DocGo Inc. 10-Q

Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021 2 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 3 Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 4-5 Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 6-7 Notes to Unaudited Condensed Consolidated Financial Statements 8-35 1 DocGo Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEET September 30, December 31, 2022 2021 Unaudited Audited ASSETS Current assets: Cash and cash equivalents $ 169,598,749 $ 175,537,221 Accounts receivable, net of allowance of $ 7,376,957 and $ 7,377,389 as of September 30, 2022 and December 31, 2021, respectively 79,999,764 78,383,614 Prepaid expenses and other current assets 2,394,324 2,111,656 Total current assets 251,992,837 256,032,491 Property and equipment, net 17,577,830 12,733,889 Intangibles, net 20,647,790 10,678,049 Goodwill 34,533,363 8,686,966 Restricted cash 9,753,575 3,568,509 Operating lease right-of-use assets 8,185,547 4,195,682 Finance lease right-of-use assets 9,421,196 9,307,113 Equity method investment 712,718 589,058 Other assets 3,095,354 3,810,895 Total assets $ 355,920,210 $ 309,602,652 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 12,153,337 $ 15,833,970 Accrued liabilities 38,558,074 35,110,877 Line of credit 1,025,881 25,881 Notes payable, current 680,703 600,449 Due to seller 9,802,238 1,571,419 Contingent consideration 4,000,000 - Operating lease liability, current 2,059,278 1,461,335 Finance lease liability, current 2,858,968 3,271,990 Total current liabilities 71,138,479 57,875,921 Notes payable, non-current 1,456,105 1,302,839 Operating lease liability, non-current 6,406,246 2,980,946 Finance lease liability, non-current 6,086,521 6,867,420 Warrant liabilities - 13,518,502 Total liabilities 85,087,351 82,545,628 Commitments and Contingencies STOCKHOLDERS’ EQUITY: Common stock ($ 0.0001 par value; 500,000,000 shares authorized as of September 30, 2022 and December 31,2021; 102,824,878 and 100,133,953 shares issued and outstanding as of September 30, 2022 and December 31,2021, respectively 10,778 10,013 Additional paid-in-capital 301,522,213 283,161,216 Accumulated deficit ( 37,036,937 ) ( 63,556,714 ) Accumulated other comprehensive loss ( 276,213 ) ( 32,501 ) Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries 264,219,841 219,582,014 Noncontrolling interests 6,613,018 7,475,010 Total stockholders’ equity 270,832,859 227,057,024 Total liabilities and stockholders’ equity $ 355,920,210 $ 309,602,652 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 2 DocGo Inc. and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue, net $ 104,319,894 $ 85,838,988 $ 331,730,750 $ 197,394,379 Expenses: Cost of revenues (exclusive of depreciation and amortization, which is shown separately below) 71,254,838 60,025,728 219,418,873 137,080,202 Operating expenses: General and administrative 22,186,036 19,612,243 70,684,270 47,239,204 Depreciation and amortization 3,014,864 2,019,576 7,253,656 5,514,303 Legal and regulatory 2,200,964 813,204 6,610,223 2,646,573 Technology and development 1,373,146 854,618 3,663,299 1,980,899 Sales, advertising and marketing 90,856 994,401 2,348,917 3,029,182 Total expenses 100,120,704 84,319,770 309,979,238 197,490,363 Income (loss) from operations 4,199,190 1,519,218 21,751,512 ( 95,984 ) Other income (expenses): Interest income (expense), net 334,221 ( 255,711 ) 296,891 ( 500,849 ) Gain/(loss) on remeasurement of warrant liabilities ( 1,831,947 ) - 1,137,070 - Gain on initial equity method investments 93,371 - 99,840 - Gain on remeasurement of finance leases - - 1,388,273 - Gain from PPP loan forgiveness - 142,667 - 142,667 Gain/(loss) on disposal of fixed assets 42,667 - 42,667 ( 27,730 ) Other income 30,900 - 42,288 - Total other (expense) income ( 1,330,788 ) ( 113,044 ) 3,007,029 ( 385,912 ) Net income (loss) before income tax benefit (expense) 2,868,402 1,406,174 24,758,541 ( 481,896 ) Income tax expense ( 401,916 ) ( 604,608 ) ( 1,163,755 ) ( 613,531 ) Net income (loss) 2,466,486 801,566 23,594,786 ( 1,095,427 ) Net loss attributable to noncontrolling interests ( 687,944 ) ( 2,705,954 ) ( 2,924,992 ) ( 1,278,363 ) Net income attributable to stockholders of DocGo Inc. and Subsidiaries 3,154,430 3,507,520 26,519,778 182,936 Other comprehensive income Foreign currency translation adjustment 248,283 69,193 252,854 171,846 Total comprehensive gain $ 3,402,713 $ 3,576,713 $ 26,772,632 $ 354,782 Net income per share attributable to DocGo Inc. and Subsidiaries - Basic $ 0.03 $ 0.06 $ 0.26 $ 0.00 Weighted-average shares outstanding - Basic 98,960,538 58,388,866 100,725,697 58,388,866 Net income per share attributable to DocGo Inc. and Subsidiaries - Diluted $ 0.03 $ 0.04 $ 0.24 $ 0.00 Weighted-average shares outstanding - Diluted 107,403,135 83,701,783 109,168,293 83,701,783 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 3 DocGo Inc. and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in- Accumulated Accumulated Other Comprehensive Noncontrolling Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Income Interests Equity Balance - December 31, 2020 28,055 $ - 35,497 $ - 55,008 $ - $ 142,346,852 $ ( 87,300,472 ) $ ( 48,539 ) $ 11,949,200 $ 66,947,041 Effect of reverse acquisition 18,099,548 - 22,900,719 - 35,488,938 - - - - - - Conversion of share due to merger recapitalization ( 18,099,548 ) - ( 22,900,719 ) 7,649 ( 35,488,938 ) - - - - - 7,649 Effect of reverse acquisition - - 76,489,205 7,649 - - 142,346,852 ( 87,300,472 ) ( 48,539 ) 11,949,200 66,954,690 Share issued for services 266 - 171,608 17 - - - - - - 17 Stock based compensation - - - - - - 391,534 - - - 391,534 Noncontrolling interest contribution - - - - - - - - - 333,025 333,025 Foreign currency translation - - - - - - - - 7,998 - 7,998 Net loss attributable to Noncontrolling interests - - - - - - - - - ( 320,632 ) ( 320,632 ) Net loss attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - ( 1,678,364 ) - - ( 1,678,364 ) Balance - March 31, 2021 28,321 $ - 76,660,813 $ 7,666 - $ - $ 142,738,386 $ ( 88,978,836 ) $ ( 40,541 ) $ 11,961,593 $ 65,688,268 Stock based compensation - - - - - - 370,000 - - - 370,000 Foreign currency translation - - - - - - - - 94,655 - 94,655 Net income attributable to Noncontrolling interests - - - - - - - - - 1,748,223 1,748,223 Net loss attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - ( 1,646,216 ) - - ( 1,646,216 ) Balance - June 30, 2021 28,321 - 76,660,813 $ 7,666 - $ - $ 143,108,386 $ ( 90,625,052 ) $ 54,114 $ 13,709,816 $ 66,254,930 UK Ltd. Shares purchase - - - - - - ( 280,772 ) - - ( 242,945 ) ( 523,717 ) Stock based compensation - - - - - - 463,046 - - - 463,046 Fees associated with equity raise ( 1,398 ) ( 1,398 ) Foreign currency translation - - - - - - - - 69,193 - 69,193 Net income attributable to Noncontrolling interests - - - - - - - - - ( 2,705,954 ) ( 2,705,954 ) Net income attributable to stockholders of Ambulnz, Inc. and Subsidiaries - - - - - - - 3,507,520 - - 3,507,520 Balance - September 30, 2021 28,321 $ - 76,660,813 $ 7,666 - $ - $ 143,289,262 $ ( 87,117,532 ) $ 123,307 $ 10,760,917 $ 67,063,620 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 4 DocGo Inc. and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED) Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in- Accumulated Accumulated Other Comprehensive Noncontrolling Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Income Interests Equity Balance - December 31, 2021 - $ - 100,133,953 $ 10,013 - $ - $ 283,161,216 $ ( 63,556,714 ) $ ( 32,501 ) $ 7,475,010 $ 227,057,024 Exercise of stock options - - 195,152 195 - - 374,149 - - - 374,344 Stock based compensation - - - - - - 1,422,937 - - - 1,422,937 Equity cost ( 19,570 ) ( 19,570 ) Noncontrolling interest contribution - - - - - - - - - 2,063,000 2,063,000 Foreign currency translation - - - - - - - - ( 5,863 ) - ( 5,863 ) Net loss attributable to Noncontrolling interests - - - - - - - - - ( 1,257,257 ) ( 1,257,257 ) Net income attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - 10,629,694 - - 10,629,694 Balance - March 31, 2022 - $ - 100,329,105 $ 10,208 - $ - $ 284,938,732 $ ( 52,927,020 ) $ ( 38,364 ) $ 8,280,753 $ 240,264,309 Common stock repurchased - - ( 70,000 ) ( 70 ) - - ( 497,829 ) - - - ( 497,899 ) Exercise of stock options - - 417,927 418 - - 778,648 - - - 779,066 Stock based compensation - - - - - - 1,999,619 - - - 1,999,619 UK Ltd. Restricted Stock - - 8,258 8 - - 82,297 - - - 82,305 Net loss attributable to Noncontrolling interests - - - - - - - - - ( 979,791 ) ( 979,791 ) Foreign currency translation - - - - - - - - 10,434 - 10,434 Net income attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - 12,735,653 - - 12,735,653 Balance - June 30, 2022 - $ - 100,685,290 $ 10,564 - $ - $ 287,301,467 $ ( 40,191,367 ) $ ( 27,930 ) $ 7,300,962 $ 254,393,696 Common stock repurchased - - - - - - - - - - - Exercise of stock options - - 378,941 38 - - 728,465 - - - 728,503 Cashless exercise of options - - 354,276 35 - - ( 354 ) - - - ( 319 ) Stock based compensation - - - - - - 1,015,660 - - - 1,015,660 UK Ltd. Restricted Stock - - - - - - 95,543 - - - 95,543 Share warrants conversion - - 1,406,371 141 - - 12,381,432 - - - 12,381,573 Acquisitions - - - - - - - - - - - Net loss attributable to Noncontrolling interests - - - - - - - - - ( 687,944 ) ( 687,944 ) Foreign currency translation - - - - - - - - ( 248,283 ) - ( 248,283 ) Net income attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - 3,154,430 - - 3,154,430 Balance - September 30, 2022 - $ - 102,824,878 $ 10,778 - $ - $ 301,522,213 $ ( 37,036,937 ) $ ( 276,213 ) $ 6,613,018 $ 270,832,859 5 DocGo Inc. and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 23,594,786 $ ( 1,095,427 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 2,592,244 1,697,380 Amortization of intangible assets 2,269,423 1,432,983 Amortization of finance