThe Company may redeem the outstanding warrants (excepthas 1 customer that accounted for approximately 30% of sales and 15% of net accounts receivable, and another customer that accounted for 17% of sales and 12% of net accounts receivable for the Private Placement Warrants):period ended June 30, 2022. As of the period ended June 30, 2021, 1 customer accounted for approximately 22% of sales and 11% of net accounts receivable, and another customer that accounted for 12% of sales and 21% of net accounts receivable. The Company expects to maintain its relationships with these customers.
If theEmerging Growth 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,
The Company is an “emerging growth company,” as describeddefined in Section 2(a) of the warrant agreement. In no event willSecurities Act of 1933, as amended (the “Securities Act”), as modified by the Company beJumpstart 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 companies that are not emerging growth companies including, but not limited to, not being required to net cash settlecomply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any warrant.golden parachute payments not previously approved.
Commencing ninety days afterDocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Further, Section 102(b)(1) of the warrants become exercisable,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 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. The Company has 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, 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 redeemmake comparison of the outstanding Warrants: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.
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.
Note 7 – Class A Common Stock Subject to Possible RedemptionCash and Cash Equivalents
Prior toCash and cash equivalents include all highly liquid investments with an original maturity of three months or less. The Company maintains most of its cash and cash equivalents with financial institutions in the consummationU.S. The accounts at financial institutions in the U.S. are insured by the Federal Deposit Insurance Corporation (“FDIC”) and are in excess of the Business Combination, the Company’s Class A common stock featured certain redemption rights that were considered to be outsideFDIC limits. The Company had cash balances of the Company’s controlapproximately $797,000 and subject to the occurrence of future events. At September$803,000 with foreign financial institutions on June 30, 20212022 and December 31, 2020, there were 11,500,000 shares of Class A common stock outstanding subject to possible redemption. The carrying value of potentially redeemable Class A common stock reported in temporary equity of the condensed consolidated balance sheets at September 30, 2021, and December 31, 2020 is comprised as follows:respectively.
| Gross proceeds from issuance of potentially redeemable Class A common stock | $ | 115,000,000 | ||
| Less: | ||||
| Proceeds allocated to Public Warrants | (3,105,000 | ) | ||
| Class A common stock issuance costs | (6,793,491 | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | 9,898,491 | |||
| Class A common stock subject to possible redemption | $ | 115,000,000 |
Note 8 – Stockholders’ Equity
Class A Common StockRestricted Cash and Insurance Reserves— Prior to the consummation of the Business Combination, the Company was authorized to issue 50,000,000 shares of Class A common stock with a par shares value of $0.0001 per share. At September 30, 2021 and December 31, 2020, there were 14,375,000 (see Class B Common Stock below) and 11,500,000 shares of Class A common stock issued and outstanding. Of the outstanding shares of Class A common stock, 11,500,000 were subject to possible redemption at both September 30, 2021 and December 31, 2020, and accordingly such shares are classified in temporary equity in the condensed consolidated balance sheets at those dates.
Class B Common Stock—PriorCash and cash equivalents subject to consummationcontractual restrictions and not readily available are classified as restricted cash in the Condensed 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 its line of credit, transportation equipment leases and a standby letter of credit as required by its insurance carrier (see Notes 8 and 13).
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 Business Combination,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 was authorizedother than to issue 12,500,000 shares of Class B common stock with a par value of $0.0001 per share. Holders ofpay or settle self-insured claims and costs. These amounts are reflected in “Restricted cash” in the Company’s Class B common stock were entitled to one vote for each share. Ataccompanying Condensed Consolidated Balance Sheets. December 31, 2020, 2,875,000 shares of Class B common stock were issued and outstanding. Effective August 24, 2021, pursuant to an election made by the Sponsor, the 2,875,000 outstanding Class B common shares were converted on a one-for-one basis into Class A common shares. Because these Class A shares were held by the Sponsor, they did not have the pre-Business Combination redemption rights of the Public Shares.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Preferred stockFair 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 Company is authorizedaccounting 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.
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 issue 1,000,000 sharesmanagement as of preferred stock with a par value of $0.0001 per share. As of SeptemberJune 30, 20212022 and December 31, 2020,2021. For certain financial instruments, including 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 for loans with similar terms, approximates its fair values.
Accounts Receivable
The Company contracts with hospitals, healthcare facilities, businesses, state and local government entities, and insurance providers to transport patients and to provide Mobile Health services at specified rates. Accounts receivable consist of billings for transportation and healthcare services provided to patients. The billings will either be paid or settled on the patient’s behalf by health insurance providers, managed care organizations, treatment facilities, government sponsored programs, businesses, or patients directly. Accounts receivable are net of insurance provider contractual allowances, which are estimated at the time 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 Condensed Consolidated Statement 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:
| Asset Category | 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 expensed as incurred. Expenditures that improve an asset or extend its estimated useful life are capitalized.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including NCI, 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 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. For the periods ending June 30, 2022 and December 31, 2021, management determined that there was no impairment loss required to be recognized for the carrying value of long-lived assets.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of the purchase price of an acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and indefinite-lived intangible assets, consisting primarily of operating licenses, are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company makes assumptions regarding the estimated future cash flows, including forecasted revenue growth, projected gross margin and the discount rate to determine the fair value of these assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges against these assets in the reporting period in which the impairment is determined.
The Company tests goodwill for impairment at the reporting unit level, which is one level below the operating segment. The Company has the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the one-step quantitative assessment. If as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required. Otherwise, no further testing will be required. If a quantitative impairment test is performed, the Company compares the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. Estimating the fair value of the reporting units requires significant judgment by management. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, goodwill impairment is recognized.
Any excess in carrying value over the estimated fair value is recorded as impairment loss and charged to the results of operations in the period such determination is made. For the periods ended June 30, 2022 and 2021, management determined that there was no impairment loss required to be recognized in the carrying value of goodwill or other intangible assets. The Company selected December 31 as its annual testing date.
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 Financial Instruments
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 Company’s Condensed Consolidated Statement of Operations and Comprehensive Income. For details regarding the related party transactions that occurred during the periods ended June 30, 2022 and 2021, refer to Note 15.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Revenue Recognition
On January 1, 2019, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), as amended.
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) ambulance and medical transportation services (“Transportation Services”) and (2) Mobile Health 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 payer.
Nature of Our Services
Revenue is primarily derived from:
| i. | Transportation Services: These services encompass both emergency response and non-emergency ambulance transport services. Net revenue from transportation services is derived from the transportation of patients based on billings to third party payors and healthcare facilities. |
| ii. | Mobile Health Services: These services include services performed at home and offices, COVID-19 testing and vaccinations, and event services which include on-site healthcare support at sporting events and concerts. |
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. For Mobile Health, the performance of the services and any related support activities 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.
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 Transportation Services and Mobile Health services is same day to 5 days with payments generally due within 30 days. For Transportation Services, the Company estimates the amount of revenues unbilled at month end and recognizes such amounts as revenue, based on available data and customer history. The Company’s Transportation Services and Mobile Health 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. The Company monitors and evaluate all contracts on a case-by-case basis to determine if multiple performance obligations are present in a contractual arrangement.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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For 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 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. Generally, for Mobile Health 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 at the same time. For certain Mobile Health services that have a fixed fee arrangement, and the services are provided over time, revenue is recognized over time as the services are provided to the customer.
In the following table, revenue is disaggregated by as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Primary Geographical Markets | ||||||||||||||||
U.S. | $ | 106,314,813 | $ | 59,946,797 | $ | 221,368,244 | $ | 107,308,709 | ||||||||
U.K. | 3,204,491 | 2,239,200 | 6,042,612 | 4,246,682 | ||||||||||||
| Total revenue | $ | 109,519,304 | $ | 62,185,997 | $ | 227,410,856 | $ | 111,555,391 | ||||||||
| Major Segments/Service Lines | ||||||||||||||||
| Transportation Services | $ | 22,175,233 | $ | 28,936,421 | $ | 49,987,743 | $ | 47,740,979 | ||||||||
| Mobile Health | 87,344,071 | 33,249,576 | 177,423,113 | 63,814,412 | ||||||||||||
| Total revenue | $ | 109,519,304 | $ | 62,185,997 | $ | 227,410,856 | $ | 111,555,391 | ||||||||
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. All stock-based compensation costs are recorded in operating expenses in the Condensed 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 noexercised or converted into common stock of the Company during the reporting periods. Potential dilutive common stock equivalents consist of the incremental common stock issuable upon exercise of warrants and the incremental shares issuable upon conversion of preferred stock issuedoptions. 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. On June 30, 2021, the Company excluded from its calculation 39,446 shares because their inclusion would have been anti-dilutive.
Equity Method Investment
On October 26, 2021, the Company acquired a 50% interest in RND Health Services Inc. (“RND”) for $655,876. 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 policies of the investee but does not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investment” on the Condensed Consolidated Balance Sheets. Changes in value of RND are recorded in “Gain from on equity method investment” on the Condensed Consolidated Statements of Operations and Comprehensive Income. The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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On November 1, 2021, the Company acquired a 20% interest in National Providers Association, LLC (“NPA”) for $30,000. 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 policies of the investee but does not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investment” on the Condensed Consolidated Balance Sheets. Changes in value of NPA are recorded in “Loss from equity method investment” on the Condensed Consolidated Statements of Operations and Comprehensive Income. The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions. Effective December 21, 2021, three members withdrew from NPA resulting in the remaining two members obtaining the remaining ownership percentage. On December 31, 2021 and June 30, 2022, DocGo owned 50% of NPA.
Under the equity method, the Company’s investment is initially measured at cost and subsequently increased or outstanding.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.
Leases
The Company categorizes leases at its inception as either operating or finance leases based on the criteria in FASB ASC 842, Leases, (“ASC 842”). The Company adopted ASC 842 on January 1, 2019, using the modified retrospective approach, and has established a Right-of-Use (“ROU”) 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 Company’s incremental borrowing rate for the lease established at the commencement date, and the ROU asset is measured as the lease liability plus any initial direct costs, less any lease incentives received before commencement. The Company recognizes 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 is such occurrences. Regarding short-term leases, ASC 842-10-25-2 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 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 the Company’s 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.
DocGo Inc. and Subsidiaries
Note 9NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Recently Issued Accounting Standards Not Yet Adopted
In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Fair Value MeasurementsCredit Losses Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), that 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. This ASU only affects entities that already adopted ASU 2016-13, which is effective for fiscal years beginning after December 15, 2022. The Company expects that this ASU will not have a material impact on the Company’s Condensed Consolidated Financial Statements.
3. Property and Equipment, net
Property and equipment, net, as of June 30, 2022 and December 31, 2021 are as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| Office equipment and furniture | $ | 2,292,194 | $ | 1,977,808 | ||||
| Buildings | 527,284 | 527,284 | ||||||
| Land | 37,800 | 37,800 | ||||||
| Transportation equipment | 14,027,121 | 13,772,251 | ||||||
| Medical equipment | 4,285,584 | 3,949,566 | ||||||
| Leasehold improvements | 603,073 | 616,446 | ||||||
| 21,773,056 | 20,881,155 | |||||||
| Less: Accumulated depreciation | (9,543,059 | ) | (8,147,266 | ) | ||||
| Property and equipment, net | $ | 12,229,997 | $ | 12,733,889 | ||||
The Company recorded depreciation expense of $729,560 and $570,351 for the three months ended June 30, 2022 and 2021, respectively.
The Company recorded depreciation expense of $1,441,438 and $1,099,192 for six months ended June 30, 2022 and 2021, respectively. The Company wrote off $45,645 of fully depreciated assets for the six months ended June 30, 2022.
4. Acquisition of Businesses
LJH Ambulance Acquisition
On November 20, 2020, AF WI LNZ, LLC, a subsidiary of Ambulnz-FMC North America LLC (“FMC NA”), a subsidiary of Holdings, entered into the Share Purchase Agreement (the “Agreement”) with LJH Ambulance (“LJH”). LJH was in the business of providing medical transportation services. The purchase price consisted of $465,000 cash consideration. The Company also agreed to pay the Seller 50% of all proceeds from accounts receivable that were outstanding as of the Agreement signing date that are actually received by the Company after the Agreement closing date. The LJH transaction closed on January 12, 2022 with the outstanding acquisition payable balance of $282,518 being paid off on March 4, 2022.
GMS Acquisition
On June 3, 2022, Holdings, entered into a Management Service Agreement (the “Agreement”) with Government Medical Services, LLC (“GMS”), a provider of medical services. On July 6, 2022 (the “Closing Date”), Holdings acquired GMS in exchange for $19 million in cash consideration. Holdings also agreed to pay GMS an additional $3 million upon GMS meeting certain performance conditions within a year of the Closing Date.
