DocGo Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 Inc. The following discussion and analysis should be read in conjunction with DocGo’s Condensed Consolidated Financial Statements and related notes thereto included in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and 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 text. 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 includes 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 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 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 risks, uncertainties and assumptions. More information regarding the risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is 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 filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2022 (the “2021 Form 10-K”), and as may be updated in this and other subsequent Quarterly Reports on Form 10-Q. Forward-looking statements are not guarantees of future performance and speak only as of the date hereof. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law. Overview DocGo, which was originally incorporated in 2015, is a healthcare transportation and mobile services company that uses proprietary dispatch and communication technology to provide quality healthcare transportation and mobile, 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 Note 10, “Business Segment Information” to the Condensed Consolidated Financial Statements for additional information regarding DocGo’s segments. For the three months ended March 31, 2022, the Company recorded net income of $9.4 million, compared to a net loss of $2.0 million in the three months ended March 31, 2021. 29 COVID-19 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 comprises of, 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. 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 of performing 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 $90.1 million in revenue in the three months ended March 31, 2022, as compared to $30.6 million in the first quarter of 2021. 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 March 31, 2022, approximately $2.2 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, and this persisted in the first quarter of 2022. The Company estimates that COVID-19 testing revenue in the first quarter of 2022 amounted to approximately $38 million. 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. 30 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 three months ended March 31, 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. During the 12 months ended December 31, 2020, DocGo completed one acquisition, for a purchase price of $0.8 million, which contributed approximately $0.1 million to 2020 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. 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 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 the management of our working capital and operating expenses. Some of our most significant operating expenses are labor costs, medical supplies and vehicle-related costs, such as fuel, maintenance, repair and insurance. Insurance costs include premiums paid for coverage as well as reserves for estimated losses within the Company’s insurance policy deductibles. We employ our proprietary technology to drive improvements in productivity per transport. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our locations. 31 Inflation 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% 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 quarter of 2022, reaching approximately 8.5% in March 2022. 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 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 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 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 Services 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. 32 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 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 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 March 31, 2022 and March 31, 2021 Three Months Ended March 31, Change Change $ in Millions 2022 2021 $ % Revenues, net $ 117.9 $ 49.7 $ 68.2 137 % Cost of revenue 78.0 35.9 42.1 117 % Operating expenses General and administrative 23.9 12.0 11.9 99 % Depreciation and amortization 2.2 1.6 0.6 38 % Legal and regulatory 1.3 0.7 0.6 86 % Technology and development 1.1 0.6 0.5 83 % Sales, advertising and marketing 1.3 0.8 0.5 63 % Total expenses 107.8 51.6 56.2 109 % Income/(loss) from operations 10.1 (1.9 ) 12.0 Other income (expenses) Interest income (expense), net (0.1 ) (0.1 ) 0.0 0 % Gain (loss) on remeasurement of warrant liabilities (0.1 ) - (0.1 ) Gain (loss) on initial equity method investment (0.1 ) - (0.1 ) Other income (0.0 ) - (0.0 ) Total other expense (0.3) (0.1) (0.2) 200 % Net income/(loss) before income tax 9.8 (2.0 ) 11.8 Income tax (expense) benefit (0.4 ) (0.0 ) (0.4 ) 0 % Net income (loss) 9.4 (2.0 ) 11.4 Net income (loss) attributable to Non-controlling interests (1.2 ) (0.3 ) (1.0 ) 300 % Net income (loss) attributable to the shareholders of DocGo Inc and Subsidiaries $ 10.6 $ (1.7 ) $ 12.3 33 Consolidated For the three months ended March 31, 2022, total revenues were $117.9 million, an increase of $68.2 million, or 137%, from the total revenues recorded in the three months ended March 31, 2021. Transportation Services For the three months ended March 31, 2022, Transportation Services revenue totaled $27.8 million and increased by $8.8 million, or 46%, as compared with the three months ended March 31, 2021. This increase was due to increases in both transportation trip volumes and the average price per trip. Volumes increased by approximately 5%, from 46,012 trips for the three months ended March 31, 2021, to 48,110 trips for the three months ended March 31, 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. Our average trip price increased from $283 in the three months ended March 31, 2021, to $353 in the three months ended March 31, 2022. The increase in the average trip price in the 2022 period reflects 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 first quarter of 2022 by a 201% increase in revenues generated from programs under which DocGo is paid a daily or hourly “standby” rate for the use of a fully staffed and equipped ambulance, which were driven by new customer acquisition and large new projects. These services do not factor in the trip counts or average trip prices mentioned above. Mobile Health For the three months ended March 31, 2022, Mobile Health revenue totaled $90.1 