lease right-of-use assets 2,391,989 2,383,940 (Gain) Loss on disposal of assets ( 42,667 ) 27,730 Gain from PPP loan forgiveness - ( 142,667 ) Gain from equity method investment ( 99,840 ) - Bad debt expense 2,702,979 2,152,470 Stock based compensation 4,616,056 1,224,580 Gain on remeasurement of finance leases ( 1,388,273 ) - Gain on remeasurement of warrant liabilities ( 1,137,070 ) - Changes in operating assets and liabilities: Accounts receivable 2,894,650 ( 28,794,602 ) Prepaid expenses and other current assets ( 282,668 ) ( 4,531,411 ) Other assets 882,432 ( 1,786,407 ) Accounts payable ( 3,983,383 ) 9,422,628 Accrued liabilities 2,596,887 24,861,804 Net cash provided by operating activities 37,607,545 6,853,001 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 1,994,161 ) ( 2,824,916 ) Acquisition of intangibles ( 1,956,434 ) ( 1,571,959 ) Acquisition of businesses ( 33,843,373 ) ( 56,496 ) Proceeds from disposal of property and equipment - 6,000 Net cash used in investing activities ( 37,793,968 ) ( 4,447,371 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit line 1,000,000 8,000,000 Repayments of notes payable ( 585,711 ) ( 374,456 ) Due to seller ( 1,007,800 ) - Noncontrolling interest contributions 2,063,000 333,025 Proceeds from exercise of stock options 1,880,568 - Common stock repurchased ( 497,759 ) - Equity costs ( 19,570 ) - Payments on obligations under finance lease ( 2,146,857 ) ( 1,830,823 ) Net cash provided by financing activities 685,871 6,127,746 Effect of exchange rate changes on cash and cash equivalents ( 252,854 ) 171,846 Net increase in cash and restricted cash 246,594 8,705,222 Cash and restricted cash at beginning of period 179,105,730 34,457,273 Cash and restricted cash at end of period $ 179,352,324 $ 43,162,495 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 6 DocGo Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Nine Months Ended September 30, 2022 2021 Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $ 102,203 $ 39,637 Cash paid for interest on finance lease liabilities $ 434,580 $ 381,937 Cash paid for income taxes $ 917,445 $ 613,531 Right-of-use assets obtained in exchange for lease liabilities $ 4,094,731 $ 3,569,276 Fixed assets acquired in exchange for notes payable $ 819,231 $ 271,194 Acquisition of remaining 20 % of Ambulnz UK LTD $ - $ 228,518 Gain from PPP loan forgiveness $ - $ 142,667 Reconciliation of cash and restricted cash Cash $ 169,598,749 $ 39,550,926 Restricted Cash 9,753,575 3,611,569 Total cash and restricted cash shown in statement of cash flows $ 179,352,324 $ 43,162,495 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements 7 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Organization and Business Operations The Business On November 5, 2021 (the “Closing Date”), DocGo Inc., a Delaware corporation (formerly known as Motion Acquisition Corp) (prior to the Closing Date, “Motion” and after the Closing Date, “DocGo”), consummated the previously announced business combination (the “Closing”) pursuant to that certain Agreement and Plan of Merger dated March 8, 2021 (the “Merger Agreement”), by and among Motion Acquisition Corp., a Delaware corporation (“Motion”), Motion Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of Motion (“Merger Sub”), and Ambulnz, Inc., a Delaware corporation (“Ambulnz”). In connection with the Closing, the registrant changed its name from Motion Acquisition Corp. to DocGo Inc. As contemplated by the Merger Agreement and as described in Motion’s definitive proxy statement/consent solicitation/prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 14, 2021 (the “Prospectus”), Merger Sub was merged with and into Ambulnz, with Ambulnz continuing as the surviving corporation (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). As a result of the Merger, Ambulnz is a wholly-owned subsidiary of DocGo and each share of Series A preferred stock of Ambulnz, no par value (“Ambulnz Preferred Stock”), Class A common stock of Ambulnz, no par value (“Ambulnz Class A Common Stock”), and Class B common stock of Ambulnz, no par value (“Ambulnz Class B Common Stock,” together with Ambulnz Class A Common Stock, “Ambulnz Common Stock”) was cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo, par value $ 0.0001 (“Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement. In connection with the Business Combination, DocGo raised $ 158.0 million of net proceeds. This amount was comprised of $ 43.4 million of cash held in Motion’s trust account from its initial public offering, net of DocGo’s transaction costs and underwriters’ fees of $ 9.6 million, and $114.6 million of cash in connection with the PIPE Financing. The transaction costs consisted of banking, legal, and other professional fees, which were recorded as a reduction to additional paid-in capital. The Business DocGo Inc. and its Subsidiaries (collectively, the “Company”) is a healthcare transportation and mobile health services (“Mobile Health”) company that uses proprietary dispatch and communication technology to provide quality healthcare transportation and healthcare services in major metropolitan cities in the United States (“U.S.”) and the United Kingdom (“U.K.”). Mobile Health performs in-person care directly to patients in the comfort of their homes, workplaces and other non-traditional locations. Ambulnz, LLC was originally formed in Delaware on June 17, 2015, as a limited liability company. On November 1, 2017, with an effective date of January 1, 2017, Ambulnz converted its legal structure from a limited liability company to a C-corporation and changed its name to Ambulnz, Inc. Ambulnz is the sole owner of Ambulnz Holdings, LLC (“Holdings”) which was formed in the state of Delaware on August 5, 2015, as a limited liability company. Holdings is the owner of multiple operating entities incorporated in various states in the U.S. as well as within England and Wales, U.K. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. 8 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Consolidated Balance Sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by U.S. GAAP. The Unaudited 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 Unaudited Condensed Consolidated Financial Statements represent a portion of consolidated joint ventures and a variable interest entity in which the Company does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated. Certain amounts in the prior years’ consolidated statements of changes in stockholders’ equity and statements of cash flows have been reclassified to conform to the current year presentation. Pursuant to the Business Combination, the merger between Motion and Ambulnz, Inc. was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, Motion was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Ambulnz, Inc. stock for the net assets of Motion, accompanied by a recapitalization. The net assets of Motion are stated at 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 accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of DocGo Inc. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in these Unaudited 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 $ 207,368 and $ 321,079 as of September 30, 2022 and 2021, respectively. The VIE’s total assets, all of which were current, amounted to $ 301,503 and $ 220,081 on September 30, 2022 and 2021, respectively. Total liabilities, all of which were current for the VIE, was $ 933,977 on September 30, 2022. The VIE’s total stockholders’ deficit was $ 632,474 and $ 30,914 on September 30, 2022 and 2021, respectively. 9 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Foreign Currency The Company’s functional currency is the U.S. dollar. The functional currency of our foreign operation is the respective local currency. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date, except for equity accounts which are translated at historical rates. The Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment is not material to the financial statements. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in its financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to revenue recognition related to the allowance for doubtful accounts, stock based compensation, calculations related to the incremental borrowing rate for the Company’s lease agreements, estimates related to ongoing lease terms, software development costs, impairment of long-lived assets, goodwill and indefinite-lived intangible assets, business combinations, reserve for losses within the Company’s insurance deductibles, income taxes, and deferred income tax. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Concentration of Credit Risk and Off-Balance Sheet Risk The Company is potentially subject to concentration of credit risk with respect to its cash, cash equivalents and restricted cash, which the Company attempts to minimize by maintaining cash, cash equivalents and restricted cash with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss. Major Customers The Company has one customer that accounted for approximately 33 % of sales and 35 % of net accounts receivable, and another customer that accounted for 11 % of sales and 0.1% of net accounts receivable for the nine month period ended September 30, 2022. The Company has one customer that accounted for approximately 44 % of sales and 42 % of net accounts receivable for the nine month period ended September 30, 2021. The Company expects to maintain these relationships with the above-referenced customers. 