DocGo Inc. and Subsidiaries
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Century Acquisition
On August 13, 2019, Ambulnz-FMC North America LLC, a subsidiary of Holdings, acquired 100% of the outstanding shares of common stock of Century Ambulance Service, Inc. (“Century”). Century was in the business of providing ambulette transportation services in New York City, Nassau and Suffolk Counties in New York State as a Medicaid Common Carrier ambulette service.
The aggregate purchase price payable by Ambulnz FMC-North America LLC was $400,000, consisting of $200,000 paid upon entering into the agreement with the remaining $200,000 to be paid upon the transfer of relevant regulatory approvals including the licenses to operate in New York City, Nassau and Suffolk Counties in New York State. The purchase price was allocated to the licenses acquired to operate the acquired business in New York State. The remaining $209,474 purchase price payment was paid off on July 1, 2022.
5. Goodwill
The Company recorded goodwill in connection with its acquisitions. The changes in the carrying value of goodwill for the period ended June 30, 2022 are as noted in the tables below:
| Carrying Value | ||||
| Balance at December 31, 2021 | $ | 8,686,966 | ||
| Goodwill acquired during the period | - | |||
| Balance at June 30, 2022 | $ | 8,686,966 | ||
6. Intangibles
Intangible assets consist of the following as of June 30, 2022 and December 31, 2021:
| June 30, 2022 | ||||||||||||||||||
| Estimated Useful Life (Years) | Gross Carrying Amount | Additions | Accumulated Amortization | Net Carrying Amount | ||||||||||||||
| Patents | 15 years | $ | 48,668 | $ | 6,795 | $ | (8,072 | ) | $ | 47,391 | ||||||||
| Computer software | 5 years | $ | 294,147 | - | (248,416 | ) | 45,731 | |||||||||||
| Operating licenses | Indefinite | $ | 8,375,514 | - | - | 8,375,514 | ||||||||||||
| Internally developed software | 4-5 years | $ | 6,013,513 | 1,009,635 | (5,076,383 | ) | 1,946,765 | |||||||||||
| $ | 14,731,842 | $ | 1,016,430 | $ | (5,332,871 | ) | $ | 10,415,401 | ||||||||||
| December 31, 2021 | ||||||||||||||||||
| Estimated Useful Life (Years) | Gross Carrying Amount | Additions | Accumulated Amortization | Net Carrying Amount | ||||||||||||||
| Patents | 15 years | $ | 19,275 | $ | 29,393 | $ | (6,367 | ) | $ | 42,301 | ||||||||
| Computer software | 5 years | 132,816 | 161,331 | (219,388 | ) | 74,759 | ||||||||||||
| Operating licenses | Indefinite | 8,375,514 | - | - | 8,375,514 | |||||||||||||
| Internally developed software | 4-5 years | 2,146,501 | 3,867,012 | (3,828,038 | ) | 2,185,475 | ||||||||||||
| $ | 10,674,106 | $ | 4,057,736 | $ | (4,053,793 | ) | $ | 10,678,049 | ||||||||||
The Company recorded amortization expense of $645,715 and $457,960 for the three months ended June 30, 2022 and 2021, respectively.
The Company recorded amortization expense of $1,279,078 and $879,984 for the six months ended June 30, 2022 and 2021, respectively.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Future amortization expense at June 30, 2022 for the next five years and in the aggregate are as follow:
| Amortization Expense | ||||
| 2022, remaining | $ | 729,885 | ||
| 2023 | 822,295 | |||
| 2024 | 272,757 | |||
| 2025 | 180,535 | |||
| 2026 | 3,698 | |||
| Thereafter | 30,717 | |||
| Total | $ | 2,039,887 | ||
7. Accrued Liabilities
Accrued liabilities consist of the following as of June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | |||||||
| Accrued bonus | $ | 3,730,768 | $ | 7,260,456 | ||||
| Accrued lab fees | 3,479,852 | 4,885,539 | ||||||
| Accrued payroll | 7,031,788 | 3,539,301 | ||||||
| Medicare advance | - | 975,415 | ||||||
| FICA/Medicare liability | 739,629 | 739,629 | ||||||
| Accrued general expenses | 6,787,508 | 3,497,418 | ||||||
| Accrued subcontractors | 8,041,022 | 9,564,833 | ||||||
| Accrued fuel and maintenance | 320,565 | 450,842 | ||||||
| Accrued workers compensation | 5,426,284 | 2,259,571 | ||||||
| Other current liabilities | 578,023 | 736,021 | ||||||
| Accrued legal fees | 2,438,884 | 1,143,629 | ||||||
| Credit card payable | 82,196 | 58,223 | ||||||
| Total accrued liabilities | $ | 38,656,519 | $ | 35,110,877 | ||||
8. Line of Credit
On May 13, 2021, the Company entered into a revolving loan and security agreement with a bank (the “Lender”), with a maximum revolving advance amount of $12,000,000. Each Revolving Advance carried interest at a per annum rate equal to the Wall Street Journal Prime Rate, plus one percent (1.00%), but in no event less than five percent (5.00%) per annum, calculated on the basis of a 360-day year for the actual number of days elapsed (“Contract Rate”). The revolving loan had a maturity date of May 12, 2022 (“Maturity Date”). This loan was secured by all assets of entities owned 100% by DocGo Inc. This loan was subject to certain financial covenants such as a Fixed Charge Coverage Ratio and Debt to Effective Tangible Net Worth, as defined in the agreement. The Company decided not to renew the agreement on the Maturity Date, therefore, the balance was $0 as of June 30, 2022.
On December 17, 2021, Ambulnz-FMC North America, LLC (“FMC NA”), entered into a revolving loan and bridge credit and security agreement with a subsidiary of one of its members with a maximum revolving advance amount of $12,000,000. Each Revolving Advance shall bear interest at a per annum rate equal to the Wall Street Journal Prime Rate (5.5% at June 30, 2022), as the same may change from time to time, plus one percent (1.00%), but in no event less than five percent (5.00%) per annum, calculated on the basis of a 360-day year for the actual number of days in the applicable period. The agreement is subject to certain financial covenants such as an unused fee, whereas the Company shall pay to the subsidiary of one of its members an unused fee in the amount of 0.5% of the average daily amount by which the Revolving Commitment Amount ($12 million) exceeds the principal balance of the aggregate outstanding advances. All accrued and unpaid interest and unused fee shall be due and payable on the first anniversary of the date of the agreement (“Revolving Credit Maturity Date”). This loan is secured by all assets of entities owned 100% by DocGo Inc. As of December 31, 2021, the outstanding balance of the line of credit was zero. On January 26, 2022, the Company drew $1,000,000 to fund operations and meet short-term obligations. As of June 30, 2022, the outstanding balance of the line of credit was $1,000,000.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. Notes Payable
The Company has various loans with finance companies with monthly installments aggregating $60,499, inclusive of interest ranging from 2.5% through 7.5%. The notes mature at various times through 2051 and are secured by transportation equipment.
The following table presents information aboutsummarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 by level within the fair value hierarchy:notes payable:
| Fair Value Measured as of September 30, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account - money market fund holding solely U.S. Treasury Securities | $ | 115,000,482 | $ | — | $ | — | $ | 115,000,482 | ||||||||
| Liabilities: | ||||||||||||||||
| Public Warrant liabilities | $ | 5,175,000 | $ | — | $ | — | $ | 5,175,000 | ||||||||
| Private Placement Warrant liabilities | — | 3,420,000 | — | 3,420,000 | ||||||||||||
| Total Warrant liabilities | $ | 5,175,000 | $ | 3,420,000 | $ | — | $ | 8,595,000 | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Equipment and financing loans payable, between 2.5% and 7.5% interest and maturing between January 2022 and May 2051 | $ | 1,615,290 | $ | 1,903,288 | ||||
| Loan received pursuant to the Payroll Protection Program | - | - | ||||||
| Total notes payable | 1,615,290 | 1,903,288 | ||||||
| Less: current portion of notes payable | $ | 566,426 | $ | 600,449 | ||||
| Total non-current portion of notes payable | $ | 1,048,864 | $ | 1,302,839 | ||||
| Fair Value Measured as of December 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account - U.S. Treasury Securities | $ | 115,020,078 | $ | — | $ | — | $ | 115,020,078 | ||||||||
| Liabilities: | ||||||||||||||||
| Public Warrant liabilities | $ | — | $ | — | $ | 5,443,335 | $ | 5,443,335 | ||||||||
| Private Placement Warrant liabilities | — | — | 3,597,335 | 3,597,335 | ||||||||||||
| Total Warrant liabilities | $ | — | $ | — | $ | 9,040,670 | $ | 9,040,670 | ||||||||
Interest expense was $43,508 and $61,324 for the periods ended June 30, 2022 and December 31, 2021, respectively.
Future minimum annual maturities of notes payable as of June 30, 2022 are as follows:
| Notes Payable | ||||
| 2022, remaining | 270,596 | |||
| 2023 | 483,842 | |||
| 2024 | 320,070 | |||
| 2025 | 244,683 | |||
| 2026 | 146,099 | |||
| Thereafter | 150,000 | |||
| Total maturities | $ | 1,615,290 | ||
| Current portion of notes payable | (566,426 | ) | ||
| Long-term portion of notes payable | $ | 1,048,864 | ||
10. Business Segment Information
The Company conducts business as 2 operating segments, Transportation Services and Mobile Health services. 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, who is the chief executive officer, in deciding how to allocate resources and assessing performance. The Company’s business operates in two operating segments because the Company’s entities have two main revenue streams, and the Company’s chief operating decision maker evaluates the Company’s financial information and resources and assesses the performance of these resources by revenue stream.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 Transportation Services and Mobile Health services segments based primarily on results of operations.
Operating results for the business segments of the Company are as follows:
| Transportation Services | Mobile Health Services | Total | ||||||||||
| Three Months Ended June 30, 2022 | ||||||||||||
| Revenues | $ | 22,175,233 | $ | 87,344,071 | $ | 109,519,304 | ||||||
| Income (loss) from operations | (19,493,937 | ) | 26,951,694 | $ | 7,457,757 | |||||||
| Total assets | $ | 198,330,033 | $ | 133,525,355 | $ | 331,855,388 | ||||||
| Depreciation and amortization expense | $ | 1,819,937 | $ | 217,834 | $ | 2,037,771 | ||||||
| Stock compensation | $ | 511,990 | $ | 1,487,629 | $ | 1,999,619 | ||||||
| Long-lived assets | $ | 28,216,054 | $ | 3,116,310 | $ | 31,332,364 | ||||||
| Three Months Ended June 30, 2021 | ||||||||||||
| Revenues | $ | 28,936,421 | 33,249,576 | $ | 62,185,997 | |||||||
| Income (loss) from operations | (598,737 | ) | 857,496 | 258,759 | ||||||||
| Total assets | $ | 94,500,701 | $ | 28,634,083 | $ | 123,134,784 | ||||||
| Depreciation and amortization expense | $ | (1,756,843 | ) | $ | (140,208 | ) | $ | (1,897,051 | ) | |||
| Stock compensation | $ | 360,600 | $ | 9,400 | $ | 370,000 | ||||||
| Long-lived assets | $ | 25,939,839 | $ | 1,905,129 | $ | 27,844,968 | ||||||
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
| Transportation Services | Mobile Health Services | Total | ||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||
| Revenues | $ | 49,987,743 | $ | 177,423,113 | $ | 227,410,856 | ||||||
| Income (loss) from operations | (28,822,314 | ) | 46,374,636 | $ | 17,552,322 | |||||||
| Total assets | $ | 198,330,033 | $ | 133,525,355 | $ | 331,855,388 | ||||||
| Depreciation and amortization expense | $ | 3,807,258 | $ | 431,534 | $ | 4,238,792 | ||||||
| Stock compensation | $ | 879,809 | $ | 2,542,747 | $ | 3,422,556 | ||||||
| Long-lived assets | $ | 28,216,054 | $ | 3,116,310 | $ | 31,332,364 | ||||||
| Six Months Ended June 30, 2021 | ||||||||||||
| Revenues | $ | 47,740,979 | 63,814,412 | $ | 111,555,391 | |||||||
| Income (loss) from operations | (4,000,937 | ) | 2,385,739 | (1,615,198 | ) | |||||||
| Total assets | $ | 94,500,701 | $ | 28,634,083 | $ | 123,134,784 | ||||||
| Depreciation and amortization expense | $ | 3,354,519 | $ | 140,208 | $ | 3,494,727 | ||||||
| Stock compensation | $ | 752,134 | $ | 9,400 | $ | 761,534 | ||||||
| Long-lived assets | $ | 25,939,839 | $ | 1,905,129 | $ | 27,844,968 | ||||||
Long-lived assets include property, plant and equipment, goodwill and intangible assets.
Geographic Information
Revenues by geographic location are included in Note 2.
