DocGo Inc. 10-K

Item 8. Financial Statements and Supplementary Data. 62 DocGo Inc. and Subsidiaries Index to the Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 1013 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 - F-4 Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2022 and 2021 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-7 - F-8 Notes to Consolidated Financial Statements F-9 - F-37 F- 1 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors DocGo, Inc. and Subsidiaries New York, New York Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of DocGo, Inc. and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and comprehensive income (loss) and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Urish Popeck & Co., LLC We have served as the Company’s auditor since 2021. Pittsburgh, PA March 14, 2023 F- 2 DocGo Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 157,335,323 $ 175,537,221 Accounts receivable, net of allowance of $ 7,818,702 and $ 7,377,389 as of December 31, 2022 and December 31, 2021, respectively 102,995,397 78,383,614 Prepaid expenses and other current assets 6,269,841 2,111,656 Assets held for sale 4,480,344 - Total current assets 271,080,905 256,032,491 Property and equipment, net 21,258,175 12,733,889 Intangibles, net 22,969,246 10,678,049 Goodwill 38,900,413 8,686,966 Restricted cash 6,773,751 3,568,509 Operating lease right-of-use assets 9,074,277 4,195,682 Finance lease right-of-use assets 9,039,663 9,307,113 Equity method investment 597,977 589,058 Deferred tax assets 9,957,967 - Other assets 3,625,254 3,810,895 Total assets $ 393,277,628 $ 309,602,652 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 21,582,866 $ 15,833,970 Accrued liabilities 31,573,031 35,110,877 Line of credit - 25,881 Notes payable, current 664,913 600,449 Due to seller 26,244,133 1,571,419 Contingent consideration 10,555,540 - Operating lease liability, current 2,325,024 1,461,335 Liabilities held for sale 4,480,344 - Finance lease liability, current 2,732,639 3,271,990 Total current liabilities 100,158,490 57,875,921 Notes payable, non-current 1,236,601 1,302,839 Operating lease liability, non-current 7,040,982 2,980,946 Finance lease liability, non-current 5,914,164 6,867,420 Warrant liabilities - 13,518,502 Total liabilities 114,350,237 82,545,628 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 3 DocGo Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (CONTINUED) December 31, 2022 2021 Commitments and contingencies STOCKHOLDERS’ EQUITY: Class A common stock ($ 0.0001 par value; 500,000,000 shares authorized as of December 31, 2022 and December 31,2021; 102,411,162 and 100,133,953 shares issued and outstanding as of December 31, 2022 and December 31,2021, respectively) 10,241 10,013 Additional paid-in-capital 301,451,435 283,161,216 Accumulated deficit ( 28,972,216 ) ( 63,556,714 ) Accumulated other comprehensive income/(loss) 741,206 ( 32,501 ) Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries 273,230,666 219,582,014 Noncontrolling interests 5,696,725 7,475,010 Total stockholders’ equity 278,927,391 227,057,024 Total liabilities and stockholders’ equity $ 393,277,628 $ 309,602,652 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 4 DocGo Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Years Ended December 31 2022 2021 Revenue, net $ 440,515,746 $ 318,718,580 Expenses: Cost of revenues (exclusive of depreciation and amortization, which is shown separately below) 285,794,520 208,971,062 Operating expenses: General and administrative 103,403,416 74,892,828 Depreciation and amortization 10,565,578 7,511,579 Legal and regulatory 8,780,590 3,907,660 Technology and development 5,384,853 3,320,183 Sales, advertising and marketing 4,755,161 4,757,970 Total expenses 418,684,118 303,361,282 Income from operations 21,831,628 15,357,298 Other income (expenses): Interest income (expense), net 762,685 ( 763,030 ) Gain on remeasurement of warrant liabilities 1,127,388 5,199,496 Gain (loss) on equity method investment 8,919 ( 66,818 ) Gain on remeasurement of finance leases 1,388,273 - Gain on bargain purchase 1,593,612 - Gain from PPP loan forgiveness - 142,667 Loss on disposal of fixed assets ( 21,173 ) ( 34,342 ) Goodwill impairment ( 2,921,958 ) - Other expenses ( 987,482 ) ( 40,086 ) Total other income 950,264 4,437,887 Net income before income tax benefit (expense) 22,781,892 19,795,185 Benefit (provision) for income tax 7,961,321 ( 615,697 ) Net income 30,743,213 19,179,488 Net loss attributable to noncontrolling interests ( 3,841,285 ) ( 4,564,270 ) Net income attributable to stockholders of DocGo Inc. and Subsidiaries 34,584,498 23,743,758 Other comprehensive income Foreign currency translation adjustment 773,707 16,038 Total comprehensive income $ 35,358,205 $ 23,759,796 Net income per share attributable to DocGo Inc. and Subsidiaries – Basic $ 0.34 $ 0.30 Weighted-average shares outstanding – Basic 101,228,369 80,293,959 Net income per share attributable to DocGo Inc. and Subsidiaries – Diluted $ 0.34 $ 0.25 Weighted-average shares outstanding – Diluted 102,975,831 94,863,613 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 5 DocGo Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Accumulated Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in- Accumulated Other Comprehensive Noncontrolling Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Income Interests Equity Balance – December 31, 2020 28,055 $ - 35,497 $ - 55,008 $ - $ 142,346,852 $ ( 87,300,472 ) $ ( 48,539 ) $ 11,949,200 $ 66,947,041 Effect of reverse acquisition 18,099,548 - 22,900,719 - 35,488,938 - - - - - - Conversion of share due to merger recapitalization ( 18,099,548 ) - ( 22,900,719 ) 7,649 ( 35,488,938 ) - - - - - 7,649 Effect of reverse acquisition - - 76,489,205 7,649 - - 142,346,852 ( 87,300,472 ) ( 48,539 ) 11,949,200 66,954,690 Share issued for services - - 171,608 17 - - - - - - 17 Exercise of cashless warrants - - 1,817,507 182 - - - - - - 182 Issuance of shares net redemption and issuance costs of $ 9,566,304 - - 5,297,097 530 - - 43,404,558 - - - 43,405,088 PIPE, net of issuance costs of $ 10,396,554 - - 12,500,000 1,250 - - 114,602,318 - - - 114,603,568 Exercise of stock options - - 1,235,131 123 - - 628,469 - - - 628,592 Stock based compensation - - - - - - 1,376,353 - - - 1,376,353 Fair value of Warrants from reverse acquisition - - - - - - ( 18,717,998 ) - - - ( 18,717,998 ) U.K. Ltd. Shares purchase (Note 4) - - 50,192 5 - - ( 479,336 ) - - ( 242,945 ) ( 722,276 ) Sponsor Earnout shares - - 2,573,213 257 - - - - - - 257 Noncontrolling interest