million, an increase of $59.4 million, or 194%, as compared with the three months ended March 31, 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 three months ended March 31, 2022, total cost of revenue (exclusive of depreciation and amortization) increased by 117%, as compared to the three months ended March 31, 2021, while revenue increased by approximately 137%. Cost of revenue as a percentage of revenue decreased to 66.2% in the first quarter of 2022 from 72.2% in the first quarter of 2021. In absolute dollar terms, total cost of revenue in the three months ended March 31, 2022 increased by $42.1 million from the levels of the three months ended March 31, 2021. This was primarily attributable to an $11.7 million increase in total compensation, reflecting higher headcount for both the Transportation Services and Mobile Health segments; a $22.6 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 $6.5 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, and the increased cost thereof as a result of increased demand during the pandemic; and a $3.2 million increase in vehicle costs, driven by a continued increase in the Company’s vehicle fleet and higher fuel and maintenance costs; and a $2.4 million increase in facilities and other costs of sales, relating to the Company’s increased scale and geographic presence. These items were partially offset by a $4.2 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 March 31, 2022 amounted to $21.5 million, up $6.8 million, or 46%, from the three months ended March 31, 2021. Cost of revenues as a percentage of revenues was unchanged at 77.3% in both periods, as the impact of higher per-trip prices, increased number of standby contracts (for which we are paid a daily or hourly rate) and the overall increase in revenue was offset by 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 March 31, 2022 amounted to $56.5 million up 167% from $21.2 million in the three months ended March 31, 2021. Cost of revenues as a percentage of revenues decreased to 62.7% from 69.0%, 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 quarter of 2022, which outweighed the increased use of higher cost subcontracted labor and significant increases in medical and general supply costs, as described above. 34 Operating Expenses For the three months ended March 31, 2022, the Company recorded $29.8 million of operating expenses compared to $15.7 million for the three months ended March 31, 2021, an increase of 90%. As a percentage of revenue, operating expenses declined from 31.6% in the first quarter of 2021 to 25.3% in the first quarter of 2022, 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 $14.1 million related primarily to a $10.4 million increase in payroll due to investments in and expansion of corporate infrastructure to support the revenue growth; a $0.5 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 $0.8 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 $0.6 million increase in depreciation and amortization due to an increase in assets to support revenue growth and capitalized software amortization; a $1.0 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 $0.5 million increase in office-related expenses, owing to the Company’s ongoing growth and geographic expansion; a $0.5 million increase in IT infrastructure, driven by the Company’s business and headcount expansion; a $0.5 million increase in bad debt expense, in line with the increase in overall revenues during the period. These were partially offset by a $0.7 million net decline in insurance expenses, reflecting the Company’s new captive insurance program for automobile and workers compensation insurance. For the Transportation Services segment, operating expenses in the three months ended March 31, 2022 were $15.6 million, up $7.0 million, or 82%, from the three months ended March 31, 2021. Operating expenses as a percentage of revenues increased to 56.1% from 45.2% in the prior year period, 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 three months ended March 31, 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 March 31, 2022 were $14.2 million, compared to operating expenses of $7.1 million in the three months ended March 31, 2021. Operating expenses as a percentage of revenues decreased to 15.7% from 23.1% 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 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. Interest Income/(Expense), Net For the three months ended March 31, 2022, the Company recorded $135,606 of net interest expense compared to $115,009 of interest expense in the three months ended March 31, 2021. 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. This outweighed the impact of higher interest income in the 2022 period, resulting from an increase in the Company’s cash balances in income-bearing accounts. Gain/(loss) on Remeasurement of Warrant Liabilities During the three months ended March 31, 2022, the Company recorded a loss of $58,749 from the remeasurement of warrant liabilities, The warrants are marked-to-market in each reporting period, and this gain reflects 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 first quarter of 2021. Gain/(Loss) on Equity Method Investment During the three months ended March 31, 2022, the Company recorded a loss of $83,341 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 as such, no gain or loss was recorded in relation to an equity method investment in the first quarter of 2021. 35 Income Tax (Expense)/Benefit During the three months ended March 31, 2022, the Company recorded income tax expense of $0.4 million, compared to an income tax expense of $10,029 in the three months ended March 31, 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 three months ended March 31, 2022, the Company had a net loss attributable to noncontrolling interest of approximately $1.3 million, compared to a net loss attributable to noncontrolling interest of $0.3 million for the three months ended March 31, 2021. The increased loss reflected ongoing investments in new markets that were entered into during 2021. 