DocGo Inc. 10-K/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors Summary,” “Item 1A. Risk Factors” and elsewhere in this Annual Report. Restatement of Previously Issued Financial Statements First Restatement As part of the First Amended Report, we restated our audited financial statements as of, and for the period ended, December 31, 2020, as a result of our prior accounting for our outstanding warrants issued in connection with our IPO and Private Placement on October 19, 2020 which had been classified as a component of equity on the premise that the instruments were indexed to our own stock and were eligible to be accounted for as equity instruments instead of classifying them as derivative liabilities. On April 12, 2021, the SEC Staff issued the SEC Staff Statement expressing the SEC Staff’s view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet instead of equity. Since issuance on October 19, 2020, our warrants were accounted for as equity within our balance sheet, and after discussion and evaluation, we have concluded that our warrants should be presented as liabilities with subsequent fair value remeasurement. Historically, our outstanding warrants were reflected as a component of equity instead of liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants, based on our application of ASC 815-40. The views expressed in the SEC Staff Statement were not consistent with our historical interpretation of the specific provisions within the warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. On May 10, 2021, in consultation with our audit committee, we concluded that our previously issued financial statements should be restated and that the warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in our statement of operations each reporting period. Our accounting for the warrants as derivative liabilities instead of as equity did not have any effect on our previously reported revenue, operating expenses, operating income, cash flows or cash. In connection with the restatement, our management reassessed the effectiveness of its disclosure controls and procedures for the period affected by the restatement. As a result of that reassessment, we determined that our disclosure controls and procedures for such period were not effective with respect to the misclassification of the Company’s warrants as components of equity instead of as derivative liabilities. For more information, see Item 9A included in this report on Form 10-K/A. The restatement is more fully described in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein. 38 Second Restatement In this Second Amended Report, we are restating our audited financial statements as of, and for the period ended, December 31, 2020, to classify the redemption value of all redeemable Class A common stock as temporary equity. During the preparation of the Company’s unaudited condensed consolidated financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should restate its financial statements to classify the portion of Class A common stock which is subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock which was subject to possible redemption in permanent equity, or total stockholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter prior to the consummation of the Business Combination provided 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. Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. As a result, the Company revised its previously filed financial statements to classify the portion of its Class A common stock which was subject to possible redemption in 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 change in the carrying value of the redeemable shares of Class A common stock as of the Initial Public Offering date resulted in a decrease of approximately $5.2 million in additional paid-in capital and a charge of approximately $7.9 million to accumulated deficit, as well as a reclassification of 1,305,238 shares of Class A common stock from permanent equity to temporary equity. On November 22, 2021, in consultation with our audit committee, we concluded that our previously issued financial statements of the Affected Period should be restated. The restatement is more fully described in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein. The change in accounting for redeemable Class A common stock did not have any impact of our cash, total assets, total liabilities, total net income (loss), or cash flows. Notwithstanding this, the restatement is considered to represent a Material Weakness in our internal controls over financial reporting. For more information, see Item 9A included in this Second Amended Report. Overview We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We consummated our Initial Public Offering on October 19, 2020. We intend to use the cash proceeds from our public offering and private placement of warrants as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the business combination. We expect to incur significant costs in the pursuit of our acquisition plans. There can be no assurance that our plans to raise capital or to complete our initial business combination will be successful. Recent Developments Merger Agreement On March 8, 2021, we entered into the Merger Agreement with Merger Sub and DocGo, which provides for the Merger of Merger Sub with and into DocGo, with DocGo being the surviving entity of the Merger and becoming a wholly-owned subsidiary of the Company. Upon consummation of the Merger, the outstanding DocGo common stock will be exchanged for a pro rata portion of an aggregate of 83,600,000 Closing Shares, less the number of Closing Shares reserved for issuance by the Company upon the exercise of outstanding options and warrants of DocGo which will be assumed by the Company. As part of the aggregate consideration payable to DocGo pursuant to the Merger Agreement, DocGo’s stockholders will also have the right to receive their pro rata portion of up to an aggregate of 5,000,000 Contingent Shares if the following stock price conditions are met: (i) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the first anniversary of the closing date; (ii) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; (iii) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date; and (iv) 1,250,000 Contingent Shares if the closing price of our Class A common stock equals or exceeds $21.