contribution - - - - - - - - - 333,025 333,025 Foreign currency translation - - - - - - - - 16,038 - 16,038 Net loss attributable to Noncontrolling interests - - - - - - - - - ( 4,564,270 ) ( 4,564,270 ) Net income attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - 23,743,758 - - 23,743,758 Balance – December 31, 2021 - $ - 100,133,953 $ 10,013 - $ - $ 283,161,216 $ ( 63,556,714 ) $ ( 32,501 ) $ 7,475,010 $ 227,057,024 Equity cost - - - - - - ( 19,570 ) - - - ( 19,570 ) Noncontrolling interest contribution - - - - - - - - - 2,063,000 2,063,000 Common stock repurchased - - ( 536,839 ) ( 54 ) - - ( 3,731,658 ) - - - ( 3,731,712 ) Exercise of stock options - - 1,053,401 105 - - 1,980,674 - - - 1,980,779 Cashless exercise of options - - 354,276 36 - - ( 230 ) - - - ( 194 ) Stock based compensation - - - - - - 7,183,992 - - - 7,183,992 Restricted stock units - - - - - - 495,579 - - - 495,579 Share warrants conversion - - 1,406,371 141 - - 12,381,432 - - - 12,381,573 Net loss attributable to Noncontrolling interests - - - - - - - - - ( 3,841,285 ) ( 3,841,285 ) Foreign currency translation - - - - - - - - 773,707 - 773,707 Net income attributable to stockholders of DocGo Inc. and Subsidiaries - - - - - - - 34,584,498 - - 34,584,498 Balance – December 31, 2022 - $ - 102,411,162 $ 10,241 - $ - $ 301,451,435 $ ( 28,972,216 ) $ 741,206 $ 5,696,725 $ 278,927,391 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 6 DocGo Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 30,743,213 $ 19,179,488 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 4,114,346 2,312,437 Amortization of intangible assets 3,214,814 1,845,193 Amortization of finance lease right-of-use assets 3,236,418 2,913,925 Loss on disposal of assets 21,173 34,342 Deferred tax asset ( 9,957,967 ) - Gain from PPP loan forgiveness - ( 142,667 ) (Loss) gain on equity method investment ( 8,919 ) 66,818 Bad debt expense 3,815,187 4,467,956 Stock based compensation 8,054,571 1,376,353 Gain on remeasurement of finance leases ( 1,388,273 ) - Gain on remeasurement of warrant liabilities ( 1,127,388 ) ( 5,199,496 ) Gain on bargain purchase ( 1,593,612 ) - Goodwill impairment 2,921,958 - Changes in operating assets and liabilities: Accounts receivable ( 8,415,793 ) ( 57,996,613 ) Cash held for sale 190,312 - Prepaid expenses and other current assets ( 4,181,035 ) ( 961,165 ) Other assets 1,557,655 ( 2,490,564 ) Accounts payable 3,637,305 11,879,850 Accrued liabilities ( 5,964,064 ) 20,766,723 Net cash provided by (used in) operating activities 28,869,901 ( 1,947,420 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ( 3,198,234 ) ( 4,808,409 ) Acquisition of intangibles ( 2,299,558 ) ( 1,849,136 ) Acquisition of businesses ( 32,953,179 ) ( 1,300,000 ) Proceeds from disposal of property and equipment 3,000 74,740 Acquisition of leased assets - ( 50,504 ) Investments in equity method investment - ( 655,876 ) Net cash used in investing activities ( 38,447,971 ) ( 8,589,185 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit - 8,000,000 Repayments of revolving line of credit ( 25,881 ) ( 8,000,000 ) Proceeds from FMC loan 1,000,000 - Repayments of FMC loan ( 1,000,000 ) - Repayments of notes payable ( 925,151 ) ( 604,826 ) Due to seller ( 2,535,521 ) ( 595,528 ) Noncontrolling interest contributions 2,063,000 333,025 Proceeds from exercise of stock options 1,980,585 628,592 Acquisition of U.K. Ltd remaining 20% shares - ( 479,331 ) Common stock repurchased ( 3,731,712 ) - Equity costs ( 19,570 ) - Payments on obligations under finance lease ( 2,985,568 ) ( 2,216,309 ) Issuance costs related to merger recapitalization - ( 19,961,460 ) Proceeds from issuance of Class A common stock, net of transaction cost - 178,102,313 Net cash (used in) provided by financing activities ( 6,179,818 ) 155,206,476 Effect of exchange rate changes on cash and cash equivalents 761,232 ( 21,414 ) Net increase in cash and restricted cash ( 14,996,656 ) 144,648,457 Cash and restricted cash at beginning of period 179,105,730 34,457,273 Cash and restricted cash at end of period $ 164,109,074 $ 179,105,730 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 7 DocGo Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Years Ended December 31, 2022 2021 Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $ 197,005 $ 315,272 Cash paid for interest on finance lease liabilities $ 559,596 $ 525,476 Cash paid for income taxes $ 1,505,235 $ 615,697 Right-of-use assets obtained in exchange for lease liabilities $ 5,035,201 $ 5,271,662 Fixed assets acquired in exchange for notes payable $ 923,377 $ 1,113,102 Gain from PPP loan forgiveness $ - $ 142,667 Due to Seller non cash $ - $ 434,494 Reconciliation of cash and restricted cash Cash $ 157,335,323 $ 175,537,221 Restricted Cash 6,773,751 3,568,509 Total cash and restricted cash shown in Consolidated Statements of Cash Flows $ 164,109,074 $ 179,105,730 Non-cash investing activities Acquisition of business funded by acquisition payable 46,324,909 1,028,942 The accompanying notes are an integral part of these Consolidated Financial Statements. F- 8 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Organization and Business Operations 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, the Company 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 concurrent PIPE private placement of shares of common stock to certain investors at a price of $ 10.00 per share (the “PIPE Financing), net of $ 10.4 million in transaction costs. These 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 Subsidiaries (collectively, the “Company”) is a healthcare transportation and Mobile Health services company (“Mobile Health”) that uses proprietary dispatch and communication technology to provide quality healthcare transportation and healthcare services in major metropolitan cities in the United States and the United Kingdom. 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 United States as well as within England and Wales, United Kingdom. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Consolidated Financial Statements include the accounts and operations of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests (“NCI”) on the Consolidated Balance Sheets represents the portion of consolidated joint ventures and a variable interest entity in which the Company does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated. F- 9 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Consolidated Financial Statements include the accounts of DocGo Inc. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in these Consolidated Financial Statements. The Company holds a variable interest which contracts with physicians and other health professionals in order to provide services to the Company. MD1 Medical Care P.C. (“MD1”) is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impacts the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of MD1 and funds and absorbs all losses of the VIE and appropriately consolidates MD1. Total revenue for the VIE amounted to $ 2,857,463 as of December 31, 2022. Net loss for the VIE was $ 373,456 as of December 31, 2022. The VIE’s total assets, all of which were current, amounted to $ 610,553 on December 31, 2022. Total liabilities, all of which were current for the VIE, was $ 320,424 on December 31, 2022. The VIE’s total stockholders’ deficit was $ 290,130 on December 31, 2022. The Company made payments of $ 3,018,119 and $ 1,746,736 to MD1 and its affiliates during the years ended December 31, 2022 and 2021, respectively. 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 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 for the year of 2022 was $ 773,707 . For the same period of 2021, it was 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. F- 10 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Major Customers The Company had one customer that accounted for approximately 35 % of sales and 45 % of net accounts receivable, for the year ended December 31, 2022. The Company had one customer that accounted for approximately 23 % of revenues and 26 % of net accounts receivable, and another customer that accounted for 26 % of revenues and 24 % of net accounts receivable for the year ended December 31, 2021. Major Vendor The Company had one vendor that accounted for approximately 12 % of total cost for the year ended December 31, 2022. The Company expects to maintain this relationship with the vendor and believe the services provided from this vendor are available from alternatives sources. The Company had one vendor that accounted for approximately 11 % of total cost for the years ended December 31, 2021. 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 its cash and cash equivalents with financial institutions in the United States. The accounts at financial institutions in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) and are in excess of FDIC limits. The Company had cash balances of approximately $ 8,125,966 and $ 803,000 with foreign financial institutions on December 31, 2022 and 2021, respectively. F- 11 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Restricted Cash Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash in the 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 self-insurance exposures, transportation equipment leases and a standby letter of credit as required by its insurance carrier (see Notes 9 and 15). 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 Consolidated Balance Sheets. 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 December 31, 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 Consolidated Statement of Operations and Consolidated Balance Sheets in the period of the change. During the year ended December 31, 2022, the Company recorded $ 4,000,000 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. In relation to the acquisition of Exceptional, the Company also agreed to pay up to $ 2,000,000 upon meeting certain performance conditions within two years of the Closing Date. The estimated Contingent consideration amount for Exceptional was $ 1,080,000 as of December 31, 2022. For Location Medical Services, LLC, the Company also recorded $ 2,475,540 estimated Contingent consideration in relation to the acquisition to be paid upon LMS meeting certain performance conditions in 2023. For Government Medical Services, an amount of $ 3,000,000 is recorded as Contingent consideration to be paid upon GMS meeting certain performance conditions within a year of the Closing Date (see Note 4). F- 12 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 receivables are periodically evaluated for collectability based on past credit history with payors and their current financial condition. Changes in the estimated collectability of account 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 receivables. 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 Consolidated Statement of Operations. 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 Lives Buildings 39 years Office equipment and furniture 3 years Vehicles 2 - 8 years Medical equipment 5 years Leasehold improvements Shorter of useful life of asset or lease term Expenditures for repairs and maintenance are charged to expense 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 charged to expense 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 lives 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 acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including NCI, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. F- 13 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. If the business combination provides for Contingent consideration, the Company records the Contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of Contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: 1) if the Contingent consideration is classified as equity, the Contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the Contingent consideration is classified as a liability, the changes in fair value are recognized in earnings. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expenses acquisition-related costs and fees associated with business combinations. The estimated fair value of net assets to be acquired, including the allocation of the fair value to identifiable assets and liabilities, is determined using established valuation techniques. Management uses assumptions on the basis of historical knowledge of the business and projected financial information of the target. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values. 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. In 2022, the Company reassigned all the assets at Ambulnz Health, LLC (“Health”) to Assets held for sale as a result of an assignment for the benefit of creditors (“ABC”) transaction. We have also recognized a non-cash charge of $ 2,921,958 for its Goodwill impairment for the year ended December 31, 2022 in the Consolidated Statements of Operations. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the reporting unit level annually on December 31 or more frequently if events or changes in circumstances indicate that it is more likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization, as indicated by our publicly quoted share price, below our net book value. Line of Credit The costs associated with the line of credit are deferred and recognized over the term of the Line of credit as interest expense. Derivative Warrant Liabilities 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. F- 14 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 statement of operations. For details regarding the related party transactions that occurred during the periods ended December 31, 2022 and 2021, refer to Note 17. Revenue Recognition On January 1, 2019, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), as amended. To determine revenue recognition for contractual arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when (or as) the relevant performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company provides to the customer. The Company generates revenues from the provision of (1) ambulance and medical transportation services (“Transportation Services”) and (2) Mobile Health services. The customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled, therefore the Company satisfies performance obligations immediately. The Company has utilized the “right to invoice” expedient which allows an entity to recognize revenue in the amount of consideration to which the entity has the right to invoice when the amount that the Company has the right to invoice corresponds directly to the value transferred to the customer. Revenues are recorded net of an estimated contractual allowances for claims subject to contracts with responsible paying entities. The Company estimates contractual allowances at the time of billing based on contractual terms, historical collections, or other arrangements. All transaction prices are fixed and determinable which includes a fixed base rate, fixed mileage rate and an evaluation of historical collections by each payer. Nature of Our Services Revenue is primarily derived from: i. Transportation Services : These services encompass both emergency response and non-emergency transport services. Non-emergency transport services include ambulance transports and wheelchair transports. Net revenue from transportation services is derived from the transportation of patients based on billings to third party payors and healthcare facilities. ii. Mobile Health Services : These services include services performed at home and offices, COVID-19 testing, 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. F- 15 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As the performance associated with such services is known and quantifiable at the end of a period in which the services occurred (i.e., monthly or quarterly), revenues are typically recognized in the respective period performed. The typical billing cycle for Transportation Services and Mobile Health services is same day to 5 days with payments generally due within 30 days. For Transportation Services, the Company estimates the amount of revenues unbilled at month end and recognizes such amounts as revenue, based on available data and customer history. The Company’s Transportation Services and Mobile Health services each represent a single performance obligation. Therefore, allocation is not necessary as the transaction price (fees) for the services provided is standard and explicitly stated in the contractual fee schedule and/or invoice. The Company monitors and evaluate all contracts on a case-by-case basis to determine if multiple performance obligations are present in a contractual arrangement. 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. Disaggregation of revenue In the following table, revenue is disaggregated by as follows: Years Ended December 31, Revenue Breakdown 2022 2021 Primary Geographical Markets United States $ 419,578,082 $ 309,218,594 United Kingdom 20,937,664 9,499,986 Total revenue $ 440,515,746 $ 318,718,580 Major Segments/Service Lines Transportation Services $ 114,624,306 $ 84,268,817 Mobile Health 325,891,440 234,449,763 Total revenue $ 440,515,746 $ 318,718,580 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 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 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. The following table presents the calculation of basic and diluted net income per share to stockholders of DocGo Inc. and Subsidiaries: For the years ending December 31, 2022 2021 Net income attributable to stockholders of DocGo Inc. and Subsidiaries: $ 34,584,498 $ 23,743,758 Weighted-average shares - basic 101,228,369 80,293,959 Effect of dilutive options 1,747,462 14,569,654 Weighted-average shares - dilutive 102,975,831 94,863,613 Net income share - basic $ 0.34 $ 0.30 Net income share - diluted $ 0.34 $ 0.25 Anti-dilutive employee share-based awards excluded 9,000,750 - F- 16 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Consolidated Balance Sheets. Changes in value of RND are recorded in “Gain (loss) on equity method investment” on the Consolidated Statements of Operations. 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. 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 Consolidated Balance Sheets. Changes in value of NPA are recorded in “Gain (loss) on equity method investment” on the Consolidated Statements of Operations. 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. As of December 31, 2021 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 ASC 842, Leases . The Company adopted FASB ASC 842, Leases , (“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 and 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. F- 17 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income Taxes Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or its tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Recently Issued Accounting Standards Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, which requires measurement and recognition of expected credit losses for financial assets held. Following the effective date philosophy for all other entities in ASU 2019-10, which includes smaller reporting companies (SRCs) and emerging growth companies (EGC), this guidance is effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. The standard is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is in the process of evaluating the potential impact of adopting this new accounting standard on our Consolidated Financial Statements and related disclosures. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures . The guidance is intended to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The standard eliminates the recognition and measurement guidance on TDRs for creditors that have adopted ASC 326, Financial Instruments — Credit Losses and requires them to make enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The new guidance also requires public business entities to present current-period gross write-offs (on a current year-to-date basis for interim-period disclosures) by year of origination in their vintage disclosures. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements. In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Debt Restructurings Disclosure of Supplier Finance Program Obligations . The guidance requires entities to disclose the key terms of supplier finance programs they use in connection with the purchase of goods and services along with information about their obligations under these programs, including a rollforward of those obligations. The guidance is not applicable to the Company. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting provided optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU was effective upon issuance and generally could be applied through December 31, 2022. Because the current relief in ASC 848, Reference Rate Reform may not cover a period of time during which a significant number of modifications may take place, the amendments in ASU No. 2022-06 defer the sunset date from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848. The ASU is effective upon issuance. The guidance is not applicable to the Company. F- 18 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Property and Equipment, net Property and equipment, net, as of December 31, 2022 and 2021, respectively, are as follows: December 31, 2022 December 31, 2021 Office equipment and furniture $ 2,686,065 $ 1,977,808 Buildings 527,283 527,284 Land 37,800 37,800 Transportation equipment 20,773,862 13,772,251 Medical equipment 5,177,520 3,949,566 Leasehold improvements 579,658 616,446 29,782,188 20,881,155 Less: Accumulated depreciation ( 8,524,013 ) ( 8,147,266 ) Property and equipment, net $ 21,258,175 $ 12,733,889 The Company recorded depreciation expenses of $ 4,114,346 and $ 2,312,437 as of December 31, 2022 and 2021, respectively. The total disposal for the years ended December 31, 2022 and 2021 were $ 50,353 and $ 0 , respectively. 4. Acquisitions 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 $ 20,338,789 in cash consideration. Holdings also agreed to pay GMS an additional $ 3,000,000 upon GMS meeting certain performance conditions within a year of the Closing Date. Acquisition costs are included in general and administrative expenses and totaled $ 1,001,883 for the twelve months ended December 31, 2022. 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 $13,708,333 consisting of $7,708,333 in cash at closing and $6,000,000 payable over a 24 month period. Holdings also agreed to pay an estimated $1,080,000 Contingent consideration upon Exceptional meeting certain performance conditions in 2023. Exceptional is in the business of providing medical transportation services. Acquisition costs are included in general and administrative expenses totaled $56,571 for the twelve months ended December 31, 2022. F- 19 DocGo Inc. and Subsidiaries NOTES TO 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 (“RB”) in exchange for $11,422,252 consisting of $7,422,252 in cash at closing and $4,000,000 of estimated Contingent consideration to be paid out over 24 months based on performance of certain obligations. RB is in the business of providing medical transportation services. Acquisition costs are included in general and administrative expenses totaled $230,175 for the twelve months ended December 31, 2022. Community Ambulance Services LTD On October 12, 2022, the Company acquired Community Ambulance Service Ltd (“CAS”), a company located in United Kingdom, in exchange for approximately $ 5,541,269 in cash. The net assets acquired through the CAS acquisition was $ 7,134,881 mainly from the vehicles with high fair market value, which directly lead to a Gain on bargain purchase of $ 1,593,612 . CAS 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. Acquisition costs are included in general and administrative expenses totaling $ 171,779  for the three and twelve months ended December 31, 2022, respectively. F- 20 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Location Medical Services, LLC On December 9, 2022, Holdings through its indirect wholly owned subsidiary, Ambulnz U.K. Ltd., closed acquiring 100 % of the outstanding shares of common stock of Location Medical Services, LLC (“LMS”). The aggregate purchase price consisted of $ 302,450 in cash consideration. The Company also agreed to pay LMS an additional $ 11,279,201 deferred consideration and an estimated $ 2,475,540 Contingent consideration upon LMS meeting certain performance conditions in 2023. Acquisition costs are included in general and administrative expenses and totaled $ 4,200 for the three and twelve months ended December 31, 2022, respectively. The following table presents the assets acquired and liabilities assumed at the date of the acquisitions: Location Medical Services Community Ambulance Service Ryan Brothers Exceptional Medical Transport Government Medical Services Total Consideration: Cash consideration $ 302,450 $ 5,541,269 $ 7,422,252 $ 6,375,000 $ 20,338,789 $ 39,979,760 Deferred consideration 11,279,201 - - 6,000,000 - 17,279,201 Amounts held under an escrow account - - - 1,333,333 - 1,333,333 Contingent consideration 2,475,540 - 4,000,000 1,080,000 3,000,000 10,555,540 Total consideration 14,057,191 5,541,269 11,422,252 14,788,333 23,338,789 69,147,834 Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ 5,404,660 $ 892,218 $ 620,248 $ 299,050 $ 1,005,453 $ 8,221,629 Accounts receivable 623,635 7,002,325 5,844,494 3,785,490 3,975,160 21,231,104 Other current assets 134,216 1,167,326 136,157 - 30,734 1,468,433 Property, plant and equipment 519,391 4,548,956 2,125,134 2,450,900 4,092 9,648,473 Intangible assets 2,419,600 - 387,550 125,000 10,305,000 13,237,150 Total identifiable assets acquired 9,101,502 13,610,825 9,113,583 6,660,440 15,320,439 53,806,789 Accounts payable $ 40,447 $ 2,036,714 $ 44,911 $ - $ 137,239 $ 2,259,311 Due to seller - - 5,844,494 4,084,540 - 9,929,034 Other current liabilities 1,012,992 4,439,230 286,792 - 562,809 6,301,823 Total liabilities assumed 1,053,439 6,475,944 6,176,197 4,084,540 700,048 18,490,168 Goodwill/(Gain on bargain purchase) 6,009,128 ( 1,593,612 ) 8,484,866 12,212,433 8,718,398 33,831,213 Total purchase price $ 14,057,191 $ 5,541,269 $ 11,422,252 $ 14,788,333 $ 23,338,789 $ 69,147,834 Proforma disclosures The following unaudited pro forma combined financial information for the fiscal years ended December 31, 2022 and 2021 gives effect to the acquisitions disclosed above as if they had occurred on January 1, 2021. The pro forma information is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company. 