10 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non- emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. The Company maintains most of its cash and cash equivalents with financial institutions in the U.S. The accounts at financial institutions in the U.S. are insured by the Federal Deposit Insurance Corporation (“FDIC”) and are in excess of FDIC limits. The Company had cash balances of approximately $ 433,000 and $ 913,000 with foreign financial institutions on September 30, 2022 and December 31, 2021, respectively. Restricted Cash and Insurance Reserves Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash in the Condensed Consolidated Balance Sheets. Restricted cash is classified as either a current or non-current asset depending on the restriction period. The Company is required to pledge or otherwise restrict a portion of cash and cash equivalents as collateral for its line of credit, transportation equipment leases and a standby letter of credit as required by its insurance carrier (see Notes 8 and 13). The Company utilizes a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, automobile liability, general liability and professional liability. Liabilities associated with the risks that are retained by the Company within its high deductible limits are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions. The Company has commercial insurance in place for catastrophic claims above its deductible limits. ARM Insurance, Inc. a Vermont-based wholly-owned captive insurance subsidiary of the Company, charges the operating subsidiaries premiums to insure the retained workers’ compensation, automobile liability, general liability and professional liability exposures. Pursuant to Vermont insurance regulations, ARM Insurance, Inc. maintains certain levels of cash and cash equivalents related to its self-insurance exposures. The Company also maintains certain cash balances related to its insurance programs, which are held in a self-depleting trust and restricted as to withdrawal or use by the Company other than to pay or settle self-insured claims and costs. These amounts are reflected in “Restricted cash” in the accompanying Condensed Consolidated Balance Sheets. 11 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Fair Value of Financial Instruments ASC 820, Fair Value Measurements , provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2022 and December 31, 2021. For certain financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, restricted cash, accounts payable and accrued expenses, and due to seller, the carrying amounts approximate their fair values as it is short term in nature. The notes payable are presented at their carrying value, which based on borrowing rates currently available to the Company for loans with similar terms, approximates its fair values. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Future changes in fair value of the contingent financial milestone consideration, as a result of changes in significant inputs such as the discount rate and estimated probabilities of financial milestone achievements, could have a material effect on the statement of operations and balance sheet in the period of the change. During the three months ended September 30, 2022, the Company recorded $ 4.0 million of contingent consideration in connection with the Ryan Brothers Atkinson, LLC business acquisition, to be paid based on the completion of certain performance obligations over a 24-month period (see Note 4). Accounts Receivable The Company contracts with hospitals, healthcare facilities, businesses, state and local government entities, and insurance providers to transport patients and to provide Mobile Health services at specified rates. Accounts receivable consist of billings for transportation and healthcare services provided to patients. The billings will either be paid or settled on the patient’s behalf by health insurance providers, managed care organizations, treatment facilities, government sponsored programs, businesses, or patients directly. Accounts receivable are net of insurance provider contractual allowances, which are estimated at the time of billing based on contractual terms or other arrangements. Accounts receivable are periodically evaluated for collectability based on past credit history with payors and their current financial condition. Changes in the estimated collectability of accounts receivable are recorded in the results of operations for the period in which the estimate is revised. Accounts receivable deemed uncollectible are offset against the allowance for uncollectible accounts. The Company generally does not require collateral for accounts receivable . 12 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. When an item is sold or retired, the costs and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is recorded in operating expenses in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the respective assets. A summary of estimated useful lives is as follows: Asset Category Estimated Useful Life Buildings 39 years Office equipment and furniture 3 years Vehicles 2 - 8 years Medical equipment 2 - 5 years Leasehold improvements Shorter of useful life of asset or lease term Expenditures for repairs and maintenance are expensed as incurred. Expenditures that improve an asset or extend its estimated useful life are capitalized. Software Development Costs Costs incurred during the preliminary project stage, maintenance costs and routine updates and enhancements of products are expensed as incurred. The Company capitalizes software development costs intended for internal use in accordance with ASC 350-40, Internal-Use Software . Costs incurred in developing the application of its software and costs incurred to upgrade or enhance product functionalities are capitalized when it is probable that the expenses would result in future economic benefits to the Company and the functionalities and enhancements are used for their intended purpose. Capitalized software costs are amortized over its useful life. Estimated useful life of software development activities are reviewed annually or whenever events or changes in circumstances indicate that intangible assets may be impaired and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades or enhancements to the existing functionality. Business Combinations The Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including NCI, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expenses acquisition-related costs and fees associated with business combinations. 13 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The estimated fair value of net assets to be acquired, including the allocation of the fair value to identifiable assets and liabilities, is determined using established valuation techniques. Management uses assumptions based on historical knowledge of the business and projected financial information of the target. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values. Impairment of Long-Lived Assets The Company evaluates the recoverability of the recorded amount of long-lived assets, primarily property and equipment and finite-lived intangible assets, whenever events or changes in circumstance indicate that the recorded amount of an asset may not be fully recoverable. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. If an asset is determined to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets targeted for disposal are reported at the lower of the carrying amount or fair value less cost to sell. For the periods ending September 30, 2022 and December 31, 2021, management determined that there was no impairment loss required to be recognized for the carrying value of long-lived assets. 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 September 30, 2022 and 2021, management determined that there was no impairment loss required to be recognized in the carrying value of goodwill or other intangible assets. The Company selected December 31 as its annual testing date. Line of Credit The costs associated with the Company’s line of credit are deferred and recognized over the term of the line of credit as interest expense. 14 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates its financial instruments to determine if such instruments contain features that qualify as embedded derivatives. Related Party Transactions The Company defines related parties as affiliates of the Company, entities for which investments are accounted for by the equity method, trusts for the benefit of employees, principal owners (beneficial owners of more than 10 % of the voting interest), management, and members of immediate families of principal owners or management, other parties with which the Company may deal with if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Related party transactions are recorded within operating expenses in the Company’s Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. For details regarding the related party transactions that occurred during the periods ended September 30, 2022 and 2021, refer to Note 15. 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. 