DocGo Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The discussion and analysis below contain certain forward-looking statements about our business and operations that are subject to the risks, uncertainties, and other factors described in the section entitled “Risk Factors,” included in Part I, Item 1A, and elsewhere in this Annual Report on Form 10-K. These risks, uncertainties, and other factors could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. Please read the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Unless the context requires otherwise, references to “DocGo,” “we,” “us,” “our” and “the Company” in this section are to the business and operations of DocGo and its consolidated subsidiaries, including those periods prior to the Business Combination. 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 financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding. Overview DocGo, which was originally formed in 2015, is a healthcare transportation and mobile services company that uses proprietary dispatch and communication technology to provide quality healthcare transportation and mobile services in-person medical treatment directly to patients in the comfort of their homes, workplaces and other non-traditional locations, in major metropolitan cities in the United States and the United Kingdom. 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 transport services. Non-emergency transport services include ambulance transports and wheelchair transports. Net revenue from Transportation Services is derived from the transportation of patients based on billings to third party payors and healthcare facilities. ● 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 the section of this prospectus titled “ Description of DocGo’s Business — Our Segments” and Note 11 to the notes to the audited consolidated financial statements of Ambulnz included in the prospectus for additional information regarding DocGo’s segments. For the years ended December 31, 2021 the Company recorded net income of $19.2 million, compared to a net loss of $14.8 million in the year ended December 31, 2020. COVID-19 On January 30, 2020, the World Health Organization announced a global health emergency because of COVID-19, a new strain of coronavirus. 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 shutdowns and restrictions have had a mixed impact on our business. In the ambulance transportation business, which comprise predominantly non-emergency medical transport, the Company experienced a decline in transportation volumes versus historical levels, as elective surgeries and other non-emergency surgical procedures were postponed or cancelled. In addition, the Company experienced lost revenue associated with sporting, concerts and other events, as those events were either cancelled or have experienced a significantly restricted number of permitted attendees In most markets, these trip volumes have recovered, and on a consolidated basis, trip volumes in December 2021 were 27.2% above those of March 2020, when COVID-19 related restrictions were first implemented. 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 partially 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 to perform COVID-19 tests at nursing homes, municipal sites, businesses, schools and other venues. RRT is part of the Mobile Health business line. Mobile Health generated approximately $234.4 million in revenue in the year ended December 31, 2021, as compared to $30.9 million in 2020 and $1.9 million in 2019. 47 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 returned 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 to HHS. DocGo also received accelerated Medicare payments of approximately $2.4 million that were required to be repaid beginning in April 2021. Through December 31, 2021, approximately $1.7 million of this advance had been recouped by Medicare . 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 Transportation Services segment during 2021 exceeded that of 2020 by approximately 33%. Since the beginning of 2021, trip volumes in most of our markets have started to return to more normal historical levels. The Company generated, during 2021, COVID-19 testing revenue, including its Mobile Health services segment, above the levels projected. 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 industrywide 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. 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 to apply 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 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 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. During the 12 months ended December 31, 2020, DocGo completed one acquisition, for a purchase price of $0.8 million, which contributed approximately $0.1m to 2020 revenues. During the 12 months ended December 31, 2019, DocGo completed four acquisitions, for an aggregate purchase price of approximately $1.1 million. These acquisitions contributed a combined total of approximately $0.4 million to 2019 revenues. 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. 