11. Equity
Preferred Stock
In November 2021, the Company’s Series A preferred stock was cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo, par value $0.0001 (the “Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement. The Company’s Condensed Consolidated Statements of Changes in Stockholders’ Equity reflect the 2020 shares as if the Merger occurred in 2020.
Prior to the reverse merger, on May 23, 2019, the Series A preferred stock was formed, and 40,000 shares were authorized. Each share of Series A preferred stock was convertible into Class A common stock at a conversion price of $3,000 per share, subject to adjustment as defined in the articles of incorporation.
Series A preferred stockholders had voting rights equivalent to the number of common stock shares issuable upon conversion. The Series A preferred stockholders were entitled to a non-cumulative dividend equal to 8% of the original issue price as defined in the agreement when declared by the board of directors.
The holders of the Series A preferred stock had preferential liquidation rights and rank senior to the holders of common stock. If a liquidation were to occur, the holders of the Series A preferred stock would have been paid an amount equal to $3,000 per share, subject to adjustment as defined in the articles of incorporation, plus all accrued and unpaid dividends thereon. After the payment of the Series A preferred stockholders, the common stockholders would have been paid out on a pro-rata basis.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Common Stock
On November 1, 2017, Ambulnz, Inc. converted its legal structure from a limited liability company to a corporation and converted its membership units into shares of common stock at a rate of 1,000 shares per membership unit. The total authorized number of shares of common stock converted was 100,000 shares, comprised of 35,597 shares of Class A common stock and 64,402 shares of Class B common stock.
Prior to the reverse merger, on May 23, 2019, the Ambulnz, Inc amended and restated its articles of incorporation and the total authorized common stock increased to 154,503 shares, comprised of 78,000 shares of Class A common stock and 76,503 shares of Class B common stock. The Class A common stockholders had voting rights equivalent to one vote per share of common stock and the Class B common stockholders have no voting rights. Dividends may be paid to the common stockholders out of funds legally available, when declared by the board of directors.
Share Repurchase Program
On May 24, 2022, the Company was authorized to purchase up to $40 million of the Company’s common stock under a share repurchase program (the “Program”). During the second quarter of 2022, the Company repurchased 70,000 shares of its common stock for $498,000. These shares were subsequently cancelled. The Program does not obligate the Company to acquire any specific number of shares and will expire on November 24, 2023. Under the Program, shares may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.
Preacquisition Warrants
On February 15, 2018, the Company issued warrants to purchase 1,367 shares of Class B common stock at a purchase price of $0.01 per share to an investor in conjunction with a capital investment. The warrants had no expiration date. The fair value on the date of issuance was $5,400 per share, for a total fair value of $7,381,800. On May 23, 2019, the warrants were exchanged for warrants to purchase 2,461 shares of Series A preferred stock at a purchase price of $0.01 per share. The exchanged warrants have no expiration date, and had a fair value on the date of issuance of $3,000 per share for a total fair value of $7,383,000. These warrants were cashless exercised in November 2021 for 1,587,700 shares of common DocGo Inc. common stock.
On June 5, 2019, the Company issued warrants to purchase 667 shares of Series A preferred stock at a purchase price of $3,000 per share to an investor in conjunction with a capital investment. The warrants would have expired on June 6, 2029. The fair value on the date of issuance was $2,078 per warrant for a total fair value of $1,386,026. These warrants were cashless exercised in November 2021 for 229,807 shares of common DocGo Inc. common stock.
12. Stock Based Compensation
Stock Options
In 2021, the Company established the DocGo Inc. Equity Incentive Plan (the “Plan”), which replaced Ambulnz, Inc’s 2017 Equity Incentive Plan. The Company reserved 16,607,894 shares of 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 2032 and are nontransferable. Stock options granted have a maximum contractual term of 10 years. On June 30, 2022, approximately 3.0 million employee stock options on a converted basis had vested.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Before the Company’s shares of stock were publicly traded, 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. The expected term of the options represented the period of time the instruments are 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 Company utilized a Monte Carlo simulationcontemporaneous valuations in determining the fair value of its shares at the date of option grants. Prior to the Merger, each valuation utilized both the discounted cash flow and guideline public company methodologies to estimate the fair value of the Public Warrantsits shares on a non-controlling and Private Placement Warrants atmarketable basis. The December 31, 2020 and used the quoted pricevaluations also included an approach that took into consideration a pending non-binding letter of the Public Warrantsintent from Motion Acquisition Corp. The March 11, 2021 valuation report relied solely on the Nasdaq Stock Market at September 30, 2021 to estimate the fair value of both the Public Warrants and Private Placement Warrants at that date.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. Effective March 31, 2021, the fair value of the Public Warrant liabilitiesCompany’s shares implied by the March 8, 2021 Merger Agreement with Motion Acquisition Corp.
A discount for lack of marketability was reclassified from Level 3applied to Level 1,the non-controlling and marketable fair value estimates determined above. The determination of an appropriate discount for lack of marketability was based on a review of discounts on the sale of restricted shares of publicly traded companies and put-based quantitative methods. Factors that influenced the size of the discount for lack of marketability included (a) the estimated time it would take for a Company stockholder to achieve marketability, and (b) the volatility of the Company’s business.
The following assumptions were used to compute the fair value of the Private Placement Warrants was reclassified from Level 3 to Level 2.stock option grants during the period ended June 30, 2022 and 2021:
Level 1 assets include investments in money market funds that invest solely in U.S. Treasury securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
| Period Ended June 30, 2022 | ||||||||
| 2022 | 2021 | |||||||
| Risk-free interest rate | 0.71 | % | 0.06 | % | ||||
| Expected term (in years) | 4 | .5 - 2 | ||||||
| Volatility | 60 | % | 65 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
The following table presentssummarizes the changes inCompany’s stock option activity under the fair value of warrant liabilities measured using Level 3 inputs duringPlan for the nine monthsperiod ended SeptemberJune 30, 2021:2022:
Public | Private | Total | ||||||||||
| Fair value as of December 31, 2020 | $ | 5,443,335 | $ | 3,597,335 | $ | 9,040,670 | ||||||
| Transfers to Levels 1 and 2 | (5,443,335 | ) | (3,597,335 | ) | (9,040,670 | ) | ||||||
| Fair value as of September 30, 2021 | $ | 0 | $ | 0 | $ | 0 | ||||||
| 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 | 2,028,281 | 4.67 | 9.24 | - | ||||||||||||
| Exercised during the year | (613,074 | ) | 1.88 | 6.57 | - | |||||||||||
| Cancelled during the year | (417,876 | ) | 7.70 | 9.05 | - | |||||||||||
| Balance as of June 30, 2022 | 9,420,303 | 6.52 | 8.55 | $ | 13,284,689 | |||||||||||
| Options vested and exercisable at June 30, 2022 | 2,971,140 | $ | 5.76 | 7.42 | $ | 8,778,770 | ||||||||||
The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s 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 periods ended June 30, 2022 and December 31, 2021 was $7.15 and $2.80, respectively. On June 30, 2022 and December 31, 2021, the total unrecognized compensation related to unvested stock option awards granted was $22,868,377 and $20,792,804, respectively, which the Company expects to recognize over a weighted-average period of approximately 3.58 years.
Note 10 – Subsequent EventsDocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Restricted Stock Units
The fair value of restricted stock units (“RSUs”) is determined on the date of grant. The Company records compensation expense in the Condensed Consolidated Statement 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 was as follows:
| RSUs | Weighted- Average Grant Date Fair Value Per RSU | |||||||
| Balance as of December 31, 2021 | 50,192 | $ | 9.97 | |||||
| Granted | 146,853 | 7.15 | ||||||
| Vested as of June 30, 2022 | (8,258 | ) | 9.97 | |||||
| Forfeited | - | - | ||||||
| Balance as of June 30, 2022 | 188,787 | 7.78 | ||||||
| Vested and unissued at June 30, 2022 | - | |||||||
| Non-vested at June 30, 2022 | 188,787 | 7.78 | ||||||
The total grant-date fair value of RSUs granted during the period ended June 30, 2022 was $1,049,999.
For the period ended June 30, 2022, the Company recorded stock-based compensation expense related to RSUs of $82,305.
As of June 30, 2022, the Company had $1,467,949 in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 3.2 years.
13. Leases
Operating Leases
The Company evaluated subsequent eventsis obligated to make rental payments under non-cancellable operating leases for office, dispatch station space, and transactions that occurred aftertransportation equipment, expiring at various dates through 2026. Under the balance sheet date upterms 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 the date that the unaudited condensed consolidated financial statements were available to be issued,hold certain funds in restricted cash and determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited condensed consolidated financial statements, except as noted below.cash equivalents accounts under some of these agreements.
On November 5,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 (ROU) 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 ROU asset and lease obligation. In making 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.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Lease Costs
The table below comprise lease expenses for the periods ended June 30, 2022 and 2021:
| Three Months Ended | Six Months Ended | |||||||||||||||
| Components of total lease cost: | June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
| Operating lease expense | $ | 428,728 | $ | 446,564 | $ | 891,353 | $ | 937,939 | ||||||||
| Short-term lease expense | 273,601 | 125,745 | 528,697 | 193,795 | ||||||||||||
| Total lease cost | $ | 702,329 | $ | 572,309 | $ | 1,420,050 | $ | 1,131,734 | ||||||||
Lease Position as of June 30, 2022
Right-of-use lease assets and lease liabilities for the Company’s operating leases were recorded in the Condensed Consolidated Balance Sheets as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Lease right-of-use assets | $ | 3,812,085 | $ | 4,195,682 | ||||
| Total lease assets | $ | 3,812,085 | $ | 4,195,682 | ||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Lease liability - current portion | $ | 1,421,036 | $ | 1,461,335 | ||||
| Noncurrent liabilities: | ||||||||
| Lease liability, net of current portion | 2,651,849 | 2,980,946 | ||||||
| Total lease liability | $ | 4,072,885 | $ | 4,442,281 | ||||
Lease Terms and Discount Rate
| Weighted average remaining lease term (in years) - operating leases | 3.97 | |||
| Weighted average discount rate - operating leases | 6.00 | % |
Undiscounted Cash Flows
Future minimum lease payments under the operating leases at June 30, 2022 are as follows:
| Operating Leases | ||||
| 2022, remaining | $ | 891,985 | ||
| 2023 | 1,338,089 | |||
| 2024 | 897,548 | |||
| 2025 | 894,740 | |||
| 2026 | 483,775 | |||
| 2027 and thereafter | 14,625 | |||
| Total future minimum lease payments | 4,520,762 | |||
| Less effects of discounting | (447,877 | ) | ||
| Present value of future minimum lease payments | $ | 4,072,885 | ||
Operating lease expense was approximately $428,728 and $446,564 for the three months ended June 30, 2022 and 2021, respectively.
Operating lease expense was approximately $891,353 and $937,939 for the six months ended June 30, 2022 and 2021, respectively.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
For the three months ended June 30, 2022, the Company made $428,728 of fixed cash payments related to operating leases and $851,307 related to finance leases.
For the three months ended June 30, 2021, the Company Motion Merger Sub Corp.,made $446,564 of fixed cash payments related to operating leases and Ambulnz consummated$652,891 related to finance leases.
For the Business Combination,six months ended June 30, 2022, the Company made $891,353 of fixed cash payments related to operating leases and $1,473,882 related to finance leases.
For the six months ended June 30, 2021, the Company made $937,939 of fixed cash payments related to operating leases and $1,254,392 related to finance leases.
Finance Leases
The Company leases vehicles under a non-cancelable finance lease agreements with a liability of $7,931,349 and $10,139,410 as further describedof June 30, 2022 and December 31, 2021, respectively. This includes accumulated depreciation expense of $8,837,761 and $7,095,242 as of June 30, 2022 and December 31, 2021, respectively.
Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $662,495 and $710,645 for the three months ended June 30, 2022 and 2021, respectively.
Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $1,518,276 and $1,357,457 for the six months ended June 30, 2022 and 2021, respectively.