2022 2021 Revenue $ 523,948,302 $ 451,696,206 Net Income 38,164,837 38,743,940 The unaudited pro forma combined financial information presented above includes the accounting effects of the acquisitions, including, to the extent applicable, amortization charges from acquired intangible assets; depreciation of property, plant and equipment that have been revalued; transaction costs; interest expense; and the related tax effects. F- 21 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. ABC Transaction and Held for Sale During the year 2022, the Company started discussions regarding the potential liquidation process of Health through an assignment for the benefit of creditors (“ABC”), with a targeting timeline for the transaction to be fully closed in December 2022. The conversation involved operations, human resources, external legal counsel, and Amb, LLC (a California limited liability company, the “Assignee”). It was the management’s intention and decision that the ABC transaction will be commenced and completed by year end 2022. Due to operational processes, the filing was extended and finalized on February 3, 2023. On February 3, 2023, Health commenced the ABC pursuant to California law. An ABC is a liquidation process governed by state law (California law in this instance) that is an alternative to a bankruptcy case under federal law. Prior to commencing the ABC, Health ceased business operations and all of its employees were terminated and treated in accordance with California law. In the ABC, all of Health’s assets were transferred to the Assignee who acts as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee. The Assignee is responsible for liquidating the assets. Similar to a bankruptcy case, there is a claims process. Creditors of Health will receive notice of the ABC and a proof of claim form and are required to submit a proof of claim in order to participate in distribution of net liquidation proceeds by the Assignee. As of December 31, 2022, Health met the criteria to be classified as held for sale. As the entity has met this criteria, the Company is required to record the respective assets and liabilities at the lower of carrying value or fair value less any costs to sell, and present the related assets and liabilities as separate line items in the Consolidated Balance Sheets. The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in the Company’s Consolidated Balance Sheets as of December 31, 2022: December 31, 2022 Pre ABC Adjustment Adjustment Post ABC Adjustment ASSETS Current assets: Cash and cash equivalents $ ( 190,312 ) $ 190,312 $ - Accounts receivable, net 1,219,927 ( 1,219,927 ) - Prepaid expenses and other current assets 22,850 ( 22,850 ) - Assets held for sale - 4,480,344 4,480,344 Total current assets 1,052,465 3,427,879 4,480,344 Property and equipment, net 1,107,279 ( 1,107,279 ) - Intangibles, net 30,697 ( 30,697 ) - Goodwill 5,085,689 ( 5,085,689 ) - Operating lease right-of-use assets 29,753 ( 29,753 ) - Intercompany receivables 17,957,076 - 17,957,076 Other assets 96,419 ( 96,419 ) - Total assets $ 25,359,378 $ ( 2,921,958 ) $ 22,437,420 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 196,122 $ ( 196,122 ) $ - Accrued liabilities 4,250,603 ( 4,250,603 ) - Intercompany payables 59,404,839 - 59,404,839 Operating lease liability, current 33,619 ( 33,619 ) - Liabilities held for sale - 4,480,344 4,480,344 Total current liabilities 63,885,183 - 63,885,183 Total liabilities $ 63,885,183 $ - $ 63,885,183 STOCKHOLDERS’ EQUITY: Accumulated deficit $ ( 38,525,805 ) $ ( 2,921,958 ) $ ( 41,447,763 ) Total stockholders’ equity attributable to DocGo Inc. and Subsidiaries ( 38,525,805 ) ( 2,921,958 ) ( 41,447,763 ) Noncontrolling interests - - - Total stockholders’ equity $ ( 38,525,805 ) $ ( 2,921,958 ) $ ( 41,447,763 ) Total liabilities and stockholders’ equity $ 25,359,378 $ ( 2,921,958 ) $ 22,437,420 The Intercompany receivables and Intercompany payables are eliminated in the Company’s Consolidated Balance Sheets. F- 22 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. Goodwill In connection with the ABC transaction, the Company has evaluated its Goodwill balances as of December 31, 2022 and has determined that there is an impairment of Goodwill related to its Health reporting unit. The impairment is primarily due to the ABC filing. As a result of this impairment, the Company has recognized a non-cash charge of $ 2,921,958 in the year ended December 31, 2022 in the Consolidated Statements of Operations. The charge was recorded as part of Other Income in the Company’s Consolidated Statements of Operations and has no impact on its cash flow, liquidity, or compliance with debt covenants. Additionally, the Company recorded Goodwill in connection with its acquisitions, the total Goodwill acquired in 2022 was $ 35,299,136 . The Company also updated the carrying value of the Goodwill in its Consolidated Balance Sheets to reflect the additional Goodwill and the impairment charge. The carrying value of Goodwill amounts $ 38,900,413 , the changes in the carrying value of Goodwill for the period ended December 31, 2022 are as noted in the tables below: Carrying Value Balance as of December 31, 2020 $ 6,610,557 Goodwill acquired during the period 2,076,409 Balance as of December 31, 2021 $ 8,686,966 Goodwill acquired during the period 35,299,136 Impairment during the year ( 2,921,958 ) Reassignment of Goodwill to Assets held for sale ( 2,163,731 ) Balance as of December 31, 2022 $ 38,900,413 7. Intangibles The Company recorded amortization expenses of $ 3,214,814 and $ 1,845,193 as of December 31, 2022 and 2021, respectively. December 31, 2022 Estimated Useful Life (Years) Gross Carrying Amount Additions Accumulated Amortization Net Carrying Amount Patents 15 years $ 48,668 $ 14,155 $ ( 10,116 ) $ 52,707 Computer software 5 years 294,147 ( 46,319 ) ( 224,886 ) 22,942 Operating licenses Indefinite 8,375,514 423,490 - 8,799,004 Internally developed software 4 - 5 years 6,013,513 2,270,545 ( 6,378,911 ) 1,905,147 Material contracts Indefinite - 62,550 - 62,550 Customer relationship 8 - 9 years - 12,397,954 ( 594,301 ) 11,803,653 Trademark 8 years - 326,646 ( 3,403 ) 323,243 $ 14,731,842 $ 15,449,021 $ (7,211,617 ) $ 22,969,246 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 F- 23 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The estimated future amortization expense of definite life intangible assets as of December 31, 2022 is as follows: Amortization Expense 2023 $ 2,494,148 2024 1,917,338 2025 1,867,861 2026 1,453,827 2027 1,453,109 Thereafter 4,921,409 Total $ 14,107,692 8. Accrued Liabilities Accrued liabilities consisted of the following at the dates indicated: December 31, 2022 December 31, 2021 Accrued bonus $ 1,500,717 $ 7,260,456 Accrued lab fees 584,203 4,885,539 Accrued payroll 4,245,838 3,539,301 Medicare advance - 975,415 FICA/Medicare liability 555,166 739,629 Accrued general expenses 11,436,462 3,497,418 Accrued subcontractors 8,101,150 9,564,833 Accrued fuel and maintenance 253,243 450,842 Accrued workers compensation and insurance liabilities 3,766,469 2,259,571 Other current liabilities 706,528 736,021 Accrued legal fees 344,417 1,143,629 Credit card payable 78,838 58,223 Total accrued liabilities $ 31,573,031 $ 35,110,877 9. 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 (7.75% as of March 10, 2023), 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 ($ 12,000,000 ) 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. In December 2022, the Company did not renew the agreement, and repaid the outstanding balance. 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. As of December 31, 2022, the outstanding balance of the line of credit is $ 0 . F- 24 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. Notes Payable The Company has various loans with finance companies with monthly installments aggregating $ 76,546 , inclusive of interest ranging from 2.5 % through 8 %. The notes mature at various times through 2027 and are secured by transportation equipment. The following table summarizes the Company’s notes payable: December 31, 2022 December 31, 2021 Equipment and financing loans payable, between 2.5 % and 8 % interest and maturing between January 2022 and October 2027 $ 1,901,514 $ 1,903,288 Loan received pursuant to the PPP Term Note - - Total notes payable 1,901,514 1,903,288 Less: current portion of notes payable $ 664,913 $ 600,449 Total non-current portion of notes payable $ 1,236,601 $ 1,302,839 Interest expenses were $ 117,664 and $ 61,324 for the periods ended December 31, 2022 and 2021, respectively. Future minimum annual maturities of notes payable as of December 31, 2022 are as follows: Notes Payable 2023 $ 563,366 2024 443,416 2025 425,863 2026 345,557 Thereafter 123,312 Total maturities $ 1,901,514 Current portion of notes payable ( 664,913 ) Non-current portion of notes payable $ 1,236,601 11. Derivative Warrant Liabilities For the year ended December 31, 2021, the Company determined the fair value of its Public Warrants, which were previously traded in active markets, using quoted market prices for identical instruments. Accordingly, the Public Warrants were classified as Level 1 financial instruments. As of December 31, 2021, there were 3,833,333 Public Warrants outstanding at a fair value of $ 8.1 million. Because the transfer of Private Warrants to anyone outside of a small group of individuals constituting the sponsors of DocGo would result in the Private Warrants having substantially the same terms as the Public Warrants, management determined that the fair value of each Private Warrant was the same as that of a Public Warrant, with an insignificant adjustment for marketability restrictions. Accordingly, the Private Warrants were classified as Level 1 financial instruments. As of December 31, 2021, 2,533,333 Private Warrants remained outstanding at a fair value of $ 5.4 million. Due to fair value changes throughout the year ended December 31, 2021, we recorded a gain on remeasurement of warrant liabilities of $ 5.2 million. As of December 31, 2022, the Company recorded a gain of approximately $ 1.1 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. On August 15, 2022, the Company announced the redemption of all of its outstanding warrants under the Warrant Agreement, dated as of October 14, 2020, by and between Motion Acquisition Corp. (“Motion”) and Continental Stock Transfer & Trust Company, as warrant agent, as part of the units sold in Motion’s initial public offering, on the redemption date of September 16, 2022 (the “Redemption Date”). Warrants surrendered for exercise on a cashless basis resulted in the issuance of 1,406,371 shares. A total of 68,514 warrants were not surrendered on the Redemption Date and were redeemed for $ 0.10 per warrant. F- 25 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. 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. Operating results for the business segments of the Company are as follows: Transportation Services Mobile Health Services Total For the Year Ended December 31, 2022 Revenues $ 114,624,306 $ 325,891,440 $ 440,515,746 Income (loss) from operations ( 45,676,221 ) 67,507,849 21,831,628 Total assets 276,456,130 116,821,498 393,277,628 Depreciation and amortization expense 8,787,570 1,778,008 10,565,578 Stock compensation 2,013,643 6,040,928 8,054,571 Long-lived assets 32,302,611 50,825,223 83,127,834 For the Year Ended December 31, 2021 Revenues $ 84,268,817 $ 234,449,763 $ 318,718,580 Income (loss) from operations ( 26,365,962 ) 41,723,260 15,357,298 Total assets 229,206,964 80,395,688 309,602,652 Depreciation and amortization expense 5,508,679 2,002,900 7,511,579 Stock compensation 592,664 783,689 1,376,353 Long-lived assets 28,814,481 3,284,423 32,098,904 Long-lived assets include Property and equipment, Goodwill and Intangible assets. Geographic Information Revenues by geographic location included in Note 2. F- 26 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. 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 (“Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement. The Company’s 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 dividends 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-rate basis. 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 shares 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. 