48 Overall economic conditions in the markets we operate Economic changes both nationally and locally in our markets 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 transport of a patient to a specific destination, for which we are able to charge a fee. This metric does not include instances where a trip is ordered and subsequently either canceled (by the customer) or declined (by the Company). As trip volume represents the most basic unit of transportation service provided by the Company, it is the best measure of the level of demand for the Company’s Transportation Services, and is used by management to monitor and manage the scale of the business. The average trip price is calculated by dividing the aggregate revenue from 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 factor in the trip counts or average trip prices mentioned above. Our ability to control expenses We pay close attention to managing 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 US, as measured by the Consumer Price Index (CPI) has been steadily increasing. 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. The inflation rate continued to increase throughout the fourth quarter, measuring approximately 7.5% in December 2021. The increased inflation rate has had an impact on the Company’s expenses in several areas, including wages, fuel and medical and other supplies. This has had the impact of compressing gross profit margins, as the Company is generally unable to pass these higher costs on to its customers, particularly in the short term. Looking to 2022, we anticipate a moderation of the inflation rate when compared to 2021, when the annual inflation rate was 4.7%, 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. 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 must 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 any such change occurs, compliance with new laws and regulations might significantly affect its operations and cost of doing business. 49 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 included 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 segment and its Mobile Health segment. Cost of Revenues Cost of revenues consists primarily of revenue generating wages paid to employees, vehicle insurance costs (including insurance premiums and costs incurred under the insurance deductibles), maintenance, and fuel related to Transportation 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 general 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 Legal and regulatory expenses include legal fees, consulting fees related to healthcare compliance, claims processing fees and legal settlements. Technology and development 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 continuing to invest 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 choose to make more significant investments. Sales, advertising and marketing 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. 50 Results of Operations Comparison of Fiscal 2021 with Fiscal 2020 For the Years Ended December 31, Change Change $ in Millions 2021 2020 $ % Revenues, net $ 318.7 $ 94.1 $ 224.6 239 % Cost of revenue 209.0 62.7 146.3 233 % Operating expenses General and administrative 74.9 34.9 40.0 115 % Depreciation and amortization 7.5 5.5 2.0 36 % Legal and regulatory 3.9 3.7 0.2 4 % Technology and development 3.3 1.2 2.1 179 % Sales, advertising and marketing 4.8 0.7 4.0 538 % Total expenses 303.4 108.8 194.6 179 % Income/(loss) from operations 15.4 (14.8 ) 30.2 Other income (expenses) Interest income (expense), net (0.8 ) (0.2 ) (0.6 ) 274 % Gain (loss) from PPP loan forgiveness 0.1 - 0.1 Gain (loss) on disposal of fixed assets (0.0 ) 0.0 (0.1 ) (213 )% Gain (loss) on remeasurement of warrant liabilities 5.2 - 5.2 Gain (loss) on initial equity method investment (0.1 ) - (0.1 ) Other income (0.0 ) 0.3 (0.3 ) (113 )% Total other expense 4.4 0.1 4.3 3450 % Net income/(loss) before income tax 19.8 (14.6 ) 34.5 Income tax (expense) benefit (0.6 ) (0.2 ) (0.4 ) 268 % Net income (loss) 19.2 (14.8 ) 34.0 Net income (loss) attributable to Non-controlling interests (4.6 ) (0.4 ) (4.1 ) 940 % Net income (loss) attributable to the shareholders of DocGo Inc and Subsidiaries $ 23.8 $ (14.4 ) $ 38.2 Consolidated For the year ended December 31, 2021, total revenues were $318.7 million, an increase of $224.6 million, or 239%, from the total revenues recorded in the year ended December 31, 2020. Transportation Services For the year ended December 31, 2021, Transportation Services revenue totaled $84.3 million and increased by $21.1 million, or 33%, as compared with the year ended December 31, 2020. This increase was due to a 12% increase in transportation trip volumes, from 159,908 trips for the year ended December 31, 2020 to 179,063 trips for the year ended December 31, 2021. The increase in trip volumes is due to a combination of growth in markets originally entered in 2019 and 2020, expansion of existing markets and entry into new markets in 2021. Our average trip price increased from $324 in the year ended December 31, 2020, to $342 in the year ended December 31, 2021. The increase in the average trip price in the 2021 period reflects a shift in mix toward higher-priced transports. We anticipate that average trip price could increase further in 2022, due to a 5.1% increase in the Medicare reimbursement rate for ambulance transports. Transportation Services revenues were also driven higher in 2021 by an 135% increase in revenues generated from programs under which DocGo is paid a fixed rate for the use of a fully staffed and equipped ambulance, driven by new customer acquisition. These services do not factor in the trip counts or average trip prices mentioned above. This was partially offset by the absence of FEMA transport revenues in the current year period. FEMA revenues amounted to approximately $4.5 million in the second quarter and full year of 2020. 