Gain on Lease Remeasurement
In June 2022, the Company reassessed its finance lease estimates relating to vehicle milage and residual value. As a result, the Company determined to purchase the vehicles at the end of the leases which resulted in Note 1.a gain of $1.4 million recorded as gains from lease accounting on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
Lease Payments
The table below presents lease payments for the periods ended June 30, 2022 and 2021:
| Three Months Ended | Six Months Ended | |||||||||||||||
| Components of total lease payment: | June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
| Finance lease payment | $ | 851,307 | $ | 652,891 | $ | 1,473,882 | $ | 1,254,392 | ||||||||
| Short-term lease payment | - | - | - | |||||||||||||
| Total lease payments | $ | 851,307 | $ | 652,891 | $ | 1,473,882 | $ | 1,254,392 | ||||||||
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Lease Position as of June 30, 2022
Right-of-use lease assets and lease liabilities for the Company’s finance leases were recorded in the Condensed Consolidated Balance Sheets as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Lease right-of-use assets | $ | 8,408,399 | $ | 9,307,113 | ||||
| Total lease assets | $ | 8,408,399 | $ | 9,307,113 | ||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Lease liability - current portion | $ | 2,655,037 | $ | 3,271,990 | ||||
| Noncurrent liabilities: | ||||||||
| Lease liability, net of current portion | 5,276,312 | 6,867,420 | ||||||
| Total lease liability | $ | 7,931,349 | $ | 10,139,410 | ||||
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 June 30, 2022:
| Weighted average remaining lease term (in years) - finance leases | 4.14 | |||
| Weighted average discount rate - finance leases | 6.01 | % |
Undiscounted Cash Flows
Future minimum lease payments under the finance leases at June 30, 2022 are as follows:
| Finance Leases | ||||
| 2022, remaining | 1,634,535 | |||
| 2023 | 2,660,174 | |||
| 2024 | 1,930,614 | |||
| 2025 | 1,628,715 | |||
| 2026 | 826,735 | |||
| 2027 and thereafter | 133,586 | |||
| Total future minimum lease payments | 8,814,359 | |||
| Less effects of discounting | (883,010 | ) | ||
| Present value of future minimum lease payments | $ | 7,931,349 | ||
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
14. Other Income
As of June 30, 2022, the Company recognized other income of $11,387, net of $19,660 from realized foreign exchange loss offset by rental income of $31,047.
15. Related Party Transactions
Historically, the Company has been involved in transactions with various related parties.
Ely D. Tendler Strategic & Legal Services PLLC provides commission services for the Company. Ely D. Tendler Strategic & Legal Services PLLC is owned by the General Counsel of the Company, and therefore is a related party. The Company made commission payments to Ely D. Tendler Strategic & Legal Services PLLC totaling $234,255 and $127,093 for the three months ended June 30, 2022 and 2021, respectively, and $443,408 and $290,218 for the six months ended June 30, 2022 and 2021, respectively.
Included in accounts payable were $99,585 and $85,133 due to this related party as of June 30, 2022 and December 31, 2021, respectively.
16. Income Taxes
As a result of the Company’s history of net operating losses (“NOL”), the Company had historically provided for a full valuation allowance against its deferred tax assets for assets that were not more-likely-than-not to be realized. The Company’s income tax (expense) benefit for the three months ended June 30, 2022 and 2021 were $(321,660) and $1,107, respectively, and $(761,839) and $(8,923) for the six months ended June 30, 2022 and 2021, respectively. The Company’s effective tax rate was 4.14% and 1.10% for the three months ended June 30, 2022 and 2021, respectively, and 4.30% and 0.47% for the six months ended June 30, 2022 and 2021, respectively. In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, and best estimates of nontaxable and nondeductible income and expense items.
17. 401(K) Plan
The Company has established a 401(k) plan in January 2022 that qualifies as a deferred compensation arrangement under Section 401 of the Internal Revenue Code. All U.S. employees that complete two months of service with the Company are eligible to participate in the plan. The Company did not make any employer contributions to this plan as of June 30, 2022.
18. Legal Proceedings
From time to time, the Company may be involved as a defendant in legal actions that arise in the normal course of business. In the opinion of management, the Company has adequate legal defense on all legal actions, and the results of any such proceedings would not materially impact the Condensed Consolidated Financial Statements of the Company. The Company 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 reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
As of June 30, 2022 and December 31, 2021, the Company recorded a liability of $1,000,000, which represents an amount for an agreed settlement, under the terms of a memorandum of understanding, of various class-based claims, both actual and potential, under Federal and California state law, as described in detail below. The settlement is subject to court approval.
Stephanie Zamora, Jascha Dlugatch, et al. v. Ambulnz Health, LLC, et al. was filed in the Los 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, the parties attended mediation and settled the claims pled in the Consolidated Complaint on a class-wide and PAGA basis in exchange for a proposed $1 million payment by Ambulnz Health, inclusive of administrative costs and fees. The parties are working on preparing all documents to obtain court approval of their settlement and anticipate obtaining preliminary approval of their settlement in the near future, subject to Court calendars and pandemic related backlogs.
19. Risk and Uncertainties
COVID-19 Risks, Impacts and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally.
The spread of COVID-19 and the related country-wide shutdowns and restrictions had a mixed impact on the Company’s business. In the ambulance transportation business, which predominantly comprises of non-emergency medical transportation, the Company 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 had a significantly restricted (or entirely eliminated) the number of permitted attendees. Both ambulance transports and event-related revenues have since recovered to pre-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 (“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 and available Emergency Medical Technicians (“EMT”) and Paramedics, the Company formed a new subsidiary, Rapid Reliable Testing, LLC (“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 segment.
Medicare Accelerated Payments
Medicare accelerated payments of approximately $2,397,024 were received by the Company in April 2020. Effective October 8, 2020, CMS is no longer accepting new applications for accelerated payments. Accordingly, the Company does not expect to receive additional Medicare accelerated payments. Payments under the Medicare Accelerated and Advance Payment program are advances that must be repaid. Effective October 1, 2020, the program was amended such that providers are required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms. The repayment terms specify that for the first 11 months after repayment begins, repayment will occur through an automatic recoupment of 25% of Medicare payments otherwise owed to the provider. At the end of the eleven-month period, recoupment will increase to 50% for six months. At the end of the six months (or 29 months from the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable. In such event, if payment is not received within 30 days, interest will accrue at the annual percentage rate of four percent (4%) from the date the letter was issued and will be assessed for each full 30-day period that the balance remains unpaid. There were no Medicare accelerated payments reflected within accrued liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2022, compared to $975,415 as of December 31, 2021. The Company’s estimate of the current liability is a function of historical cash receipts from Medicare and the repayment terms set forth above.
20. Subsequent Events
On July 6, 2022, Holdings acquired Government Medical Services, LLC (“GMS”) in exchange for $19 million in cash. GMS is engaged in the business of providing licensed healthcare clinicians.
On July 13, 2022, the Company acquired Exceptional Medical Transportation, LLC (“Exceptional”) in exchange for $6.4 million in cash. Exceptional is in the business of providing medical transportation services.
On July 20, 2022, Ambulnz Community Partners LTD, a subsidiary of the Company located in United Kingdom, entered into a financing agreement to acquire six ambulances. The total purchase price was approximately £0.6 million GBP (approximately $0.7 million), payable in 60 monthly installment payments starting on August 26, 2022.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations
ReferencesUnless the context requires otherwise, references to “DocGo,” “we,” “us,” “our” and “the Company” in this section are to the “Company,” “our,” “us” or “we” refer to Motion Acquisition Corp.business and operations of DocGo Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statementsDocGo’s Condensed Consolidated Financial Statements and therelated notes thereto contained elsewhereincluded in this report. CertainQuarterly Report on Form 10-Q. In addition to historical information, contained in thethis discussion and analysis set forth below includescontains forward-looking statements that involve risks, uncertainties, and uncertainties.assumptions that could cause DocGo’s actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed herein and under the caption, “Cautionary Note Regarding Forward-Looking Statements.”
Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in DocGo’s Condensed Consolidated Financial Statements or in the associated notes. Certain other amounts that appear in this section may similarly not sum due to rounding.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q may includeincludes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”), regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. 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 if any, are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends” or similar expressions. Forward-looking statements are inherently subject to known and unknown risks, uncertainties and assumptions about usassumptions. Additional information regarding the risks and uncertainties and other important factors that maycould cause our actual results levels of activity, performance or achievements to bediffer materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identifythose in the forward-looking statements by terminology suchis set forth under the heading “Risk Factors” in Part I, Item 1A. in DocGo’s Annual Report on Form 10-K for the year ended December 31, 2021, as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” orfiled with the negative of such terms orSecurities and Exchange Commission (the “SEC”) on March 15, 2022 (the “2021 Form 10-K”), and may be updated in this and other similar expressions. Factors that might cause or contribute to such a discrepancy include, butsubsequent Quarterly Reports on Form 10-Q. Forward-looking statements are not limitedguarantees of future performance and speak only as of the date hereof. We undertake no obligation to those described in our other SEC filings.update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law.
Overview
We areDocGo, which was originally incorporated in 2015, is a blank checkhealthcare transportation and mobile services company incorporated as a Delaware corporation on August 11, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On October 19, 2020, we consummated our initial public offering (“Initial Public Offering”) of units (the “Units”that uses proprietary dispatch and with respectcommunication technology to the Class A common stock includedprovide quality healthcare transportation and mobile, in-person medical treatment directly to patients in the Units, the “Public Shares”comfort of their homes, workplaces and with respect to the warrants includedother non-traditional locations, in major metropolitan cities in the Units, the “Public Warrants”) and simultaneous private placement (“Private Placement”) of warrants (“Private Placement Warrants”), which is summarized in Note 3 to the accompanying unaudited condensed consolidated financial statements. Upon the closing of the Initial Public OfferingU.S. 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 Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee.U.K.
As more fully described in
The Company derives revenue primarily from its two operating segments: Transportation Services and Mobile Health services.
| ● | Transportation Services: The services offered by this segment encompass both emergency response and non-emergency ambulance transport services. Net revenue from Transportation Services is derived from the transportation of patients based on billings to third-party payors and healthcare facilities. |
| ● | Mobile Health Services: The services offered by this segment include services performed at home and offices, COVID-19 testing, and event services which include on-site healthcare support at sporting events and concerts. |
See Note 110, “Business Segment Information” to the accompanying unaudited condensed consolidated financial statements, on March 8, 2021,Condensed Consolidated Financial Statements for additional information regarding DocGo’s segments.
For the three months ended June 30, 2022, the Company entered into a merger agreement (the “Merger Agreement”) with Ambulnz, Inc. dba DocGo (“DocGo”) pursuantrecorded net income of $11.8 million, compared to which DocGo would merge with and into a newly incorporated subsidiarynet income of $0.1 million in the Company (the “Merger”), with DocGo being the surviving entity of the Merger and becoming a wholly-owned subsidiary of the Company. Concurrently with the execution of the Merger Agreement, we entered into a series of subscription agreements with accredited investors providing for the purchase by such investors of an aggregate of 12,500,000 shares of Class A common stock at a price per share of $10.00, for gross proceeds of $125 million (collectively, the “PIPE”). The closing of the PIPE was conditioned upon the consummation of the Merger. The Merger and the PIPE were consummated on November 5, 2021 following the receipt of required approval by the stockholders of the Company and DocGo, required regulatory approvals, and the fulfillment of other conditions.three months ended June 30, 2021.
Our amendedFor the six months ended June 30, 2022, the Company recorded net income of $21.1 million, compared to a net loss of $1.9 million in the six months ended June 30, 2021.
COVID-19
The spread of COVID-19 and restated certificatethe related shutdowns and restrictions had a mixed impact on our business. In the ambulance transportation business, which comprises of, incorporation providesnon-emergency medical transport, the Company saw a decline in volumes from historical and expected levels, as elective surgeries and other non-emergency surgical procedures were postponed. In addition, the Company experienced lost revenue associated with sporting, concerts and other events, as those events were cancelled or had a significantly restricted (or entirely eliminated) number of permitted attendees. Both ambulance transports and event-related revenues have since recovered to pre-COVID levels or higher.
There are two areas where the Company 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 that wepartially offset some of the lost non-emergency transport revenues. In addition, in response to the need for widespread COVID-19 testing and available EMTs and paramedics, the Company expanded its operations to include Rapid Reliable Testing (“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 business segment. Mobile Health generated approximately $87.3 and $177.4 million in revenue in the three and six months ended June 30, 2022, respectively, as compared to $33.2 and $63.9 million in the three and six months ended June 30, 2021, respectively.
During 2020 and the early part of 2021, the Company continued to operate with several back-office employees working remotely. To date, the Company has not witnessed any degradation in productivity from these employees, the large majority of whom have now returned to their respective offices, and our operations have proceeded without major interruption. By early 2021, nearly all remote employees had until October 19, 2022 (24 monthsreturned to work in their respective offices and other locations. DocGo also utilized several government programs in 2020 related to the pandemic, receiving approximately $1.0 million in payments through the Public Health and Social Services Emergency Fund authorized under the Coronavirus Aid, Relief and Economic Security Act and related legislation as well as various state and local programs, net of amounts that will be repaid. DocGo also received accelerated Medicare payments of approximately $2.4 million that were repaid in 2022.