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 months ended March 31, 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. Capital Resources Comparison as of March 31, 2022 and March 31, 2021 Three Months Ended March 31, $ in Millions 2022 2021 Change $ Change % Working capital Current Assets $ 268.2 $ 62.7 $ 205.5 328 % Current Liabilities 61.0 31.0 30.0 97 % Total working capital $ 207.2 $ 31.7 $ 175.5 554 % As of March 31, 2022, available cash totaled $188.4 million, which represented an increase of $160.2 million as compared to March 31, 2021, reflecting the receipt of the proceeds from the merger described above, as well as positive cash flow. As of March 31, 2022, working capital amounted to $207.2 million, which represented an increase of $175.5 million as compared to March 31, 2021, primarily reflecting the increased cash balance. Increased accounts receivable, reflecting the growth of the business in 2021 and the early part 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. 36 Cash Flows Three months ended March 31, 2022 and 2021 Three Months Ended March 31, $ in Millions 2022 2021 Change Change Cash Flow Summary Net cash provided by/(used in) operating activities $18.2 $(1.4) 19.6 Net cash provided by/(used in) investing activities (1.1 ) (1.3 ) 0.2 (15 %) Net cash provided by/(used in) financing activities 2.5 (0.6 ) 1.9 Effect of exchange rate changes 0.0 0.0 (0.0 ) 0 % Net (decrease) increase in cash $ 19.6 $ (3.3 ) 21.7 Operating Activities During the three months ended March 31, 2022, operating activities provided $18.2 million of cash, aided by net income of $9.4 million. Non-cash charges amounted to $4.8 million and included $1.6 million in depreciation of property and equipment and right-of-use assets, $0.6 million from amortization of intangible assets, $1.2 million in bad debt expense primarily related to a provision for potential uncollectible accounts receivable and $1.4 million of stock compensation expense. Changes in assets and liabilities resulted in approximately $4.1 million in additional operating cash flow, as a $1.1 million decrease in accounts receivable, a $2.2 million decrease in other assets and a $3.1 increase in accrued liabilities outweighed the effect of a $1.5 million increase in prepaid expenses and a $0.7 million decline in accounts payable. Operating cash flow in the first quarter of 2022 was aided by collections of large accounts receivable from invoices generated in the fourth quarter of 2021. During the three months ended March 31, 2021, operating activities used $1.4 million of cash and primarily resulted from a net loss of $2.0 million and changes in assets and liabilities, which were partially offset by non-cash charges of $2.7 million. The non-cash items included $0.7 million of bad debt expense primarily related to a provision for potential uncollectible accounts receivable, $1.2 million resulting from the depreciation of property and equipment and right-of-use assets, $0.4 million from amortization of intangible assets, and $0.4 million of stock compensation expense. Changes in assets and liabilities resulted in approximately $2.0 million in negative operating cash flow and were primarily driven by a $7.1 million increase in accounts receivable and a $1.1 million increase in prepaid expenses and other current assets, which were partially offset by a $6.2 million increase in combined accounts payable and accrued expenses. Investing Activities During the three months ended March 31, 2022, investing activities used $1.1 million of cash and primarily consisted of the acquisition of property and equipment totaling $0.5 million and the acquisition of intangibles in the amount of $0.6 million to support the ongoing growth of the business. During the three months ended March 31, 2021, investing activities used $1.3 million of cash and primarily consisted of the acquisition of property and equipment totaling $0.8 million and the acquisition of intangibles in the amount of $0.5 million to support growth of new transportation and mobile health markets. Financing Activities During the three months ended March 31, 2022, financing activities provided $2.5 million of cash, due to $1.0 million in proceeds from the Company’s revolving credit line, $2.1 million in non-controlling interest contributions and $0.4 million in proceeds from the exercise of stock options, which were partly offset by $0.6 million in payments on obligations under the terms of finance leases, $0.1 million in repayments of notes payable, a reduction of $0.2 million in amounts due to seller and a $0.1 million of equity cost. During the three months ended March 31, 2021, financing activities used $0.5 million of cash, as noncontrolling interest contributions were outweighed by repayments made on notes payable and finance leases. 37 Future minimum annual maturities of notes payable as of March 31, 2022 are as follows: Notes Payable 2022, remaining $ 0.4 2023 $ 0.5 2024 $ 0.3 2025 $ 0.3 2026 $ 0.2 2027 and thereafter $ 0.1 Total maturities $ 1.8 Current portion of notes payable $ (0.6 ) Long-term portion of notes payable $ 1.2 Future minimum lease payments under operating leases as of March 31, 2022, and for the following five fiscal years and thereafter are as follows: Operating Leases 2023 $ 1.2 2024 $ 1.3 2025 $ 0.9 2026 $ 0.9 2027 $ 0.4 2028 and thereafter $ 0.0 Total future minimum lease payments $ 4.7 Less effects of discounting $ (0.5 ) Present value of future minimum lease payments $ 4.2 Future minimum lease payments under finance leases as of March 31, 2022, and for the following five fiscal years and thereafter are as follows: Finance Leases 2023 $ 2.9 2024 $ 3.0 2025 $ 1.8 2026 $ 1.8 2027 $ 1.2 2028 and thereafter $ 0.1 Total future minimum lease payments $ 10.8 Less effects of discounting $ (1.1 ) Present value of future minimum lease payments $ 9.7 38 Critical Accounting Policies Basis of Presentation The Company’s Condensed 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 Condensed 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 Condensed Consolidated Financial Statements represent 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 Condensed Consolidated Financial Statements include the accounts of DocGo Inc and its subsidiaries. All significant intercompany transactions and balances have been eliminated in these Condensed Consolidated Financial Statements. The 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 Company. 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. Net loss for the VIE was $85,379 as of March 31, 2022. The VIE’s total assets, all of which were current, amounted to $509,769 on March 31, 2022. Total liabilities, all of which were current for the VIE, was $1,020,254 on March 31, 2022. The VIE’s total stockholders’ deficit was $510,485 on March 31, 2022. 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. 39 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. 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 Condensed Consolidated Financial Statements. 40 Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.