51 Mobile Health For the year ended December 31, 2021, Mobile Health revenue totaled $234.4 million, an increase of $203.5 million, or 659%, as compared with the year ended December 31, 2020. This significant increase was mainly due to the expansion of the services offered by this segment in 2021, particularly with respect to COVID-19 related testing (which began in May 2020) and vaccination and other healthcare services revenues included in the Mobile Health segment. This expansion accelerated throughout 2021 as the Company increased its customer base and geographic reach, while extending several large customer contracts and began providing a broader range of services. Cost of Revenue For the year ended December 31, 2021, total cost of revenue (exclusive of depreciation and amortization) increased by 233%, as compared to the year ended December 31, 2020, while revenue increased by approximately 239%. Cost of revenue as a percentage of revenue decreased to 65.6% in 2021 from 66.6% in 2020. In absolute dollar terms, cost of revenue in the year ended December 31, 2021 increased by $146.3 million from the levels of the year ended December 31, 2020. This was primarily attributable to a $40.9 million increase in total compensation, reflecting higher headcount for both the Transportation Services and Mobile Health segments; a $65.5 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 $12.7 million increase in lab fees related to COVID-19 testing activity, which was launched toward the middle of the prior-year period and continued to increase in volume throughout the year, particularly in the fourth quarter of 2021; a $20.8 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, particularly in the fourth quarter of 2021, and the increased cost thereof as a result of increased demand during the pandemic; and a $4.6 million increase in vehicle costs, driven by a continued increase in the Company’s vehicle fleet and higher fuel costs; and $1.6 increase in facilities and other costs of sales, relating to the Company’s increased scale and geographic presence. For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the year ended December 31, 2021 amounted to $63.4 million, up $19.6 million, or 45%, from the year ended December 31, 2021. Cost of revenues as a percentage of revenues increased to 75.3% from 69.3%, reflecting 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 year ended December 31, 2021 amounted to $145.6 million, compared to $18.9 million in the year ended December 31, 2020. Cost of revenues as a percentage of revenues increased to 62.3% from 61.2%, despite lower average per-test lab fees and the inclusion of higher-margin, hourly-based programs in the 2021 period, reflecting the increased use of higher cost subcontracted labor and significant increases in medical supply costs, as described above. Operating expenses For the year ended December 31, 2021, the Company recorded $94.4 million of operating expenses compared to $46.1 million for the year ended December 31, 2020, an increase of 105%. As a percentage of revenue, operating expenses declined from 49.0% in 2020 to 29.6% in 2021, due primarily to the significant increase in overall revenues described above, coupled with the semi-fixed nature cost of the corporate infrastructure. The increase of $48.3 million related primarily to a $25.8 million increase in payroll due to investments in and expansion of corporate infrastructure to support the revenue growth; a $0.9 million increase in subcontracted labor costs, due to the growth of the Mobile Health segment, which outpaced the Company’s ability to hire enough internal personnel to service these revenues; a $3.7 million increase in sales and marketing cost, driven by higher sales commissions and increased marketing activity arising from the expansion of the Mobile Health segment; a $1.0 million increase in liability insurance expense, reflecting a reserve for estimated losses under the Company’s insurance policy deductibles; a $4.5 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 $3.4 million increase in depreciation and amortization due to an increase in assets to support revenue growth and capitalized software amortization; a $1.9 million increase in legal, accounting and other professional fees related to increased revenue and related contract generation and financing and capital-raising activities; a $1.8 million increase in office-related expenses, owing to the Company’s ongoing geographic expansion; a $0.8 million increase in licenses and taxes, due primarily to the geographic expansion of the Mobile Health segment; a $1.9 million increase in computer IT infrastructure, driven by the Company’s business and headcount expansion; and a $2.6 million increase in bad debt expense, in line with the increase in overall revenues during the period. 