While it is very difficult to accurately predict the future direction of the effects of the COVID-19 pandemic, and the related impact on medical transportation levels, the revenue from the closingTransportation Services segment during 2021 exceeded that of 2020 by approximately 33%. Since the beginning of 2021, trip volumes in most of our Initial Public Offering)markets have started to return to more normal historical levels, and this trend has continued into 2022 The Company generated, during 2021, COVID-19 testing revenue, included in its Mobile Health services segment, above the levels projected, and this persisted in the second quarter of 2022. Given the nature of the Company’s contracts with most of its customers, which include multiple procedures for which the Company is paid per hours worked, per vehicles and related equipment utilized and on a per-procedure basis, it is difficult to determine the revenues that are attributable to COVID-19 testing. However, the Company estimates that COVID-19 testing revenue in the three and six months ended June 30, 2022 amounted to approximately $28 million and $66 million, respectively. In a broader, strategic sense, the consumer focus on Mobile Health services and the formation of RRT, and its emergence as a significant contributor to overall revenues, have accelerated the diversification in the Company’s business by more rapid expansion of the Mobile Health segment.
The Company’s current business plan assumes gradual recovery of industry-wide transportation volumes to historical levels, plus an increased demand for mobile health services, a demand that was accelerated by the pandemic, but which is also being driven by longer-term secular factors, such as the increasing desire on the part of patients to receive treatments outside of traditional settings, such as doctor’s offices and hospitals. However, given the unpredictable, unprecedented, and fluid nature of the pandemic and its economic consequences, we are unable to predict the duration and extent to which the pandemic and its related positive and negative impacts will affect our business, financial condition, and results of operations in future periods.
Factors Affecting Our Results of Operations
Our operating results and financial performance are influenced by a variety of factors, including, among others, obtaining operating licenses, acquisitions, conditions in the healthcare transportation and mobile health services markets and economic conditions generally, availability of healthcare professionals, changes in the cost of labor, and production schedules of our suppliers. Some of the more important factors are briefly discussed below. Future revenue growth and improvement in operating results will be largely contingent on DocGo’s ability to penetrate new markets and further penetrate existing markets, which is subject to a number of uncertainties, many of which are beyond DocGo’s control. The COVID-19 pandemic has also significantly impacted DocGo’s business, as discussed above.
Operating Licenses
DocGo has historically pursued a strategy of applying for ambulance operating licenses in the states, counties and cities, identified for future new market entry. The approval of a new operating license may take an extended period of time. DocGo reduces this risk through its acquisition strategy by identifying businesses and/or underlying licenses in these new markets that may be for sale.
Acquisitions
Historically, DocGo has pursued an acquisition strategy to obtain ambulance operating licenses from small operators. Future acquisitions may also include larger companies that may help drive revenue, profitability, cash flow and stockholder value. DocGo did not complete any acquisitions during the six months ended June 30, 2022. During the 12 months ended December 31, 2021, DocGo completed one acquisition, for a purchase price of $2.3 million, which contributed approximately $0.3 million to 2021 revenues.
On July 6, 2022, the Company acquired Government Medical Services, LLC (“GMS”) in exchange for $19 million in cash. GMS was engaged in the business of providing licensed healthcare clinicians. We believe this acquisition will allow us to increase our presence in that market. We are currently in the process of finalizing the accounting for this transaction and expect to complete our initialpreliminary allocation of the purchase consideration to the asset acquired and liabilities assumed by the end of the third quarter of 2022.
On July 13, 2022, the Company acquired Exceptional Medical Transportation, LLC (“Exceptional”) in exchange for $6.4 million in cash. Exceptional was in the business combination. If we had been unableof providing medical transportation services. We believe this acquisition will allow us to increase our presence in that market. We are currently in the process of finalizing the accounting for this transaction and expect to complete our initial business combination within such periodpreliminary allocation of the purchase consideration to the assets acquired and stockholders didliabilities assumed by the end of the third quarter of 2022.
Healthcare Services Market
The transportation services market is highly dependent on patients requiring transportation after surgeries and other medical procedures and treatments. During the pandemic, DocGo experienced a decrease in transportation volumes as a result of fewer elective surgeries. However, the Company was able to reallocate assets to locations where demand increased as a result of the pandemic.
Overall Economic Conditions in the Markets In Which We Operate
Economic changes both nationally and locally in our markets may impact our financial performance. Unfavorable changes in demographics, health care coverage of transportation and mobile health services, interest 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.
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 otherwise approve an amendment to our charter to extend such date, we would have been required to: (i) cease all operations exceptinclude 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, it is the best measure of the level of demand for the purposeCompany’s Transportation Services and is used by management to monitor and manage the scale of winding up, (ii) as promptly as reasonably possible butthe business.
The average trip price is calculated by dividing the aggregate revenue from completed transports (“trips”) by the total number of transports 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 DocGo is paid a fixed rate for the use of a fully staffed and equipped ambulance do not more than 10 business days thereafter, redeemfactor in the Public Shares, at a per-share price, payable in cash, equaltrip counts or average trip prices mentioned above.
Our Ability to Control Expenses
We pay close attention to the aggregate amount then on depositmanagement 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 drive improvements in productivity per transport. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our locations.
Inflation
Beginning in April 2021, the inflation rate in the Trust Account including interest earnedUS, as measured by the Consumer Price Index (CPI) has steadily increased. In 2019, the inflation rate was approximately 1.8%, while it dropped to approximately 1.2% in 2020. These data are reported monthly, showing year-over-year changes in prices across a basket of goods and services. For 2021, inflation increased from the 1.4%-2.6% range in the first quarter, to 4.2% in April, and was in the 5.0% area through the end of the third quarter of 2021, before increasing to the 6.0%-7.0% range in the fourth quarter. For the full year, the inflation rate was 4.7% in 2021, the highest annual rate since the 5.4% rate recorded in 1990. The inflation rate continued to increase throughout the first half of 2022, reaching approximately 9.1% in June 2022. The increased inflation rate has had an impact on the funds heldCompany’s expenses in several areas, including wages, fuel and medical and other supplies. This has had the impact of compressing gross profit margins, as the Company is generally unable to pass these higher costs on to its customers, particularly in the Trust Accountshort term. Looking to the second half 2022, we anticipate a moderation of the inflation rate when compared to the first half of the year but expect that inflation will remain above the levels seen in the previous 10 years, when the annual inflation rate ranged from 0.1% to 2.4%. If inflation is above the levels that the Company anticipates in 2022, gross margins could be below plan and our business, operating results and cash flows may be adversely affected.
Investing in R&D and Enhancing Our Customer Experience
Our performance is dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel. We intend to continually develop and introduce innovative new software services, integrate 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 will likely be adversely affected.
Regulatory Environment
DocGo 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.
Components of Results of Operations
Our business consists of two reportable segments — Transportation Services and Mobile Health services. The Company evaluates the performance of both segments based primarily on results of its operations. Accordingly, other income and expenses not previously releasedincluded in results from operations are only included in the discussion of consolidated results of operations.
Revenue
The Company’s revenue consists of services provided by its ambulance Transportation Services segment and its Mobile Health segment.
Cost of Revenues
Cost of revenues consists primarily of revenue generating wages paid to usemployees, vehicle insurance costs (including insurance premiums and costs incurred under the insurance deductibles), maintenance, and fuel related to payTransportation Services, and laboratory fees, facility rent, medical supplies and subcontractors. We expect cost of revenue to continue to rise in proportion to the expected increase in revenue.
Operating Expenses
General and Administrative Expenses
General and administrative expense consists primarily of salaries, bad debt expense, insurance expense, consultant fees, and professional fees for accounting services. We expect our taxes (lessgeneral and administrative expense to increase as we scale up headcount with the growth of our business, and as a result of operating as a public company, including compliance with SEC rules and regulations, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Depreciation and Amortization
DocGo 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 $100,000healthcare compliance, claims processing fees and legal settlements.
Technology and Development Expenses
Technology and development expense, net of capitalization, consists primarily of cost incurred in the design and development of DocGo’s proprietary technology, third-party software and technologies. We expect technology and development expense to increase in future periods to support our growth, including our intent to continue investing in the optimization, accuracy and reliability of our platform and drive efficiency in our operations. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we may choose to make more significant investments.
Sales, Advertising and Marketing Expenses
Our sales and marketing expenses consist of costs directly associated with our sales and marketing activities, which primarily include sales commissions, marketing programs, trade shows, and promotional materials. We expect that our sales and marketing expenses will 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.
Results of Operations
Comparison of the three months ended June 30, 2022 and 2021
| Three Months Ended June 30, | Change | Change | ||||||||||||||
| $ in Millions | 2022 | 2021 | $ | % | ||||||||||||
| Revenue, net | $ | 109.5 | $ | 62.2 | $ | 47.3 | 76 | % | ||||||||
| Cost of revenues | 70.2 | 41.0 | 29.2 | 71 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 24.6 | 16.0 | 8.6 | 54 | % | |||||||||||
| Depreciation and amortization | 2.0 | 1.9 | 0.1 | 5 | % | |||||||||||
| Legal and regulatory | 3.1 | 1.2 | 1.9 | 158 | % | |||||||||||
| Technology and development | 1.1 | 0.7 | 0.5 | 57 | % | |||||||||||
| Sales, advertising and marketing | 1.0 | 1.2 | (0.2 | ) | (17 | )% | ||||||||||
| Total expenses | 102.0 | 61.9 | 40.1 | 65 | % | |||||||||||
| Income (loss) from operations | 7.5 | 0.3 | ||||||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income (expense), net | 0.1 | (0.1 | ) | 0.2 | (200 | )% | ||||||||||
| Gain on remeasurement of warrant liabilities | 3.0 | - | 3.0 | |||||||||||||
| Gain (loss) on initial equity method investments | 0.1 | - | 0.1 | |||||||||||||
| Gain on remeasurement of finance leases | 1.4 | - | 1.4 | |||||||||||||
| Loss on disposal of fixed assets | - | - | 0.0 | |||||||||||||
| Other income (loss) | 0.0 | - | 0.0 | |||||||||||||
| Total other income (expense) | 4.6 | (0.2 | ) | 4.8 | (2,400 | )% | ||||||||||
| Net income (loss) before income tax benefit (expense) | 12.1 | 0.1 | ||||||||||||||
| Income tax expense | (0.3 | ) | - | (0.3 | ) | |||||||||||
| Net income (loss) | 11.8 | 0.1 | ||||||||||||||
| Net loss attributable to noncontrolling interests | (1.0 | ) | 1.7 | (2.7 | ) | (156 | )% | |||||||||
| Net income (loss) attributable to stockholders of DocGo Inc. and Subsidiaries | $ | 12.8 | $ | (1.6 | ) | |||||||||||
Consolidated
For the three months ended June 30, 2022, total revenues were $109.5 million, an increase of $47.3 million, or 76%, from the total revenues recorded in the three months ended June 30, 2021.
Transportation Services
For the three months ended June 30, 2022, Transportation Services revenue totaled $22.2 million and decreased by $6.7 million, or 23%, as compared with the three months ended June 30, 2021. The decrease in total transportation services revenue reflected a decline in project-based “standby” revenue, as these projects, which involved emergency deployments for different municipal entities and which began during the first half of 2021, gradually wound down during the second half of 2021. Emergency deployment revenue amounted to pay dissolution expenses)$2.0 million in the three months ended June 30, 2022, compared to $10.2 million in the same period in 2021. Excluding these revenues from both periods, core Transportation Services revenue increased by approximately 8% during the three months ended June 30, 2022, when compared with the three months ended June 30, 2021. This increase was due to increases in both transportation trip volumes and the average price per trip. Volumes increased by approximately 5%, dividedfrom 45,592 trips for the three months ended June 30, 2021, to 47,673 trips for the three months ended June 30, 2022. The increase in trip volumes is due to a combination of growth in the customer base in certain core markets and entry into new markets in 2021 and early 2022. Our average trip price increased from $305 in the three months ended June 30, 2021, to $360 in the three months ended June 30, 2022. The increase in the average trip price in 2022 reflected a shift in mix toward higher-priced transports, as well as a shift in the customer (payer) mix towards higher-priced transports. The average trip price also benefited from a 5.1% increase in the average Medicare reimbursement rate for ambulance transports. Transportation Services revenues were also driven higher in the second quarter of 2022 by a $0.4 million increase in revenues generated from programs under which the numberCompany is paid a daily or hourly rate for the use of then outstanding Public Shares, which redemption would have completely extinguished public stockholders’ rightsa fully staffed and equipped ambulance. These services do not factor in the trip counts or average trip prices mentioned above.
Mobile Health
For the three months ended June 30, 2022, Mobile Health revenue totaled $87.3 million, an increase of $54.1 million, or 163%, as stockholders (includingcompared with the rightthree months ended June 30, 2021. This significant increase was mainly due to receive further liquidating distributions, if any). There are no redemption rights or liquidating distributionsthe expansion of the services offered by this segment, particularly with respect to our warrants,COVID-19 related testing and vaccination and other healthcare services revenues included in the Mobile Health segment. This expansion accelerated through 2021 and into 2022 as the Company increased its customer base, primarily in the municipal and cruise line customer segments, and its geographic reach, while extending several large customer contracts and introducing a broader range of services.