15 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Nature of Our Services Revenue is primarily derived from: i. Transportation Services : These services encompass both emergency response and non-emergency ambulance transport services. Net revenue from transportation services is derived from the transportation of patients based on billings to third party payors and healthcare facilities. ii. Mobile Health Services : These services include services performed at home and offices, testing and vaccinations, and event services which include on-site healthcare support at sporting events and concerts. The Company concluded that Transportation Services and any related support activities are a single performance obligation under ASC 606. The transaction price is determined by the fixed rate usage-based fees or fixed fees which are agreed upon in the Company’s executed contracts. For Mobile Health, the performance of the services and any related support activities are a single performance obligation under ASC 606. Mobile Health services are typically billed based on a fixed rate (i.e., time and materials separately or combined) fee structure taking into consideration staff and materials utilized. As the performance associated with such services is known and quantifiable at the end of a period in which the services occurred (i.e., monthly or quarterly), revenues are typically recognized in the respective period performed. The typical billing cycle for Transportation Services and Mobile Health services is same day to 5 days with payments generally due within 30 days. For large municipal customers in the Mobile Health segment, invoices are generally produced on a monthly basis, in arrears, and are generally due within 30-60 days of when they are submitted to the customer. For Transportation Services, the Company estimates the amount unbilled at month end and recognizes such amounts as revenue, based on available data and customer history. The Company’s Transportation Services and Mobile Health services each represent a single performance obligation. Therefore, allocation is not necessary as the transaction price (fees) for the services provided is standard and explicitly stated in the contractual fee schedule and/or invoice. The Company monitors and evaluates all contracts on a case-by-case basis to determine if multiple performance obligations are present in a contractual arrangement. For Transportation Services, the customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled, therefore the Company satisfies performance obligations at the same time. For Transportation Services, where the customer pays fixed rate usage-based fees, the actual usage in the period represents the best measure of progress. Generally, for Mobile Health services, the customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled, therefore the Company satisfies performance obligations at the same time. For certain Mobile Health services that have a fixed fee arrangement, and the services are provided over time, revenue is recognized over time as the services are provided to the customer. 16 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In the following table, revenue is disaggregated as follows: Revenue Breakdown Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Primary Geographical Markets United States $ 101,337,899 $ 83,286,509 $ 322,706,143 $ 190,595,217 United Kingdom 2,981,995 2,552,479 9,024,607 6,799,162 Total revenue $ 104,319,894 $ 85,838,988 $ 331,730,750 $ 197,394,379 Major Segments/Service Lines Transportation Services $ 27,670,109 $ 17,916,162 $ 77,657,852 $ 65,657,141 Mobile Health 76,649,785 67,922,826 254,072,898 131,737,238 Total revenue $ 104,319,894 $ 85,838,988 $ 331,730,750 $ 197,394,379 Stock Based Compensation The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company accounts for forfeitures as they occur. All stock-based compensation costs are recorded in operating expenses in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. Earnings per Share Earnings per share represents the net income attributable to stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during the reporting periods. Potential dilutive common stock equivalents consist of the incremental common stock issuable upon exercise of warrants and the incremental shares issuable upon conversion of stock options. In reporting periods in which the Company has a net loss, the effect is considered anti-dilutive and excluded from the diluted earnings per share calculation. Equity Method Investment On October 26, 2021, the Company acquired a 50 % interest in RND Health Services Inc. (“RND”) for $ 655,876 . The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee but does not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investment” on the Condensed Consolidated Balance Sheets. Changes in value of RND are recorded in “Gain from equity method investment” on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions. 17 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) On November 1, 2021, the Company acquired a 20% interest in National Providers Association, LLC (“NPA”) for $30,000. The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee but does not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investment” on the Condensed Consolidated Balance Sheets. Changes in value of NPA are recorded in “Loss from equity method investment” on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions. Effective December 21, 2021, three members withdrew from NPA resulting in the remaining two members obtaining the remaining ownership percentage. On December 31, 2021 and September 30, 2022, DocGo owned 50% of NPA. Under the equity method, the Company’s investment is initially measured at cost and subsequently increased or decreased to recognize the Company’s share of income and losses of the investee, capital contributions and distributions and impairment losses. The Company performs a qualitative assessment annually and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Leases The Company categorizes leases at its inception as either operating or finance leases based on the criteria in FASB ASC 842, Leases , (“ASC 842”). The Company adopted ASC 842 on January 1, 2019, using the modified retrospective approach, and has established a Right-of-Use (“ROU”) Asset and a current and non-current lease liability for each lease arrangement identified. The lease liability is recorded at the present value of future lease payments discounted using the discount rate that approximates the Company’s incremental borrowing rate for the lease established at the commencement date, and the ROU asset is measured as the lease liability plus any initial direct costs, less any lease incentives received before commencement. The Company recognizes a single lease cost, so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis. The Company has lease arrangements for vehicles, equipment, and facilities. These leases typically have original terms not exceeding 10 years and, in some cases contain multi-year renewal options, none of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component. The Company has incorporated residual value obligations in leases for which there is such occurrences. Regarding short-term leases, ASC 842-10-25-2 permits an entity to make a policy election not to apply the recognition requirements of ASC 842 to short-term leases. The Company has elected not to apply the ASC 842 recognition criteria to any leases that qualify as short-term leases. Income Taxes Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. 18 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Recently Issued Accounting Standards Not Yet Adopted None 3. Property and Equipment, net Property and equipment, net, as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Office equipment and furniture $ 2,749,874 $ 1,977,808 Buildings 527,283 527,284 Land 37,800 37,800 Transportation equipment 18,477,444 13,772,251 Medical equipment 5,764,863 3,949,566 Leasehold improvements 609,226 616,446 28,166,490 20,881,155 Less: Accumulated depreciation ( 10,588,660 ) ( 8,147,266 ) Property and equipment, net $ 17,577,830 $ 12,733,889 The Company recorded depreciation expense of $ 1,150,806 and $ 598,188 for the three months ended September 30, 2022 and 2021, respectively. The Company recorded depreciation expense of $ 2,592,244 and $ 1,697,380 for nine months ended September 30, 2022 and 2021, respectively. 4. Acquisition of Businesses Government Medical Services, LLC On July 6, 2022, Holdings, acquired 100 % of the outstanding shares of common stock of Government Medical Services, LLC (“GMS”), a provider of medical services. The aggregate purchase price consisted of $ 20.3 million in cash consideration. Holdings also agreed to pay GMS an additional $ 3.0 million upon GMS meeting certain performance conditions within a year of the Closing Date. Acquisition costs are included in general and administrative expenses and totaled $ 0 for the three months ended September 30, 2022 and $ 800,000 for the nine months ended September 30, 2022. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. The Company’s unaudited condensed consolidated financial statements include the results of operations of GMS from the date of acquisition. The historical results of operations of GMS were not significant to the Company’s unaudited condensed consolidated results of operations for the periods presented. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to GMS’s net tangible assets and intangible assets based on their estimated fair value on the acquisition date. The preliminary purchase price allocation, as set forth in the table below, reflects various preliminary fair value estimates and analysis prepared by the Company. Any change in the fair value of the net assets of GMS will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from preliminary purchase price allocation presented here. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired, fair value of right to use assets and associated operating lease liabilities assumed, and net working capital adjustments. Exceptional Medical Transportation, LLC On July 13, 2022, the Company acquired 100 % of the outstanding shares of common stock of Exceptional Medical Transportation, LLC (“Exceptional”) in exchange for $ 13.7 million consisting of $ 7.7 million in cash at closing and $ 6 million payable over a 24 month period. Exceptional is in the business of providing medical transportation services. Acquisition costs are included in general and administrative expenses totaled $ 0 for the three months ended September 30, 2022 and $ 0 for the nine months ended September 30, 2022. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. The Company’s unaudited condensed consolidated financial statements include the results of operations of Exceptional from the date of acquisition. The historical results of operations of Exceptional were not significant to the Company’s unaudited condensed consolidated results of operations for the periods presented. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to Exceptional’s net tangible assets and intangible assets based on their estimated fair value on the acquisition date. The preliminary purchase price allocation, as set forth in the table below, reflects various preliminary fair value estimates and analysis prepared by the Company. Any change in the fair value of the net assets of Exceptional will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from preliminary purchase price allocation presented here. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired, fair value of right to use assets and associated operating lease liabilities assumed, and net working capital adjustments. 19 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Ryan Brothers Fort Atkinson, LLC On August 9, 2022, the Company acquired 100 % of the outstanding shares of common stock of Ryan Brothers Fort Atkinson, LLC (“RT”) in exchange for $ 11.4 million consisting of $ 7.4 million in cash at closing and $ 4.0 million of estimated contingent consideration to be paid out over 24 months based on performance of certain obligations. RT is in the business of providing medical transportation services. Acquisition costs are included in general and administrative expenses totaled $ 0 for the three months ended September 30, 2022 and $ 0 for the nine months ended September 30, 2022. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. The Company’s unaudited condensed consolidated financial statements include the results of operations of RT from the date of acquisition. The historical results of operations of RT were not significant to the Company’s unaudited condensed consolidated results of operations for the periods presented. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to RT ’s net tangible assets and intangible assets based on their estimated fair value on the acquisition date. The preliminary purchase price allocation, as set forth in the table below, reflects various preliminary fair value estimates and analysis prepared by the Company. Any change in the fair value of the net assets of RT will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from preliminary purchase price allocation presented here. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired, fair value of right to use assets and associated operating lease liabilities assumed, and net working capital adjustments. The following table presents the preliminary allocation of the assets acquired and liabilities assumed: Ryan Brothers Exceptional Medical Transport GMS Total Consideration: Cash Consideration $ 7,422,252 $ 6,375,000 $ 20,338,789 $ 34,136,041 Due to Seller - 6,000,000 - 6,000,000 Contingent Consideration 4,000,000 - - 4,000,000 Amounts held under an escrow account - 1,333,333 - 1,333,333 Total consideration 11,422,252 13,708,333 20,338,789 45,469,374 Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ 620,548 $ 299,050 $ 1,005,453 $ 1,925,051 Accounts receivable - - 3,975,160 3,975,160 Other current assets 136,157 - 30,734 166,891 Property, plant and equipment 2,125,134 2,450,900 4,092 4,580,126 Intangible assets 387,550 125,000 9,794,000 10,306,550 Total identifiable assets acquired 3,269,389 2,874,950 14,809,439 20,953,778 Accounts payable 44,911 - 137,239 182,150 Due to Seller - 299,050 - 299,050 Other current liabilities 286,792 - 562,809 849,601 Total liabilities assumed 331,703 299,050 700,048 1,330,801 Goodwill 8,484,566 11,132,433 6,229,398 25,846,397 Total purchase price $ 11,422,252 $ 13,708,333 $ 20,338,789 $ 45,469,374 20 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. Goodwill The Company recorded goodwill in connection with its acquisitions. The changes in the carrying value of goodwill for the period ended September 30, 2022 are as noted in the tables below: Carrying Value Balance at December 31, 2021 $ 8,686,966 Goodwill acquired during the period 25,846,397 Balance at September 30, 2022 34,533,363 6. Intangibles Intangible assets consist of the following as of September 30, 2022 and December 31, 2021: September 30, 2022 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Amount Patents 15 years $ 48,668 $ 13,655 $ ( 9,075 ) $ 53,248 Computer software 5 years $ 294,147 11,144 ( 263,192 ) $ 42,099 Operating licenses Indefinite $ 8,375,514 450,200 - $ 8,825,714 Internally developed software 4 - 5 years $ 6,013,513 1,907,616 ( 5,778,894 ) $ 2,142,235 Material Contracts Indefinite - 62,550 - 62,550 Customer Relationship 9 years - 9,794,000 ( 272,056 ) $ 9,521,944 $ 14,731,842 $ 12,239,165 $ ( 6,323,217 ) $ 20,647,790 December 31, 2021 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Amount Patents 15 years $ 19,275 $ 29,393 $ ( 6,367 ) $ 42,301 Computer software 5 years 132,816 161,331 ( 219,388 ) 74,759 Operating licenses Indefinite 8,375,514 - - 8,375,514 Internally developed software 4 - 5 years 2,146,501 3,867,012 ( 3,828,038 ) 2,185,475 $ 10,674,106 $ 4,057,736 $ ( 4,053,793 ) $ 10,678,049 The Company recorded amortization expense of $ 990,345 and $ 552,999 for the three months ended September 30, 2022 and 2021, respectively. The Company recorded amortization expense of $ 2,269,423 and $ 1,432,983 for the nine months ended September 30, 2022 and 2021, respectively. 21 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Future amortization expense at September 30, 2022 for the next five years and in the aggregate are as follows: Amortization Expense 2022, remaining $ 680,930 2023 2,078,406 2024 1,510,563 2025 1,460,965 2026 1,094,588 Thereafter 4,934,074 Total $ 11,759,526 Amortization expense As of September 30, 2022 2,269,423 As of September 30, 2021 1,432,983 As of December 31, 2021 1,845,193 7. Accrued Liabilities Accrued liabilities consist of the following as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Accrued bonus $ 496,660 $ 7,260,456 Accrued lab fees 1,363,138 4,885,539 Accrued payroll 7,068,616 3,539,301 Medicare advance - 975,415 FICA/Medicare liability 759,232 739,629 Accrued general expenses 7,393,906 3,497,418 Accrued subcontractors 11,259,341 9,564,833 Accrued fuel and maintenance 310,064 450,842 Accrued workers compensation 5,465,030 2,259,571 Other current liabilities 12,259 736,021 Accrued legal fees 2,447,997 1,143,629 Accrued insurance liabilities 1,840,420 - Credit card payable 141,411 58,223 Total accrued liabilities $ 38,558,074 $ 35,110,877 8. Line of Credit On December 17, 2021, Ambulnz-FMC North America, LLC (“FMC NA”), entered into a revolving loan and bridge credit and security agreement with a subsidiary of one of its members with a maximum revolving advance amount of $ 12,000,000 . Each Revolving Advance shall bear interest at a per annum rate equal to the Wall Street Journal Prime Rate (6.25% at September 30, 2022), as the same may change from time to time, plus one percent (1.00%), but in no event less than five percent (5.00%) per annum, calculated on the basis of a 360-day year for the actual number of days in the applicable period. The agreement is subject to certain financial covenants such as an unused fee, whereas the Company shall pay to the subsidiary of one of its members an unused fee in the amount of 0.5 % of the average daily amount by which the Revolving Commitment Amount ($ 12 million) exceeds the principal balance of the aggregate outstanding advances. All accrued and unpaid interest and unused fee shall be due and payable on the first anniversary of the date of the agreement (“Revolving Credit Maturity Date”). This loan is secured by all assets of entities owned 100 % by DocGo Inc. As of December 31, 2021, the outstanding balance of the line of credit was zero. On January 26, 2022, the Company drew $ 1,000,000 to fund operations and meet short-term obligations. As of September 30, 2022, the outstanding balance of the line of credit was $ 1,000,000 . 22 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. Notes Payable The Company has various loans with finance companies with monthly installments aggregating $ 64,855 , inclusive of interest ranging from 2.5 % through 8 %. The notes mature at various times through 2051 and are secured by transportation equipment. The following table summarizes the Company’s notes payable: September 30, 2022 December 31, 2021 Equipment and financing loans payable, between 2.5 % and 8 % interest and maturing between January 2022 and May 2051 $ 2,136,808 $ 1,903,288 Loan received pursuant to the Payroll Protection Program Term Note - - Total notes payable 2,136,808 1,903,288 Less: current portion of notes payable $ 680,703 $ 600,449 Total non-current portion of notes payable $ 1,456,105 $ 1,302,839 Interest expense was $ 69,804 and $ 61,324 for the periods ended September 30, 2022 and December 31, 2021, respectively. Future minimum annual maturities of notes payable as of September 30, 2022 are as follows: Notes Payable 2022, remaining 137,959 2023 582,722 2024 446,812 2025 386,785 2026 311,769 Thereafter 270,761 Total maturities $ 2,136,808 Current portion of notes payable ( 680,703 ) Long-term portion of notes payable $ 1,456,105 10. Business Segment Information The Company conducts business as two operating segments, Transportation Services and Mobile Health services. In accordance with ASC 280, Segment Reporting , operating segments are components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer, in deciding how to allocate resources and assessing performance. The Company’s business operates in two operating segments because the Company’s entities have two main revenue streams, and the Company’s chief operating decision maker evaluates the Company’s financial information and resources and assesses the performance of these resources by revenue stream. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its Transportation Services and Mobile Health services segments based primarily on results of operations. 