52 For the Transportation Services segment, operating expenses in the year ended December 31, 2021 were $47.2 million, up $8.5 million, or 22%, from the year ended December 31, 2020. Operating expenses as a percentage of revenues declined to 56.1% from 61.2% in the prior year period, reflecting the increase in Transportation Services revenues, compared to the semi-fixed cost nature of the corporate infrastructure. The increased operating expenses, in dollar terms, in the year ended December 31, 2021 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 year ended December 31, 2021 were $47.2 million, compared to operating expenses of $7.5 million in the year ended December 31, 2020. Operating expenses as a percentage of revenues decreased to 20.1% from 24.2% in 2020, 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, 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 computer IT infrastructure, and facilities costs, as described above. Interest income (expense, net) For the year ended December 31, 2021, the Company recorded $0.8 million of net interest expense compared to $0.2 million of interest expense in the year ended December 31, 2020. The increase in net interest expense in the current period reflects an increase in payments made for leased vehicles, as the Company’s fleet expanded. Other income During the year ended December 31, 2021, the Company recorded a $0.1 million gain from the forgiveness of a PPP loan made to one of the Company’s subsidiaries. No gain or loss was recorded in relation to the disposition of any loan in the prior year period. Gain on remeasurement of warrant liabilities During the year ended December 31, 2021, the Company recorded a $5.2 million gain from the remeasurement of warrant liabilities, The warrants are marked-to-market in each reporting period, and this gain reflects the decline in DCGO’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 2020. Income tax (expense)/benefit During the year ended December 31, 2021, the Company recorded income tax expense of $0.6 million, compared to an income tax expense of $0.2 million in the year ended December 31, 2020. 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 year ended December 31, 2021, the Company had a net loss attributable to noncontrolling interest of approximately $4.6 million, compared to a net loss attributable to noncontrolling interest of $0.4 million for the year ended December 31, 2020. The increased loss reflects ongoing investments made into new markets that were entered into during 2020 and 2021. 53 Liquidity and Capital Resources Since inception, DocGo completed three equity financing transactions as its 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 accounts receivable. 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. Despite the fact that the Company generated positive net income in the year ended December 31, 2021, operating cash flows are not always sufficient to meet immediate obligations arising from current operations. For example, as the business has grown, the Company’s expenditures for human capital and supplies has expanded accordingly, and the timing of the payments for payroll and to associated vendors, compared to the timing of receipts of cash from customers frequently results in the requirement for 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 will be sufficient to satisfy operating requirements for at least the next twelve months. Capital Resources Comparison as of December 31, 2021 and December 31, 2020 $ in Millions As of December 31, 2021 As of December 31, 2020 Change $ Change % Working capital Current Assets $ 256.0 $ 58.4 $ 197.6 338 % Current Liabilities 57.9 23.5 $ 34.4 146 % Total working capital $ 198.1 $ 34.9 $ 163.2 468 % As of December 31, 2021, available cash totaled $175.5 million, which represented an increase of $143.1 million compared to December 31, 2020, reflecting the receipt of the proceeds of the Motion transaction described above. As of December 31, 2021, working capital amounted to $198.1 million, which represents an increase of $163.2 million compared to December 31, 2020, reflecting the increased cash balance. Increased accounts receivable, reflecting the growth of the business in 2021, were partially offset by increases in current liabilities reflecting the growth of the business and resulting from extended payment terms from vendors. Cash Flows Year ended December 31, 2021 and 2020 For the Year ended December 31, $ in Millions 2021 2020 Change Change Cash Flow Summary Net cash provided by/(used in) operating activities $ (1.9 ) $ (10.7 ) 8.8 -82 % Net cash used in investing activities (8.6 ) (6.0 ) (3.1 ) 43 % Net cash provided by financing activities 155.2 (0.8 ) 156.5 Effect of exchange rate changes 0.0 0.2 (0.2 ) -100 % Net (decrease) increase in cash $ 144.7 $ (17.3 ) 162.0 % 54 Operating activities During the year ended December 31, 2021, operating activities used $1.9 million of cash, despite net income of $19.2 million. Non-cash charges amounted to $7.7 million, as $5.2 million in depreciation of property and equipment and right-of-use assets, $1.8 million from amortization of intangible assets, $4.5 million in bad debt expense primarily related to a provision for potential uncollectible accounts receivable and $1.4 million of stock compensation expense were partially offset by $5.2 million in a non-cash gain on the remeasurement of warrant liabilities. Changes in assets and liabilities resulted in approximately $28.8 million in negative operating cash flow and were primarily driven by a $57.1 million increase in accounts receivable arising from the growth of the business, particularly in the fourth quarter of the year and the inclusion of larger Mobile Health customers with extended credit terms; and a $3.5 million increase in prepaid expenses and other current assets, partially offset by a $32.6 million increase in accounts payable and accrued expenses due primarily to the extension of credit and timing of payments, as DocGo attempted to align the timing of payments to vendors with the timing of payments received from customers, where