Cost of Revenue
For the three months ended June 30, 2022, total cost of revenue (exclusive of depreciation and amortization) increased by 71%, as compared to the three months ended June 30, 2021, while revenue increased by approximately 76%. Cost of revenue as a percentage of revenue decreased to 64.1% in the second quarter of 2022 from 66.0% in the second quarter of 2021.
In absolute dollar terms, total cost of revenue in the three months ended June 30, 2022 increased by $29.2 million, compared to the same period in 2021. This was primarily attributable to a $17.7 million increase in total compensation, due to higher headcount for both the Transportation Services and Mobile Health segments; a $9.0 million increase in subcontracted labor, driven mostly by the Mobile Health segment, where revenue increases outpaced the Company’s ability to service such revenue solely with internal resources, temporarily causing the Company to rely increasingly on subcontracted labor; a $1.9 million increase in medical supplies, due to the purchase of COVID-19 test kits and the need for increased personal protective equipment (“PPE”) and related supplies, a $1.7 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 $2.4 million increase in travel costs, relating 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 an approximately $1.1 million in increases across a variety of other cost of revenue categories relating to the Company’s increased scale and geographic presence. These items were partially offset by a $5.0 million decrease in lab fees related to COVID-19 testing activity, reflecting lower per-test lab fees and a shift toward rapid tests.
For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended June 30, 2022 amounted to $17.7 million, up $0.4 million, or 2.3%, from the three months ended June 30, 2021. Cost of revenues as a percentage of revenues increased to 80% from 60% in prior year quarter, due to the decline in higher-margin, project-based standby revenue, combined with the impact of higher hourly wages in certain markets and increased overtime for field employees, and increased fuel costs, as described above.
For the Mobile Health segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended June 30, 2022 amounted to $52.5 million up 120% from $23.9 million in the three months ended June 30, 2021. Cost of revenues as a percentage of revenues decreased to 60.1% from 72.0%, due to the increase in revenues, lower average per-test lab fees and the continued shift away from higher-cost subcontracted labor toward Company personnel in the first half of 2022, which would have expired worthless if we had failedoutweighed significant increases in medical and general supply costs, as described above.
Operating Expenses
For the three months ended June 30, 2022, the Company recorded $31.8 million of operating expenses compared to complete our initial$20.9 million for the three months ended June 30, 2021, an increase of 52%. As a percentage of revenue, operating expenses declined from 33.6% in the second quarter of 2021 to 29.0% in the second quarter of 2022, due primarily to the significant increase in overall revenues described above, coupled with the semi-fixed nature of the cost of corporate infrastructure. The increase of $10.9 million related primarily to a $5.3 million increase in payroll due to investments in and expansion of corporate infrastructure to support revenue growth; a $2.8 million increase in legal, accounting and other professional fees related to increased revenue and related contract generation, directors and officers’ insurance and SEC filing-related costs; a $0.9 increase in subcontractor costs, reflecting the Company’s increasing administrative needs; a $0.1 million increase in depreciation and amortization due to an increase in assets to support revenue growth and capitalized software amortization; a $0.3 million increase in office-related expenses, due to the Company’s ongoing growth and geographic expansion; a $0.3 million increase in IT infrastructure, driven by the Company’s business combination withinand headcount expansion; a $0.1 million increase in bad debt expense; and a $1.1 million increase across various other operating expense categories, driven primarily by the 24-month time period.Company’s ongoing growth.
For the Transportation Services segment, operating expenses in the three months ended June 30, 2022 were $23.9 million, up $12.0 million, or 101%, from the three months ended June 30, 2021. Operating expenses as a percentage of revenues increased to 107.7% from 41.2% for the three months ended June 30, 2021, due primarily to a significant increase in corporate infrastructure, all of which is allocated to the Transportation Services segment. The increased operating expenses, in dollar terms, in the three and six months ended June 30, 2022, primarily reflected higher costs for payroll, travel and entertainment, professional fees and depreciation, as described above.
For the Mobile Health segment, operating expenses in the three months ended June 30, 2022 were $7.9 million, down 6.0% from operating expenses of $8.4 million in the three months ended June 30, 2021. Operating expenses as a percentage of revenues decreased to 9.1% from 25.3% in the second quarter of 2021, reflecting the rapid rate of increase in Mobile Health revenues. Significant expenditures were made in both periods in the expansion of services and geographic areas of operation, as well as the buildout of the Mobile Health management infrastructure. The prior year’s quarter featured significant start-up costs for projects that began to generate revenues during the second half of 2021 and into 2022.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $60,000 of cash in our operating bank account and approximately $47,000 of negative working capital.
Until the time of our Initial Public Offering on October 19, 2020, 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 of shares of Class B common stock, par value $0.0001 per share (the “Founder Shares”) to Motion Acquisition LLC, a Delaware limited liability company (the “Sponsor”)Interest Income/(Expense), and advances to us from our Sponsor of approximately $71,000 under a related party note payable to pay for other offering costs in connection with the Initial Public Offering. Subsequent to October 19, 2020 through September 30, 2021, our liquidity needs were satisfied from the net proceeds of the consummation of the Private Placement not held in the Trust Account. We fully repaid the note payable on October 19, 2020. In addition, in order to finance transaction costs in connection with a business combination, our officers, directors and initial stockholders could have provided us with loans (“Working Capital Loans”), although they were not required to do so. At September 30, 2021 and as of the closing of the Business Combination, there were no Working Capital Loans outstanding.
We used substantially all of the funds held in the Trust Account to complete the Business Combination. Funds held in the Trust Account were also used to fund the redemption of Class A common stock.
We had sufficient cash on hand to fund operations through the date of the Business Combination on November 5, 2021. Subsequent to the Business Combination management believes that we will be able to fund current and foreseeable liquidity needs with cash on hand and cash generated from operations.
Revision to Previously Reported Financial Statements
As discussed in Note 2 to the accompanying unaudited condensed consolidated financial statements, the Company revised its previously filed financial statements to classify all of its Class A common stock that is subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering, in accordance with ASC 480. The impact of the revision to the audited consolidated balance sheet as of December 31, 2020 and the unaudited consolidated balance sheets at March 31, 2021 and June 30, 2021 were reclassifications of $17.2 million, $15.2 million and $18.2 million, respectively, from total stockholders’ equity (deficit) to Class A common stock subject to possible redemption in temporary equity. There was no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss).
Results of Operations
Our entire activity since inception on August 11, 2020 through September 30, 2021 was in preparation for our formation, our Initial Public Offering, and, since consummating our Initial Public Offering, the search for business combination candidates and negotiating the terms of a merger with our selected target company. We did not generate any revenues prior to the consummation of the Business Combination.Net
For the three months ended SeptemberJune 30, 2021, we had2022, the Company recorded $98,276 of net interest income compared to $130,129 of net interest expense in the three months ended June 30, 2021. This was due to a significantly higher amount of interest earned in the second quarter of 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.
Gain/(loss) on Remeasurement of Warrant Liabilities
During the three months ended June 30, 2022, the Company recorded a gain of approximately $0.5$3.0 million which included non-operating income of approximately $0.9 million arising from the changeremeasurement of warrant liabilities. The warrants are marked-to-market in fair valueeach reporting period, and this gain reflected the decline in DocGo’s stock price relative to the beginning of the period. No gain or loss was recorded in relation to the remeasurement of warrant liabilities in the same period in 2021.
Gain/(Loss) on Equity Method Investment
During the three months ended June 30, 2022, the Company recorded a gain of $89,810, 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 second half of 2021, and general and administrative expenses totalingas such, no gain or loss was recorded in relation to an equity method investment in the same period in 2021.
Gain/(loss) from Remeasurement of Finance Leases
During the three months ended June 30, 2022, the Company recorded a gain of approximately $0.3 million.$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.
Income Tax (Expense)/Benefit
During the three months ended June 30, 2022, the Company recorded income tax expense of $321,660, compared to an income tax benefit of $1,107 in the three months ended June 30, 2021. The increase in income tax expense resulted from the higher level of pretax income as well as state income taxes in jurisdictions the Company entered during the past year.
Noncontrolling Interest
For the ninethree months ended SeptemberJune 30, 2021, we2022, the Company had a net loss attributable to noncontrolling interest of approximately $0.5$1.0 million, which included non-operating incomecompared to a net gain attributable to noncontrolling interest of approximately $0.4$1.7 million arising fromfor the changethree months ended June 30, 2021. The loss reflected ongoing investments in fair valuenew markets that were entered into during 2021 and the first quarter of warrant liabilities2022.
Comparison of the six months ended June 30, 2022 and general and administrative expenses totaling approximately $1.0 million.2021
| Six Months Ended June 30, | Change | Change | ||||||||||||||
| $ in Millions | 2022 | 2021 | $ | % | ||||||||||||
| Revenue, net | $ | 227.4 | $ | 111.6 | $ | 115.8 | 104 | % | ||||||||
| Cost of revenues | 148.2 | 76.9 | 71.3 | 93 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 48.5 | 27.8 | 20.6 | 74 | % | |||||||||||
| Depreciation and amortization | 4.2 | 3.5 | 0.7 | 20 | % | |||||||||||
| Legal and regulatory | 4.4 | 1.8 | 2.6 | 144 | % | |||||||||||
| Technology and development | 2.3 | 1.1 | 1.2 | 109 | % | |||||||||||
| Sales, advertising and marketing | 2.3 | 2.0 | 0.3 | 15 | % | |||||||||||
| Total expenses | 209.9 | 113.2 | 96.7 | 86 | % | |||||||||||
| Income (loss) from operations | 17.5 | (1.6 | ) | |||||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income (expense), net | - | (0.2 | ) | 0.2 | (100 | )% | ||||||||||
| Gain on remeasurement of warrant liabilities | 3.0 | - | 3.0 | |||||||||||||
| Gain (loss) on initial equity method investments | - | - | - | |||||||||||||
| Gain on remeasurement of finance leases | 1.4 | - | 1.4 | |||||||||||||
| Loss on disposal of fixed assets | - | - | - | |||||||||||||
| Other income (loss) | - | - | - | |||||||||||||
| Total other income (expense) | 4.4 | (0.2 | ) | 4.6 | (2,300 | )% | ||||||||||
| Net income (loss) before income tax benefit (expense) | 21.9 | (1.9 | ) | |||||||||||||
| Income tax expense | (0.8 | ) | - | (0.8 | ) | |||||||||||
| Net income (loss) | 21.1 | (1.9 | ) | |||||||||||||
| Net loss attributable to noncontrolling interests | (2.2 | ) | 1.4 | (3.6 | ) | (257 | )% | |||||||||
| Net income (loss) attributable to stockholders of DocGo Inc. and Subsidiaries | $ | 23.3 | $ | (3.3 | ) | |||||||||||
Consolidated
Contractual ObligationsFor the six months ended June 30, 2022, total revenues were $227.4 million, an increase of $115.8 million, or 104%, from the total revenues recorded in the six months ended June 30, 2021.
Transportation Services
For the six months ended June 30, 2022, Transportation Services revenue totaled $50.0 million, an increase of $2.3 million, or 4.8%, as compared with the six months ended June 30, 2021. This increase was due to a rise in both transportation trip volumes and the average price per trip. Volumes increased by approximately 5%, from 91,604 trips for the six months ended June 30, 2021, to 96,260 trips for the six months ended June 30, 2022. The increase in trip volumes is due to a combination of growth in the customer base in certain core markets and entry into new markets in 2021 and early 2022. Average trip price increased from $294 in the six months ended June 30, 2021, to $357 the six months ended June 30, 2022. The increase in the average trip price in the 2022 period was due to a shift in mix toward higher-priced transports, as well as a shift in the customer (payer) mix towards higher-priced transports. The average trip price also benefited from a 5.1% increase in the average Medicare reimbursement rate for ambulance transports. The increase in trip-based Transportation Services revenues were largely offset by a decline in project-based “standby” revenue, as these projects, which involved emergency deployments for different municipal entities and which began during the first half of 2021, gradually wound down during the second quarter of 2022. Emergency deployment revenue amounted to $10.3 million in the six months ended June 30, 2022, compared to $12.3 million in the first six months of 2021. Excluding these revenues from both periods, core Transportation Services revenue increased by approximately 12.1% in the six months ended June 30, 2022, when compared with the six months ended June 30, 2021. Transportation Services revenues were also driven higher in the first six months of 2022 by a $1.5 million increase in revenues generated from programs under which the Company is paid a daily or hourly rate for the use of a fully staffed and equipped ambulance. These services do not factor in the trip counts or average trip prices mentioned above.