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date. Pursuant to the Merger Agreement, the Sponsor will enter into an escrow agreement and will deposit an aggregate of 575,000 Sponsor Earnout Shares into escrow, which shares will either be released to the Sponsor or forfeited if certain stock price conditions are met or not, as follows: (i) with respect to 287,500 Sponsor Earnout Shares, the closing price of our Class A common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the third anniversary of the closing date, and (ii) with respect to the remaining 287,500 Sponsor Earnout Shares, the closing price of our Class A common stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date. 39 Consummation of the Proposed Transaction is subject to customary conditions of the respective parties, including the approval of the Merger Agreement, the Proposed Transaction and certain other actions related thereto by our stockholders and DocGo’s stockholders, the availability of at least $175,000,000 in cash from the Trust Account and from the proceeds of the PIPE (discussed below), after giving effect to redemptions, if any, by the Company’s public stockholders and other permitted disbursements, and DocGo having obtained certain regulatory approvals of the New York Department of Health with respect to the Proposed Transaction. The Merger Agreement may also be terminated by either party under certain circumstances. PIPE Private Placement Concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements with PIPE Investors, pursuant to which the Company will, substantially concurrently with, and contingent upon, the consummation of the Merger, issue an aggregate of 12,500,000 shares of the Company’s Class A common stock at a price of $10.00 per share, for aggregate gross proceeds to the Company of $125,000,000. The Company has agreed that, as soon as reasonably practicable, but in no event later than 30 calendar days following the closing date of the Merger, it shall file a registration statement with the SEC covering the resale by the Investors of the Class A common stock issued to them in the PIPE and use its best efforts to have such registration statement declared effective as promptly as practicable thereafter, but in no event later than the earlier of 60 calendar days after filing (or 90 calendar days in the event the SEC issues written comments) or the 10th business day after the Company is notified that the registration statement will not be subject to review or further review. Liquidity and Capital Resources Prior to the Initial Public Offering, our liquidity needs were satisfied through a payment of $25,000 from our Chief Executive Officer to fund certain offering costs in exchange for the issuance to the Sponsor of the Founder Shares, and advances to us from our Sponsor of approximately $71,000 under a note payable to pay for other offering costs in connection with the Initial Public Offering. We fully repaid this note payable on October 19, 2020. Subsequent to the Initial Public Offering, our liquidity needs have been satisfied from the net sales proceeds of the Private Placement Warrants not held in the Trust Account. At December 31, 2020, we had an unrestricted cash balance of approximately $879,000 and working capital of approximately $888,000. We expect our working capital needs will be satisfied through these funds, which are held outside of the Trust Account. Investment income on funds held in the Trust Account may be used to pay income taxes, if any, and Delaware franchise taxes. In addition, our Sponsor, officers, directors and their affiliates may, but are not obligated to, loan us funds as may be required in connection with the business combination. Except as may be precluded by the terms of a business combination definitive agreement, up to $1,500,000 of these working capital loans may be converted into warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender, and such warrants would be identical to the Private Placement Warrants. Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we will be using these funds to pay existing accounts payable and to consummate our initial business combination. As a result of the restatement described in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein, we classify the warrants issued in connection with our IPO and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Derivative Instruments and Warrant Liabilities We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, 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 of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. We issued an aggregate of 6,366,666 warrants in connection with our IPO and the Private Placement, which, as a result of the restatement made in the First Amended Report and described further in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein, are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrants as liabilities at fair value and adjust 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 statement of operations. The fair value of the warrants issued in connection with our IPO and the Private Placement was determined using Monte Carlo simulations at the two measurement dates (October 19, 2020 and December 31, 2020). 40 Results of Operations To date, we have neither engaged in any significant business operations nor generated any revenues. All activities to date relate to our corporate formation, Initial Public Offering, search for suitable business combination candidates, and negotiations with DocGo. Since consummating our Initial Public Offering on October 19, 2020, we have incurred expenses primarily for legal and audit services, Nasdaq listing fees, directors’ and officers’ liability insurance, trust and transfer agent fees, Delaware franchise taxes, diligence-related expenses on our target company, and investor relations. For the period from August 11, 2020 (inception) through December 31, 2020, we had a net loss of $4,223,533 which was attributable to general and administrative expenses and formation costs. We will not be generating any revenue until the closing and completion of our initial business combination. As a result of the restatement made in the First Amended Report and described further in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein, we classify the warrants issued in connection with our IPO and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. We also recorded the portion of the IPO offering costs that was associated with the warrants as a non-operating expense in the statement of operations in the amount of $191,112 based on a relative fair value basis. For the period from August 11, 2020 (inception) through December 31, 2020, the change in fair value of warrants was an increase of $3,883,670. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2020. Contractual Obligations As of December 31, 2020, we did not have any lease obligations or purchase commitments, and we had no long-term liabilities other than the warrant liabilities of $9,040,670 and the deferred underwriting commission of $4,025,000 that is payable from the Trust Account upon consummating our initial business combination. Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company has identified the following as its critical accounting policies: Redeemable Shares 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, as a result of the restatement made in this Second Amended Report and described further in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein, 11,500,000 shares of Class A common stock subject to possible redemption were classified as temporary equity in the accompanying consolidated balance sheet at December 31, 2020, 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 to additional paid-in capital and accumulated deficit. Warrant Liabilities We account for the warrants issued in connection with our IPO in accordance with the guidance contained in ASC 815-40-15-7D 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 statement of operations. The fair value of the warrants was determined using Monte Carlo simulations at the IPO date and at December 31, 2020. 41 Net Income (Loss) per Common Share 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 42