23 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Operating results for the business segments of the Company are as follows: Transportation Services Mobile Health Services Total Three Months Ended September 30, 2022 Revenues $ 27,670,109 $ 76,649,785 $ 104,319,894 Income (loss) from operations ( 4,213,156 ) 8,412,346 $ 4,199,190 Total assets $ 173,789,449 $ 182,130,761 $ 355,920,210 Depreciation and amortization expense $ 2,464,694 $ 550,170 $ 3,014,864 Stock compensation $ 373,641 $ 737,562 $ 1,111,203 Long-lived assets $ 19,584,744 $ 53,174,239 $ 72,758,983 Three Months Ended September 30, 2021 Revenues $ 17,916,162 67,922,826 $ 85,838,988 Income (loss) from operations ( 11,308,739 ) 12,827,957 1,519,218 Total assets $ 115,444,782 $ 28,634,083 $ 144,078,865 Depreciation and amortization expense $ 1,860,088 $ 159,488 $ 2,019,576 Stock compensation $ 458,346 $ 4,700 $ 463,046 Long-lived assets $ 25,641,586 $ 2,252,650 $ 27,894,236 24 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Transportation Services Mobile Health Services Total Nine Months Ended September 30, 2022 Revenues $ 77,657,852 $ 254,072,898 $ 331,730,750 Income (loss) from operations ( 33,035,470 ) 54,786,982 $ 21,751,512 Total assets $ 173,789,449 $ 182,130,761 $ 355,920,210 Depreciation and amortization expense $ 6,271,952 $ 981,704 $ 7,253,656 Stock compensation $ 1,253,450 $ 3,280,309 $ 4,533,759 Long-lived assets $ 19,584,744 $ 53,174,239 $ 72,758,983 Nine Months Ended September 30, 2021 Revenues $ 65,657,142 131,737,237 $ 197,394,379 Income (loss) from operations ( 15,309,680 ) 15,213,696 ( 95,984 ) Total assets $ 115,444,782 $ 28,634,083 $ 144,078,865 Depreciation and amortization expense $ 5,214,607 $ 299,696 $ 5,514,303 Stock compensation $ 1,215,180 $ 9,400 $ 1,224,580 Long-lived assets $ 25,641,586 $ 2,252,650 $ 27,894,236 Long-lived assets include property, plant and equipment, goodwill and intangible assets. Geographic Information Revenues by geographic location are included in Note 2. 11. Equity Preferred Stock In November 2021, the Company’s Series A preferred stock was cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo, par value $ 0.0001 (the “Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement. The Company’s Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity reflect the 2020 shares as if the Merger occurred in 2020. Prior to the reverse merger, on May 23, 2019, the Series A preferred stock was formed, and 40,000 shares were authorized. Each share of Series A preferred stock was convertible into Class A common stock at a conversion price of $ 3,000 per share, subject to adjustment as defined in the articles of incorporation. Series A preferred stockholders had voting rights equivalent to the number of common stock shares issuable upon conversion. The Series A preferred stockholders were entitled to a non-cumulative dividend equal to 8 % of the original issue price as defined in the agreement when declared by the board of directors. The holders of the Series A preferred stock had preferential liquidation rights and rank senior to the holders of common stock. If a liquidation were to occur, the holders of the Series A preferred stock would have been paid an amount equal to $ 3,000 per share, subject to adjustment as defined in the articles of incorporation, plus all accrued and unpaid dividends thereon. After the payment of the Series A preferred stockholders, the common stockholders would have been paid out on a pro-rata basis. 25 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Common Stock On November 1, 2017, Ambulnz, Inc. converted its legal structure from a limited liability company to a corporation and converted its membership units into shares of common stock at a rate of 1,000 shares per membership unit. The total authorized number of shares of common stock converted was 100,000 shares, comprised of 35,597 shares of Class A common stock and 64,402 shares of Class B common stock. Prior to the reverse merger, on May 23, 2019, the Ambulnz, Inc amended and restated its articles of incorporation and the total authorized common stock increased to 154,503 shares, comprised of 78,000 shares of Class A common stock and 76,503 shares of Class B common stock. The Class A common stockholders had voting rights equivalent to one vote per share of common stock and the Class B common stockholders have no voting rights. Dividends may be paid to the common stockholders out of funds legally available, when declared by the board of directors. Share Repurchase Program On May 24, 2022, the Company was authorized to purchase up to $ 40 million of the Company’s common stock under a share repurchase program (the “Program”). During the second quarter of 2022, the Company repurchased 70,000 shares of its common stock for $ 498,000 . These shares were subsequently cancelled. There were no shares repurchased during the third quarter of 2022. The Program does not obligate the Company to acquire any specific number of shares and will expire on November 24, 2023. Under the Program, shares may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as part of accelerated share repurchases, block trades and other methods. The timing, manner, price and amount of any common stock repurchases under the Program are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. Preacquisition Warrants On February 15, 2018, the Company issued warrants to purchase 1,367 shares of Class B common stock at a purchase price of $ 0.01 per share to an investor in conjunction with a capital investment. The warrants had no expiration date. The fair value on the date of issuance was $ 5,400 per share, for a total fair value of $ 7,381,800 . On May 23, 2019, the warrants were exchanged for warrants to purchase 2,461 shares of Series A preferred stock at a purchase price of $ 0.01 per share. The exchanged warrants have no expiration date and had a fair value on the date of issuance of $ 3,000 per share for a total fair value of $ 7,383,000 . These warrants were cashless exercised in November 2021 for 1,587,700 shares of common DocGo Inc. common stock. On June 5, 2019, the Company issued warrants to purchase 667 shares of Series A preferred stock at a purchase price of $ 3,000 per share to an investor in conjunction with a capital investment. The warrants would have expired on June 6, 2029 . The fair value on the date of issuance was $ 2,078 per warrant for a total fair value of $ 1,386,026 . These warrants were cashless exercised in November 2021 for 229,807 shares of common DocGo Inc. common stock. 12. Stock Based Compensation Stock Options In 2021, the Company established the DocGo Inc. Equity Incentive Plan (the “Plan”), which replaced Ambulnz, Inc’s 2017 Equity Incentive Plan. The Company reserved 16,607,894 shares of common stock for issuance under the Plan. The Company’s stock options generally vest on various terms based on continuous services over periods ranging from three to five years. The stock options are subject to time vesting requirements through 2032 and are nontransferable. Stock options granted have a maximum contractual term of 10 years. On September 30, 2022, approximately 2.5 million employee stock options on a converted basis had vested. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Before the Company’s shares of stock were publicly traded, management took the average of several publicly traded companies that were representative of the Company’s size and industry in order to estimate its expected stock volatility. The expected term of the options represented the period of time the instruments are expected to be outstanding. The Company based the risk-free interest rate on the rate payable on the U.S. Treasury securities corresponding to the expected term of the awards at the date of grant. Expected dividend yield was zero based on the fact that the Company had not historically paid and does not intend to pay a dividend in the foreseeable future. The Company utilized contemporaneous valuations in determining the fair value of its shares at the date of option grants. Prior to the Merger, each valuation utilized both the discounted cash flow and guideline public company methodologies to estimate the fair value of its shares on a non-controlling and marketable basis. The December 31, 2020 valuations also included an approach that took into consideration a pending non-binding letter of intent from Motion Acquisition Corp. The March 11, 2021 valuation report relied solely on the fair value of the Company’s shares implied by the March 8, 2021 Merger Agreement with Motion Acquisition Corp. A discount for lack of marketability was applied to the non-controlling and marketable fair value estimates determined above. The determination of an appropriate discount for lack of marketability was based on a review of discounts on the sale of restricted shares of publicly traded companies and put-based quantitative methods. Factors that influenced the size of the discount for lack of marketability included (a) the estimated time it would take for a Company stockholder to achieve marketability, and (b) the volatility of the Company’s business. 26 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following assumptions were used to compute the fair value of the stock option grants during the period ended September 30, 2022 and 2021: Period Ended September 30, 2022 2022 2021 Risk-free interest rate . 07 % - 2.8 % . 15 % - . 62 % Expected term (in years) 4 . 