Mobile Health
For the six months ended June 30, 2022, Mobile Health revenue totaled $177.4 million, an increase of $113.5 million, or 178%, as compared with the six months ended June 30, 2021. This significant increase was mainly due to the expansion of the services offered by this segment, particularly with respect to COVID-19 related testing and vaccination and other healthcare services revenues included in the Mobile Health segment. This expansion accelerated through 2021 and into 2022 as the Company increased its customer base and geographic reach, while extending several large customer contracts and introducing a broader range of services.
Cost of Revenue
For the six months ended June 30, 2022, total cost of revenue (exclusive of depreciation and amortization) increased by 93% as compared to the six months ended June 30, 2021, while revenue increased by approximately 104%. Cost of revenue as a percentage of revenue decreased to 65.2% in the first six months of 2022 from 68.9% in the first six months of 2021.
In absolute dollar terms, total cost of revenue in the six months ended June 30, 2022 increased by $71.3 million from the prior year period. This was primarily attributable to an $29.8 million increase in total compensation, reflecting higher headcount for both the Transportation Services and Mobile Health segments; a $31.6 million increase in subcontracted labor, driven mostly by the Mobile Health segment, where revenue increases outpaced the Company’s ability to service such revenue solely with internal resources, temporarily causing the Company to rely increasingly on subcontracted labor; a $8.4 million increase in medical supplies, due to the purchase of COVID-19 test kits and the need for increased PPE and related supplies, and the increased cost thereof as a result of increased demand during the pandemic; a $4.8 million increase in vehicle costs, driven by a continued increase in the Company’s vehicle fleet and higher fuel and maintenance costs; a $0.6 million increase in facilities and related expenses, due to the Company’s geographic expansion; a $0.2 million increase in communications costs, driven by the increased number of Company employees operating in the field; a $2.4 million increase in travel expenses, relating to field personnel and other clinicians who traveled out of their home regions to provide Mobile Health services; a $2.3 million increase in insurance expenses, reflecting an increase in loss reserves, commensurate with the increase in the Company’s business, headcount and vehicle fleet; and an increase of $0.6 million distributed among a variety of other cost of revenue items. These items were partially offset by a $9.4 million decrease in lab fees related to COVID-19 testing activity, reflecting lower per-test lab fees, and a shift toward rapid tests.
For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the six months ended June 30, 2022 amounted to $ 39.2 million, up $7.2 million, or 22.5%, from the six months ended June 30, 2021. Cost of revenues as a percentage of revenues increased to 78.4% in the first six months of 2022 from 67.1% in the prior year period, due to the decline in higher-margin, project-based standby revenue, combined with the impact of higher hourly wages in certain markets and increased overtime for field employees, and increased fuel costs, as described above.
For the Mobile Health segment, cost of revenues (exclusive of depreciation and amortization) in the six months ended June 30, 2022 amounted to $109.0 million, up 142%, from $ 45.1 million in the six months ended June 30, 2021. Cost of revenues as a percentage of revenues decreased to 61.4% from 70.6%, due to the increase in revenues, lower average per-test lab fees and the increased number of higher-margin, hourly-based programs in the first half of 2022, which outweighed the increased use of higher cost subcontracted labor and significant increases in medical and general supply costs, as described above.
Operating Expenses
For the six months ended June 30, 2022, the Company recorded $61.7 million of operating expenses compared to $36.3 million for the six months ended June 30, 2021, an increase of 70.0%. As a percentage of revenue, operating expenses decreased from 32.5% in the first six months of 2021 to 27.1% in the first six months 2022, due primarily to the significant increase in overall revenues described above, coupled with the semi-fixed nature of the cost of corporate infrastructure. The increase of $25.3 million related primarily to a $15.2 million increase in payroll due to investments in and expansion of corporate infrastructure to support the revenue growth; a $0.4 million increase in travel and entertainment expenses, reflecting both the growth of the overall employee base, as well as increased business development related activities for both the Transportation Services and Mobile Health segments; a $0.7 million increase in depreciation and amortization due to an increase in assets to support revenue growth and capitalized software amortization; a $3.9 million increase in legal, accounting and other professional fees related to increased revenue and related contract generation, directors and officers’ insurance and SEC filing-related costs; a $0.9 million increase in office-related expenses, owing to the Company’s ongoing growth and geographic expansion; a $0.9 million increase in IT infrastructure, driven by the Company’s business and headcount expansion; a $0.3 million increase in marketing expenses, primarily owing to the ongoing expansion of Mobile Health services; a $0.6 million increase in bad debt expense, in line with the increase in overall revenues during the period; a $1.1 million increase in subcontractor expenses, in line with the expanding administrative needs of the Company; and approximately $1.3 million in other increases spread across a variety of other operating expense lines.
For the Transportation Services segment, operating expenses in the six months ended June 30, 2022 were $39.6 million, up $19.1 million, or 92.6%, from the six months ended June 30, 2021. Operating expenses as a percentage of revenues increased to 79.1% from 43.1% for the six months ended June 30, 2021, despite the increase in Transportation Services revenues, due to a significant increase in corporate infrastructure, all of which is allocated to the Transportation Services segment. The increased operating expenses, in dollar terms, in the six months ended June 30, 2022 primarily reflected higher costs for payroll, travel and entertainment, professional fees and depreciation, as described above.
For the Mobile Health segment, operating expenses in the six months ended June 30, 2022 were $22.1 million, up 42.5%, from operating expenses of $15.5 million in the six months ended June 30, 2021. Operating expenses as a percentage of revenues decreased to 12.4% from 24.2% in the first half of 2021, despite significant expenditures made in the expansion of services and geographic areas of operation, as well as the buildout of the Mobile Health management infrastructure throughout 2021 and the early part of 2022, due to the faster rate of increase in Mobile Health revenues. The increased operating expenses, in dollar terms, in 2021 were primarily driven by higher costs for payroll, subcontracted labor costs, travel and entertainment, marketing and IT infrastructure, and facilities costs, as described above. The six months ended June 30, 2021 featured significant start-up costs for projects that began to generate revenues during the second half of 2021 and into 2022.
Interest Income/(Expense), Net
For the six months ended June 30, 2022, the Company recorded $37,330 of net interest expense compared to $245,138 of net interest expense in the six months ended June 30, 2021. The decline in net interest expense was due to a significantly higher amount of interest earned in the first six months of 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. This was partially offset by an increase in payments made for leased vehicles, as the Company’s fleet expanded.
Gain/(loss) on Remeasurement of Warrant Liabilities
During the six months ended June 30, 2022, the Company recorded a gain of approximately $3.0 million from the remeasurement of warrant liabilities. The warrants are marked-to-market in each reporting period, and this gain was due to the decline in DocGo’s stock price relative to the beginning of the period. No gain or loss was recorded in relation to the remeasurement of warrant liabilities in the prior year period.
Gain/(loss) from Remeasurement of Finance Leases
During the six months ended June 30, 2022, the Company recorded a gain 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 prior year period.
Income Tax (Expense)/Benefit
During the six months ended June 30, 2022, the Company recorded income tax expense of $761,839, compared to an income tax expense of $8,923 in the six months ended June 30, 2021. The increase in income tax expense resulted from the higher level of pretax income as well as state income taxes in jurisdictions the Company entered during the past year.
Noncontrolling Interest
For the six months ended June 30, 2022, the Company had net loss attributable to noncontrolling interest of approximately $ 2.2 million, compared to a net gain attributable to noncontrolling interest of $1.4 million for the six months ended June 30, 2021. The loss in the first six months of 2022 reflected ongoing investments in new markets that were entered into during 2021 and early 2022.
Liquidity and Capital Resources
Since inception, DocGo has completed three equity financing transactions that served as the Company’s principal source of liquidity, with minimal debt incurred. Generally, the Company utilized equity raised to finance operations during its development phase, investments in assets, ambulance operating licenses and funding working capital. The Company has also funded these activities through operating cashflows. In November 2021, upon the completion of the merger between Motion Acquisition Corp. and Ambulnz, Inc., the Company received proceeds of approximately $158.1 million, net of transaction expenses. Although the Company generated positive net income in the three and six months ended June 30, 2022, operating cash flows may not be 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 Company using existing cash balances to fund these working capital needs. The Company’s 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. Future capital requirements depend on many factors, including potential acquisitions, our level of investment in technology, and rate of growth in existing and into new markets. The cost of ongoing technology development is another factor that is considered. Capital requirements might also be affected by factors which the Company cannot control, such as interest rates, and other monetary and fiscal policy changes to the manner in which the Company currently operates. Additionally, as the impact of the COVID-19 on the economy and operations evolves, the Company will continuously assess its liquidity needs. If the Company’s growth rate is higher than is currently anticipated, resulting in greater-than-anticipated capital requirements, the Company might need or choose to raise additional capital through debt or equity financings.
Considering the foregoing, DocGo anticipates that existing balances of cash and cash equivalents, future expected cash flows generated from our operations and an available line of credit (as discussed in Note 8, “Line of Credit” to the Condensed Consolidated Financial Statements) will be sufficient to satisfy operating requirements for at least the next twelve months.
Registration RightsCapital Resources
The Sponsor is entitledComparison as of June 30, 2022 and 2021
| As of June 30, | Change | Change | ||||||||||||||
| $ in Millions | 2022 | 2021 | $ | % | ||||||||||||
| Working capital | ||||||||||||||||
| Current assets | $ | 275.7 | $ | 77.7 | $ | 198.0 | 255 | % | ||||||||
| Current liabilities | 57.9 | 46.7 | 11.2 | 24 | % | |||||||||||
| Total working capital | $ | 217.8 | $ | 31.0 | $ | 186.8 | 603 | % | ||||||||
As of June 30, 2022, available cash totaled $198.1 million, which represented an increase of $165.0 million as compared to registration rights pursuantJune 30, 2021, reflecting the receipt of the proceeds from the merger described above, as well as positive cash flow. As of June 30, 2022, working capital amounted to $217.8 million, which represented an increase of $186.8 million as compared to June 30, 2021, primarily reflecting the increased cash balance. Increased accounts receivable, reflecting the growth of the business in the second half of 2021 and the first half of 2022, were partially offset by increases in current liabilities, which reflected the growth of the business and resulted from extended payment terms from vendors.
Cash Flows
Six months ended June 30, 2022 and 2021
| As of June 30, | Change | Change | ||||||||||||||
| $ in Millions | 2022 | 2021 | $ | % | ||||||||||||
| Cash flow summary | ||||||||||||||||
| Net cash provided by/(used in) operating activities | $ | 30.2 | $ | (1.1 | ) | $ | 31.3 | 2845 | % | |||||||
| Net cash provided by/(used in) investing activities | (2.0 | ) | (3.7 | ) | 1.7 | 46 | % | |||||||||
| Net cash provided by/(used in) financing activities | 1.1 | 7.1 | (6.0 | ) | (85 | )% | ||||||||||
| Effect of exchange rate changes | - | 0.1 | (0.1 | ) | (100 | )% | ||||||||||
| Net (decrease) increase in cash | $ | 29.3 | $ | 2.4 | $ | 26.9 | 1121 | % | ||||||||
Operating Activities
During the six months ended June 30, 2022, operating activities provided $30.2 million of cash, aided by net income of $21.1 million. Non-cash charges amounted to $5.1 million and included $3.0 million in depreciation of property and equipment and right-of-use assets, $1.3 million from amortization of intangible assets, $1.8 million in bad debt expense primarily related to a registration rights agreement. The Sponsor will be entitledprovision for potential uncollectible accounts receivable and $3.4 million of stock compensation expense. These were partially offset by non-cash gains of $1.4 million relating to make up to three demands, excluding short form registration demands, that we register the Founder Sharesremeasurement of finance lease liabilities and Private Placement Warrants. In addition,$3.0 million from the Sponsor has “piggy-back” registration rights to include its securitiesremeasurement of warrant liabilities. Changes in assets and liabilities resulted in approximately $3.9 million in additional operating cash flow, as a $4.3 million decrease in accounts receivable, a $2.1 million decrease in other registration statements filedassets and a $3.6 million increase in accrued liabilities outweighed the effect of a $3.2 million increase in prepaid expenses and a $2.9 million decline in accounts payable. Operating cash flow in the first half of 2022 was aided by us. We will bearcollections of large accounts receivable from invoices generated in the expenses incurred in connection with the filingfourth quarter of any such registration statements.2021.