possible, in an attempt to manage cash balances. During the year ended December 31, 2020, operating activities used $10.7 million of cash, primarily resulting from a net loss of $14.8 million, partially offset by non-cash charges of $7.7 million. The non-cash items included $1.9 million of bad debt expense primarily related to a provision for potential uncollectible accounts receivable, $4.0 million resulting from the depreciation of property and equipment and right-of-use assets, $1.4 million from amortization of intangible assets, and $0.7 million of stock compensation expense, partially offset by a non-cash gain of $0.3 million from a write off of amounts due to a seller. Changes in assets and liabilities resulted in approximately $3.6 million in negative operating cash flow and were primarily driven by a $16.2 million increase in accounts receivable and a $0.1 million increase in prepaid expenses and other current assets, which were partially offset by a $12.7 million increase in combined accounts payable and accrued expenses. Investing activities During the year ended December 31, 2021, investing activities used $8.6 million of cash, primarily consisting of the acquisition of property and equipment totaling $4.8 million and the acquisition of businesses and intangibles in the amount of $3.1 million to support the ongoing growth of the business. In addition, there was an equity investment amounting to approximately $0.7 million. During the year ended December 31, 2020, investing activities used $6.0 million, primarily consisting of the acquisition of intangibles ($1.9 million) and the acquisition of property and equipment ($4.4 million) to support growth of new transportation markets, partially offset by $0.3 million in proceeds from the disposal of property and equipment. Financing activities During the year ended December 31, 2021, financing activities provided $155.2 million of cash, due primarily to $158.1 million in proceeds from the issuance of common stock in connection with the Motion merger, which is net of $20.0 million in issuance costs. This was slightly offset by $2.2 million in payments on obligations under the terms of a finance lease, and $0.5 million in expenditures to acquire the remaining 20% of the Company’s U.K. subsidiary. During 2021, the Company received $8.0 million in proceeds from a revolving bank loan, which was repaid during the fourth quarter of 2021. During the year ended December 31, 2020, financing activities used $0.8 million of cash, as noncontrolling interest contributions were outweighed by repayments made on notes payable and finance leases. Future minimum annual maturities of notes payable at December 31, 2021 are as follows: Notes Payable 2022 $ 0.6 2023 $ 0.5 2024 $ 0.3 2025 $ 0.2 2026 $ 0.2 2027 and thereafter $ 0.1 Total maturities $ 1.9 Current portion of notes payable $ 0.6 Long-term portion of notes payable $ 1.3 55 Future lease payments included in lease liabilities as of December 31, 2021, and for the following five fiscal years and thereafter were as follows: Operating Leases 2022 $ 3.8 2023 $ 3.0 2024 $ 1.7 2025 $ 1.7 2026 $ 1.1 2027 and thereafter $ 0.0 Total future minimum lease payments 11.3 Less effects of discounting $ (1.2 ) Present value of future minimum lease payments $ 10.1 Critical Accounting Policies Basis of Presentation The Company’s consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests (“NCI”) on the consolidated statements of financial condition represents the 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. 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 historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Ambulnz, 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 accounting. Principles of Consolidation The Company’s Consolidated Financial statements include the accounts of DocGo Inc and its subsidiaries. All significant intercompany transactions and balances have been eliminated in these Consolidated Financial statements. The Company holds a variable interest which contracts with physicians and other health professionals in order to provide services to the Company. MD1 Medical Care P.C. (“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. Total revenue for the VIE amounted to $477,654 as of December 31, 2021. Net loss for the VIE was $122,982 as of December 31, 2021. The VIE’s total assets, all of which were current, amounted to $481,338 on December 31, 2021. Total liabilities, all of which were current for the VIE, was $906,444 on December 31, 2021. The VIE’s total stockholders’ deficit was $425,106 on December 31, 2021. The Company made payments of $1,746,736 and $298,404 to MD1 and its affiliates during the years ended December 31, 2021 and 2020, respectively. 56 Business Combinations The Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”), which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including 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 on the basis of historical knowledge of the business and projected financial information of the target. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the 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 December 31, 2021 and 2020, 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. 57 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. Income Taxes Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or its tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Please see Note 2, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.