5 - 2 Volatility 60 % - 64 % 65 % Dividend yield 0 % 0 % The following table summarizes the Company’s stock option activity under the Plan for the period ended September 30, 2022: Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Balance as of, December 31, 2021 8,422,972 $ 6.21 8.77 $ 24,706,020 Granted/ Vested during the year 2,183,026 5.92 9.07 - Exercised during the year ( 1,637,159 ) 2.04 5.47 - Cancelled during the year ( 706,642 ) 7.71 8.82 - Balance as of September 30, 2022 8,262,197 7.04 8.72 $ 22,950,815 Options vested and exercisable at September 30, 2022 2,502,717 $ 6.11 8.30 $ 10,010,617 The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price and the exercise price of the stock options. The weighted average grant date fair value per share for stock option grants during the periods ended September 30, 2022 and December 31, 2021 was $ 5.92 and $ 2.80 , respectively. On September 30, 2022 and December 31, 2021, the total unrecognized compensation related to unvested stock option awards granted was $ 27,812,078 and $ 20,792,804 , respectively, which the Company expects to recognize over a weighted-average period of approximately 3.73 years. Restricted Stock Units The fair value of restricted stock units (“RSUs”) is determined on the date of grant. The Company records compensation expense in the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board of Directors ranges from one to four years. 27 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Activity under RSUs was as follows: RSUs Weighted- Average Grant Date Fair Value Per RSU Balance as of, December 31, 2021 50,192 $ 9.97 Granted 146,853 7.15 Vested during the year ( 16,645 ) 9.97 Forfeited - - Balance as of, September 30, 2022 180,400 7.67 Vested and unissued at September 30, 2022 - Non-vested at September 30, 2022 180,400 7.67 The total grant-date fair value of RSUs granted during the period ended September 30, 2022 was $ 1,049,999 . For the period ended September 30, 2022, the Company recorded stock-based compensation expense related to RSUs of $ 177,840 . As of September 30, 2022, the Company had $ 1,241,163 in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 3.1 years. 13. Leases Operating Leases The Company is obligated to make rental payments under non-cancellable operating leases for office, dispatch station space, and transportation equipment, expiring at various dates through 2026 . Under the terms of the leases, the Company is also obligated for its proportionate share of real estate taxes, insurance and maintenance costs of the property. The Company is required to hold certain funds in restricted cash and cash equivalents accounts under some of these agreements. Certain leases for property and transportation equipment contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include in the calculation of the right-of-use (ROU) asset and lease obligations for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and whether the optional period and payments should be included in the calculation of the associated ROU asset and lease obligation. In making such judgment, the Company considers all relevant economic factors that would require whether to exercise or not exercise the option. The Company’s lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates, which were used to discount its real estate lease liabilities. The Company used estimated borrowing rates of 6 % on January 1, 2019, for all leases that commenced prior to that date, for office spaces and transportation equipment. 28 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Lease Costs The table below comprise lease expenses for the periods ended September 30, 2022 and 2021: Three Months Ended Nine Months Ended Components of total lease cost: September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Operating lease expense $ 626,188 $ 508,128 $ 1,517,541 $ 1,446,067 Short-term lease expense 334,619 $ 62,653 863,316 256,448 Total lease cost $ 960,807 $ 570,781 $ 2,380,857 $ 1,702,515 Lease Position as of September 30, 2022 Right-of-use lease assets and lease liabilities for the Company’s operating leases were recorded in the Condensed Consolidated Balance Sheets as follows: September 30, 2022 December 31, 2021 Assets Lease right-of-use assets $ 8,185,547 $ 4,195,682 Total lease assets $ 8,185,547 $ 4,195,682 Liabilities Current liabilities: Lease liability - current portion $ 2,059,278 $ 1,461,335 Noncurrent liabilities: Lease liability, net of current portion 6,406,246 2,980,946 Total lease liability $ 8,465,524 $ 4,442,281 Lease Terms and Discount Rate The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s finance leases as of September 30, 2022: Weighted average remaining lease term (in years) - operating leases 5 .22 Weighted average discount rate - operating leases 6.00 % 29 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Undiscounted Cash Flows Future minimum lease payments under the operating leases at September 30, 2022 are as follows: Operating Leases 2022, remaining $ 676,878 2023 2,375,470 2024 1,880,974 2025 1,897,247 2026 1,499,654 2027 and thereafter 1,418,692 Total future minimum lease payments 9,748,915 Less effects of discounting ( 1,283,391 ) Present value of future minimum lease payments $ 8,465,524 Operating lease expense was approximately $ 960,807 and $ 570,781 for the three months ended September 30, 2022 and 2021, respectively. Operating lease expense was approximately $ 2,380,857 and $ 1,702,515 for the nine months ended September 30, 2022 and 2021, respectively. For the three months ended September 30, 2022, the Company made $ 626,188 of fixed cash payments related to operating leases and $ 672,975 related to finance leases. For the three months ended September 30, 2021, the Company made $ 519,716 of fixed cash payments related to operating leases and $ 725,233 related to finance leases. For the nine months ended September 30, 2022, the Company made $ 1,517,541 of fixed cash payments related to operating leases and $ 2,146,857 related to finance leases. For the nine months ended September 30, 2021, the Company made $ 1,446,067 of fixed cash payments related to operating leases and $ 1,972,283 related to finance leases. Finance Leases The Company leases vehicles under a non-cancelable finance lease agreements with a liability of $ 8,945,489 and $ 10,139,410 as of September 30, 2022 and December 31, 2021, respectively. This includes accumulated depreciation expense of $ 9,662,686 and $ 7,095,242 as of September 30, 2022 and December 31, 2021, respectively. Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $ 873,713 and $ 752,313 for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $ 2,391,989 and $ 2,109,770 for the nine months ended September 30, 2022 and 2021, respectively. Gain on Lease Remeasurement In June 2022, the Company reassessed its finance lease estimates relating to vehicle milage and residual value. As a result, the Company determined to purchase the vehicles at the end of the leases which resulted in a gain of $ 1.4 million recorded as gains from lease accounting on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. 30 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Lease Payments The table below presents lease payments for the periods ended September 30, 2022 and 2021: Three Months Ended Nine Months Ended Components of total lease payment: September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Finance lease payment $ 672,975 $ 717,891 $ 2,146,857 $ 1,972,283 Short-term lease payment - - - Total lease payments $ 672,975 $ 717,891 $ 2,146,857 $ 1,972,283 Lease Position as of September 30, 2022 Right-of-use lease assets and lease liabilities for the Company’s finance leases were recorded in the Condensed Consolidated Balance Sheets as follows: September 30, 2022 December 31, 2021 Assets Lease right-of-use assets $ 9,421,196 $ 9,307,113 Total lease assets $ 9,421,196 $ 9,307,113 Liabilities Current liabilities: Lease liability - current portion $ 2,858,968 $ 3,271,990 Noncurrent liabilities: Lease liability, net of current portion 6,086,521 6,867,420 Total lease liability $ 8,945,489 $ 10,139,410 Lease Terms and Discount Rate The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s finance leases as of September 30, 2022: Weighted average remaining lease term (in years) - finance leases 3.92 Weighted average discount rate - finance leases 6.01 % 31 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Undiscounted Cash Flows Future minimum lease payments under the finance leases at September 30, 2022 are as follows: Finance Leases 2022, remaining 878,626 2023 3,127,590 2024 2,398,030 2025 2,095,826 2026 1,185,433 2027 and thereafter 274,974 Total future minimum lease payments 9,960,479 Less effects of discounting ( 1,014,990 ) Present value of future minimum lease payments $ 8,945,489 Future minimum lease payments under the operating leases at September 30, 2022 are as follows: Operating Leases 2022, remaining $ 676,878 2023 2,375,470 2024 1,880,974 2025 1,897,247 2026 1,499,654 2027 and thereafter 1,418,692 Total future minimum lease payments 9,748,915 Less effects of discounting ( 1,283,391 ) Present value of future minimum lease payments $ 8,465,524 14. Other Expense As of September 30, 2022, the Company recorded a loss of approximately $ 1.8 million from the remeasurement of warrant liabilities. The warrants are marked-to-market in each reporting period, and this loss reflected the increase in DocGo’s stock price relative to the beginning of the period. No gain or loss was recorded in relation to the remeasurement of warrant liabilities in the same period in 2021. The Company redeemed all of its outstanding warrants in September 2022. 15. Related Party Transactions Historically, the Company has been involved in transactions with various related parties. Ely D. Tendler Strategic & Legal Services PLLC provides legal services for the Company. Ely D. Tendler Strategic & Legal Services PLLC is owned by the General Counsel of the Company, and therefore is a related party. The Company made legal payments to Ely D. Tendler Strategic & Legal Services PLLC totaling $ 261,185 and $ 186,075 for the three months ended September 30, 2022 and 2021, respectively, and $ 704,593 and $ 476,293 for the nine months ended September 30, 2022 and 2021, respectively. 