CommitmentsDuring the six months ended June 30, 2021, operating activities used $1.1 million of cash and Other Obligationsprimarily resulted from a net loss of $1.9 million and changes in assets and liabilities, which were partially offset by non-cash charges of $5.5 million. The non-cash items included $1.2 million of bad debt expense primarily related to a provision for potential uncollectible accounts receivable, $2.6 million resulting from the depreciation of property and equipment and right-of-use assets, $0.9 million from amortization of intangible assets, and $0.8 million of stock compensation expense. Changes in assets and liabilities resulted in approximately $4.8 million in negative operating cash flow and were primarily driven by a $17.4 million increase in accounts receivable and a $2.4 million increase in prepaid expenses and other current assets, which were partially offset by a $2.8 million increase in accounts payable and a $12.2 million increase in accrued expenses.
AsInvesting Activities
During the six months ended June 30, 2022, investing activities used $2.0 million of September 30, 2021, we did not have any lease obligations or purchase commitments,cash and we had no long-term liabilities other thanconsisted of the warrant liabilitiesacquisition of $8.6property and equipment totaling approximately $1.0 million and the deferred underwriting commissionacquisition of $4.0 million that was payable from the Trust Account upon consummating our initial business combination. In addition, upon consummation of the Merger described herein, we were obligated to pay an M&A advisory fee to Barclays Capital Inc. from the Trust Accountintangibles in the amount of approximately $3.0 million.$1.0 million to support the ongoing growth of the business.
Critical Accounting PoliciesDuring the six months ended June 30, 2021, investing activities used $3.6 million of cash and primarily consisted of the acquisition of property and equipment totaling $2.6 million and the acquisition of intangibles in the amount of $1.0 million to support growth of new transportation and mobile health markets.
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:Financing Activities
Derivative Warrant LiabilitiesDuring the six months ended June 30, 2022, financing activities provided $1.1 million of cash, due to $1.0 million in proceeds from one of the Company’s subsidiary’s revolving credit line, $2.1 million in non-controlling interest contributions and $0.7 million in proceeds from the exercise of stock options, which were partly offset by $1.4 million in payments on obligations under the terms of finance leases, $0.3 million in repayments of notes payable, a reduction of $0.9 million in amounts due to seller and $0.1 million in equity costs.
We account forDuring the warrants issuedsix months ended June 30, 2021, financing activities provided $7.1 million of cash, including $8.0 million in connection with our Initial Public Offeringproceeds from the Company’s revolving credit line and Private Placement$0.3 million in accordance withnon-controlling interest contributions. These were partially offset by $0.9 million in payments on obligations under the guidance containedterms of finance leases and $0.3 in ASC 815-40, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised and any change in fair value is recognized in our statementrepayments of operations. The fair value of the warrants was determined using Monte Carlo simulations at the Initial Public Offering date and at December 31, 2020, and subsequently by reference to the quoted price of the Public Warrants on the Nasdaq Stock Market.
Class A Common Stock Subject to .Possible Redemption.notes payable.
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. In all other circumstances, our shares of Class A common stock are classified within stockholders’ equity. Prior to the consummation of the Business Combination, our Public Shares featured certain redemption rights that were considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at both September 30, 2021 and December 31, 2020, 11,500,000 shares of Class A common stock subject to possible redemption were classified as temporary equity in the accompanying condensed consolidated balance sheets, outside of the stockholders’ equity section.
Immediately upon the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount value. The change in the carrying value of shares of the redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.
Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
We did not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 6,366,666 shares of common stock in the calculation of diluted income (loss) per share because their exercise is contingent upon future events and since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net loss per share is the same as basic net loss per share for the three months ended September 30, 2021, and 2020, and for the nine months ended September 30, 2021, and the period from August 11, 2020 (inception) through September 30, 2020. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, weFuture minimum annual maturities of notes payable as of the six months ended June 30, 2022 are as follows:
| Notes Payable | ||||
| 2022, remaining | 0.3 | |||
| 2023 | 0.5 | |||
| 2024 | 0.3 | |||
| 2025 | 0.2 | |||
| 2026 | 0.1 | |||
| Thereafter | 0.2 | |||
| Total maturities | $ | 1.6 | ||
| Current portion of notes payable | (0.6 | ) | ||
| Long-term portion of notes payable | $ | 1.0 | ||
Future minimum lease payments under operating leases as of the six months ended June 30, 2022, and for the following five fiscal years and thereafter are as follows:
| Operating Leases | ||||
| 2022, remaining | $ | 0.9 | ||
| 2023 | 1.3 | |||
| 2024 | 0.9 | |||
| 2025 | 0.9 | |||
| 2026 | 0.5 | |||
| 2027 and thereafter | 0.0 | |||
| Total future minimum lease payments | 4.5 | |||
| Less effects of discounting | (0.4 | ) | ||
| Present value of future minimum lease payments | $ | 4.1 | ||
Future minimum lease payments under finance leases as of the six months ended June 30, 2022, and for the following five fiscal years and thereafter are as follows:
| Finance Leases | ||||
| 2022, remaining | $ | 1.6 | ||
| 2023 | 2.7 | |||
| 2024 | 1.9 | |||
| 2025 | 1.6 | |||
| 2026 | 0.8 | |||
| 2027 and thereafter | 0.1 | |||
| Total future minimum lease payments | 8.8 | |||
| Less effects of discounting | (0.9 | ) | ||
| Present value of future minimum lease payments | $ | 7.9 | ||
Share Repurchases
On May 24, 2022, the Board approved a share repurchase program to purchase up to $40 million of the Company’s common stock (the “Program”). The Program does not obligate the Company to acquire any specific number of shares and will expire on November 24, 2023, and the Program may be suspended, extended, modified or discontinued at any time. Under the Program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions and/or a non-discretionary trading plan, all in compliance with the processrules of evaluating the benefitsSEC and other applicable legal requirements. The timing, manner, price and amount of relying onany common stock repurchases under the other reduced reporting requirements providedProgram are determined by the JOBS Act. Subject to certain conditions set forthCompany in the JOBS Act, if, as an “emerging growth company,” we choose to relyits discretion and depend on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our systema variety of internal controls over financial reportingfactors, including legal requirements, price and economic and market conditions. As of June 30, 2022, $39.5 million remained available for share repurchases pursuant to Section 404, (ii) provide allthe Program.
The following table shows the share repurchase activity for the three months ended June 30, 2022:
| Month | Total Number of Shares Purchased | Average Price Paid per Share | Total Amount Repurchased | |||||||||
| April 1 through 30, 2022 | - | $ | - | - | ||||||||
| May 1 through 31, 2022 | 30,000 | $ | 6.96 | 30,000 | ||||||||
| June 1 through 30, 2022 | 40,000 | $ | 7.23 | 40,000 | ||||||||
| Total | 70,000 | $ | 7.10 | 70,000 | ||||||||
Critical Accounting Estimates
For a discussion of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplementour critical accounting policies, refer to the auditor’s report providing additional information aboutsection entitled “Critical Accounting Policies” in our Annual Report on Form 10-K for the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.year ended December 31, 2021.
Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk
We are a smaller reporting company, as defined by Rule 12b-2 ofunder the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and withBased on our management’s evaluation (with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and proceduresofficer), as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based onperiod covered by this evaluation,report, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective as of September 30, 2021, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of the redeemable Class A common stock issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of October 19, 2020, its financial statements for the period ended December 31, 2020 and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in ourreports that we file or submit under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’sSecurities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There waswere no changechanges in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three monthsquarter ended SeptemberJune 30, 2021 covered by this Quarterly Report on Form 10-Q2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except as described below.
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the redeemable Class A common stock. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
PART II -II. OTHER INFORMATION
Item 1. Legal Proceedings
We and other participants in the healthcare industry 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 contained in Note 18, “Legal Proceedings” of the Notes to our Condensed Consolidated Financial Statements.
From time to time, in the ordinary course of 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 1A. Risk Factors
Factors that could causematerially and adversely affect our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K/A filed with the SEC on November 23, 2021. Any of these factors could result in a significant business, financial condition and/or material adverse effect on our results of operations or financial condition.are described in the 2021 Form 10-K. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business, financial condition and/or results of operations. As of the date of this Amendment No. 1,Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report2021 Form 10-K, other than the inflation rate risk and share repurchase risk discussed below.
Inflation Rate Risk
Beginning in April 2021, the inflation rate in the US, as measured by the Consumer Price Index (CPI) has steadily increased. In 2019, the inflation rate was approximately 1.8%, while it dropped to approximately 1.2% in 2020. These data are reported monthly, showing year-over-year changes in prices across a basket of goods and services. For 2021, inflation increased from the 1.4%-2.6% range in the first quarter, to 4.2% in April, and was in the 5.0% range through the end of the third quarter of 2021, before increasing to the 6.0%-7.0% range in the fourth quarter. For the full year, the inflation rate was 4.7% in 2021, the highest annual rate since the 5.4% rate recorded in 1990. The inflation rate continued to increase throughout the second quarter of 2022, reaching approximately 9.1% in June 2022. The increased inflation rate has had an impact on Form 10-K/A filedthe Company’s expenses in several areas, including wages, fuel and medical and other supplies. This has compressed gross profit margins, as the Company is generally unable to pass these higher costs on to its customers, particularly in the short term. Looking to the rest of 2022, we anticipate a moderation of the inflation rate when compared to the first quarter of the year but expect that inflation will remain above the levels seen in the previous 10 years, when the annual inflation rate ranged from 0.1% to 2.4%. If inflation is above the levels that the Company anticipates in 2022, gross margins could be below plan.
Share Repurchase Program Risk
We have adopted a share repurchase program to repurchase shares of our common stock; however, any future decisions to reduce or discontinue repurchasing our common stock pursuant to our share repurchase program could cause the market price for our common stock to decline.
Although our Board has authorized the share repurchase program, any determination to execute our share repurchase program will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements and other factors, as well as our Board’s continuing determination that the repurchase program is in the best interests of our stockholders and is in compliance with all laws and agreements applicable to the SECrepurchase program. Our share repurchase program does not obligate us to acquire any common stock. If we fail to meet any expectations related to share repurchases, the market price of our common stock could decline, and could have a material adverse impact on November 23, 2021, exceptinvestor confidence. Additionally, price volatility of our common stock over a given period may cause the average price at which we repurchase our common stock to exceed the stock’s market price at a given point in time.
We may disclose changesfurther increase or decrease the amount of repurchases of our common stock in the future. Any reduction or discontinuance by us of repurchases of our common stock pursuant to such factorsour current share repurchase program could cause the market price of our common stock to decline. Moreover, in the event repurchases of our common stock are reduced or disclose additional factors from timediscontinued, our failure or inability to timeresume repurchasing common stock at historical levels could result in a lower market valuation of our future filings with the SEC.common stock.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
On October 19, 2020, we consummatedMay 24, 2022, the Initial Public OfferingBoard approved a share repurchase program to purchase up to $40 million of 11,500,000 Units.the Company’s common stock (the “Program”). The Units soldProgram does not obligate the Company to acquire any specific number of shares and will expire on November 24, 2023, and the Program may be suspended, extended, modified or discontinued at any time. Under the Program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions and/or a non-discretionary trading plan, all in compliance with the Initial Public Offering were sold at an offeringrules of the SEC and other applicable legal requirements. The timing, manner, price and amount of $10.00 per unit, generating total gross proceeds of $115 million. Barclays Capital Inc. acted as sole book-running manager. The securities in the offering were registeredany common stock repurchases under the Securities Act on registration statement on Form S-1 (No. 333-249061). The Securities and Exchange Commission declared the registration statement effective on October 14, 2020.
Simultaneous with the consummation of the Initial Public Offering,Program are determined by the Company consummated the Private Placementin its discretion and depend on a variety of an aggregatefactors, including legal requirements, price and economic and market conditions. As of 2,533,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating total proceeds of $3.8 million. The issuance was madeJune 30, 2022, $39.5 million remained available for share repurchases pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.Program.
The Company grantedfollowing table shows the underwriter a 45-day option fromshare repurchase activity for the date of Initial Public Offering to purchase up to 1,725,000 additional Units to cover over-allotments, if any, 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.three months ended June 30, 2022:
Of the gross proceeds received from the Initial Public Offering and sale of the Private Placement Warrants, $115,000,000 was placed in the Trust Account.
| Month | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| April 1 through 30, 2022 | - | $ | - | - | $ | 40,000,000 | ||||||||||
| May 1 through 31, 2022 | 30,000 | $ | 6.96 | 30,000 | $ | 39,791,200 | ||||||||||
| June 1 through 30, 2022 | 40,000 | $ | 7.23 | 40,000 | $ | 39,502,000 | ||||||||||
| Total | 70,000 | $ | 7.10 | 70,000 | $ | 39,502,000 | ||||||||||
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.Exhibits
| * | Filed herewith. |
| ** |
SIGNATURESIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereuntothereunto duly authorized.
| DocGo Inc. | ||
| Date: August 9, 2022 | By: | /s/ Andre Oberholzer |
| Andre Oberholzer | ||
| Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory) | ||
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