32 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Pride Staff also provides subcontractor services for the Company. The Pride Staff is owned by the operations manager of the Company and his spouse, and therefore, a related party. The Company made subcontractor payments to PrideStaff totaling $ 118,645 and $ 92,359 for the three months ended September 30, 2022 and 2021, respectively, and $ 364,844 and $ 592,417 for the nine months ended September 30, 2022 and 2021, respectively. Included in accounts payable were $ 118,604 and $ 94,636 due to related parties as of September 30, 2022 and December 31, 2021, respectively. 16. Income Taxes As a result of the Company’s history of net operating losses (“NOL”), the Company had historically provided for a full valuation allowance against its deferred tax assets for assets that were not more-likely-than-not to be realized. The Company’s income expense for the three months ended September 30, 2022 and 2021 were $ 401,906 and $ 604,608 , respectively, and $ 1,163,755 and $ 613,531 for the nine months ended September 30, 2022 and 2021, respectively. In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, and best estimates of non-taxable and non-deductible income and expense items. 17. 401(K) Plan The Company has established a 401(k) plan in January 2022 that qualifies as a deferred compensation arrangement under Section 401 of the Internal Revenue Code. All U.S. employees that complete two months of service with the Company are eligible to participate in the plan. The Company did not make any employer contributions to this plan as of September 30, 2022. 18. Legal Proceedings From time to time, the Company may be involved as a defendant in legal actions that arise in the normal course of business. In the opinion of management, the Company has adequate legal defense on all legal actions, and the results of any such proceedings would not materially impact the Unaudited Condensed Consolidated Financial Statements of the Company. The Company provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the Unaudited Condensed Consolidated Financial Statements. As of September 30, 2022 and December 31, 2021, the Company recorded a liability of $ 1,000,000 , which represents an amount for an agreed settlement, under the terms of a memorandum of understanding, of various class-based claims, both actual and potential, under Federal and California state law, as described in detail below. The settlement is subject to court approval. Stephanie Zamora, Jascha Dlugatch, et al. v. Ambulnz Health, LLC, et al . was filed in the Los Angeles Superior Court on October 11, 2018, and the complaint alleged wage and hour violations pursuant to California’s Private Attorneys’ General Act of 2004 (“PAGA”). On February 24, 2020, this case was consolidated with Jascha Dlugatch, et. Al. v. Ambulnz Health, LLC (the “Consolidated Compliant”), another lawsuit filed in the Los Angeles Superior Court. On May 6, 2021, the parties attended mediation and settled the claims pled in the Consolidated Complaint on a class-wide and PAGA basis in exchange for a proposed $ 1 million payment by Ambulnz Health, inclusive of administrative costs and fees. On September 9, 2022, the Court preliminarily approved the proposed settlement. 33 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 19. Risk and Uncertainties COVID-19 Risks, Impacts and Uncertainties On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally. The spread of COVID-19 and the related country-wide shutdowns and restrictions had a mixed impact on the Company’s business. In the ambulance transportation business, which predominantly comprises of non-emergency medical transportation, the Company saw a decline in volumes from historical and expected levels, as elective surgeries and other procedures were postponed. In some of the Company’s larger markets, such as New York and California, there were declines in trip volume. In addition, the Company experienced lost revenues associated with sporting, concerts and other events, as those events were cancelled or had a significantly restricted (or entirely eliminated) the number of permitted attendees. Ambulance transports and event-related revenues have both since recovered to pre-COVID levels or higher. There are two areas where the Company has experienced positive business impacts from COVID-19. In April and May 2020, the Company participated in an emergency project with Federal Emergency Management Agency (“FEMA”) in the New York City area. This engagement resulted in incremental transportation revenue. In addition, in response to the need for widespread COVID-19 testing and available Emergency Medical Technicians (“EMT”) and Paramedics, the Company formed a new subsidiary, Rapid Reliable Testing, LLC (“RRT”), with the goal to perform COVID-19 tests at nursing homes, municipal sites, businesses, schools and other venues. RRT is part of the Mobile Health segment. Since early 2020, RRT has grown significantly, and its services have expanded beyond COVID-19 testing to a wide variety of tests, vaccinations and other procedures. While COVID-19 testing activity continued to grow throughout 2021 and into early 2022, such activity has slowed considerably over the past several months, as the pandemic has waned, and COVID-19 testing accounted for a relatively small proportion of the Company’s overall revenues during the third quarter of 2022. We anticipate that COVID-19 will continue to account for a shrinking proportion of the Company’s revenues in the fourth quarter of 2022 and beyond. The Company’s current business plan assumes continued recovery of industry-wide transportation volumes to historical levels and beyond, 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. Likewise, we are unable to predict the emergence of future, unrelated pandemics, which would have some of the same impacts as those experienced with COVID-19. 34 DocGo Inc. and Subsidiaries NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Medicare Accelerated Payments Medicare accelerated payments of approximately $ 2,397,024 were received by the Company in April 2020. Effective October 8, 2020, CMS is no longer accepting new applications for accelerated payments. Accordingly, the Company does not expect to receive additional Medicare accelerated payments. Payments under the Medicare Accelerated and Advance Payment program are advances that must be repaid. Effective October 1, 2020, the program was amended such that providers are required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms. The repayment terms specify that for the first 11 months after repayment begins, repayment will occur through an automatic recoupment of 25 % of Medicare payments otherwise owed to the provider. At the end of the eleven-month period, recoupment will increase to 50% for six months. At the end of the six months (or 29 months from the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable. In such event, if payment is not received within 30 days, interest will accrue at the annual percentage rate of four percent (4%) from the date the letter was issued and will be assessed for each full 30-day period that the balance remains unpaid. There were no Medicare accelerated payments reflected within accrued liabilities in the Condensed Consolidated Balance Sheets as of September 30, 2022, compared to $ 975,415 as of December 31, 2021. The Company’s estimate of the current liability is a function of historical cash receipts from Medicare and the repayment terms set forth above. 20. Subsequent Events On October 12, 2022, the Company acquired Community Ambulance Service Ltd, a company located in United Kingdom, in exchange for approximately £4.8 million in cash. Community Ambulance Service Ltd is engaged in providing emergency and non-emergency transport services, including high dependency, urgent care, mental health and blue light transport services and diagnostics testing. We believe this acquisition will allow us to increase our presence in that market, while giving us improved access to municipal contracts. We are currently in the process of finalizing the accounting for this transaction and will have completed our preliminary allocation of the purchase consideration to the asset acquired and liabilities assumed as of the end of the fourth quarter of 2022. On November 1, 2022, the Company entered into a revolving loan and security agreement with two banks, with one bank as the administrative agent (the “Lenders”), with a maximum revolving advance amount of $90,000,000. The revolving facility includes the ability for the Company to request an increase to the commitment by an additional up to $50,000,000, though no Lender (nor the Lenders collectively) are obligated to increase their respective commitments. Borrowings under the revolving facility bear interest at a per annum rate equal to, (i) at the Company’s option, the (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. The applicable margins are based on the Company’s consolidated net leverage ratio, adjusted on a quarterly basis. The initial applicable margins are 1.25% for an adjusted term SOFR loan and 0.25% for a base rate loan and will be updated based on the consolidated net leverage ratio reported in the compliance certificate. The revolving facility matures on the five-year anniversary of the closing date, November 1, 2027. The revolving facility is secured by a first-priority lien on substantially all of the Company’s present and future personal assets and intangible assets. The revolving facility is subject to certain financial covenants such as a net leverage ratio and interest coverage ratio, as defined in the agreement. The Company has not made any draws under the facility and there is no amount outstanding. 35