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 and fourth quarter of 2022, the Company repurchased 536,839 shares of its common stock for $ 3,731,712 . These shares were subsequently cancelled. There were no shares repurchased during the third quarter of 2022. The Program does not oblige 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. F- 27 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14. Stock Based Compensation Stock Options In 2021, the Company established the DocGo Inc. Equity incentive Plan (the “Plan”) replacing Ambulnz, Inc’s 2017 Equity Incentive Plan. The Plan reserved 16,607,894 shares of Class A common stock for issuance under the Plan. The Company’s stock options generally vest on various terms based on continuous services up to five years. The stock options are subject to time vesting requirements through 2026 and are nontransferable. Stock options granted have a maximum contractual term of 10 years. On December 31, 2022, approximately 2.6 million employee options had vested. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Management took the company specific volatility and 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 represents the period of time the instruments are expected to be outstanding. The Company bases 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 is zero based on the fact that the Company has not historically paid and does not intend to pay a dividend in the foreseeable future. Prior to the merger, the Company utilized contemporaneous valuations in determining the fair value of its shares at the date of option grants. 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 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. For certain stock options issued prior to the Merger, 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 include (a) the estimated time it would take for a Company stockholder to achieve marketability, and (b) the volatility of the Company’s business. Subsequent to the Merger, the Company utilized publicly available pricing. The following assumptions were used to compute the fair value of the sole stock option grant during the period ended December 31, 2022 and 2021: Years Ended December 31 2022 2021 Risk-free interest rate 0.71 % - 4.31 % 0.12 % - 0.67 % Expected term (in years) 6.25 1 - 5 Volatility 60 % - 69 % 63 % - 65 % Dividend yield 0 % 0 % The following table summarizes the Company’s stock option activity under the Plan for the period ended December 31, 2022: Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Balance as of December 31, 2020 4,635,898 $ 1.84 7.28 $ 8,129,671 Granted/ Vested during the year 5,495,095 2.88 9.80 - Exercised during the year ( 1,235,130 ) 0.50 4.32 - Cancelled during the year ( 472,891 ) 2.37 7.93 - Balance as of December 31, 2021 8,422,972 $ 6.21 8.77 $ 24,706,020 Granted/ Vested during the year 5,443,368 7.04 - - Exercised during the year ( 1,699,720 ) 2.03 - - Cancelled during the year ( 595,312 ) 8.28 - - Balance as of December 31, 2022 11,571,308 7.11 9.05 $ 39,389,063 Options vested and exercisable as of December 31, 2022 2,628,288 $ 6.15 8.02 $ 6,982,555 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 years ended December 31, 2022 and 2021 was $ 7.04 and $ 2.88 , respectively. On December 31, 2022 and December 31, 2021, the total unrecognized compensation related to unvested stock option awards granted was $ 41,666,564 and $ 20,792,804 , respectively, which the Company expects to recognize over a weighted-average period of approximately 2.16 years. F- 28 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Restricted Stock Units The fair value of restricted stock units (“RSUs”) is determined on the date of grant. The Company records compensation expenses in the Consolidated Statements of Operations and Comprehensive Income on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board of Directors ranges from one to four years . Activity under RSUs was as follows: RSUs Weighted- Average Grant Date Fair Value Per RSU Balance as of December 31, 2021 50,192 $ 9.97 Granted 311,637 8.17 Vested during the year ( 56,242 ) 5.86 Balance as of December 31, 2022 305,587 8.35 Vested and unissued as of December 31, 2022 56,242 5.86 Non-vested as of December 31, 2022 305,587 8.35 The total grant-date fair value of RSUs granted during the period ended December 31, 2022 was $ 2,547,498 . In 2022, the company entered into agreements to issue $ 535,000 in aggregate RSUs in 2023. The number of shares to be issued in 2023 will be based on the stock prices at stated dates in these agreements. For the year ended December 31, 2022, the Company recorded stock-based compensation expense related to RSUs of $ 870,579 . As of December 31, 2022, the Company had $ 2,177,713 in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.7 years. 15. 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 2029 . 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 the determination of 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. F- 29 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Lease Costs The table below comprise lease expenses for the periods ended December 31, 2022 and 2021, respectively: Components of total lease cost: December 31, 2022 December 31, 2021 Operating lease expense $ 2,294,636 $ 1,993,984 Short-term lease expense 1,201,622 1,012,260 Total lease cost $ 3,496,258 $ 3,006,244 Lease Position as of December 31, 2022 Right-of-use lease assets and lease liabilities for the Company’s operating leases were recorded in the Consolidated Balance Sheets as follows: December 31, 2022 December 31, 2021 Assets Lease right-of-use assets $ 9,074,277 $ 4,195,682 Total lease assets $ 9,074,277 $ 4,195,682 Liabilities Current liabilities: Lease liability – current portion $ 2,325,024 $ 1,461,335 Noncurrent liabilities: Lease liability, net of current portion 7,040,982 2,980,946 Total lease liability $ 9,366,006 $ 4,442,281 Lease Terms and Discount Rate Weighted average remaining lease term (in years) – operating leases 5.57 Weighted average discount rate – operating leases 6.00 % F- 30 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Undiscounted Cash Flows Future minimum lease payments under the operating leases as of December 31, 2022 are as follows: Operating Leases 2023 $ 2,788,584 2024 2,346,789 2025 2,345,424 2026 1,716,501 2027 and thereafter 1,440,116 Total future minimum lease payments 10,637,414 Less effects of discounting $ ( 1,271,408 ) Present value of future minimum lease payments $ 9,366,006 Operating lease expenses approximated $ 2,294,636 and $ 1,993,984 for the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2022, the Company made $ 2,294,636 of fixed cash payments related to operating leases and $ 2,985,568 related to finance leases. Finance Leases The Company leases vehicles under a non-cancelable finance lease agreements with a liability of $ 8,646,803 and $ 10,139,410 for the periods ended December 31, 2022 and 2021, respectively (accumulated depreciation of $ 7,906,966 and $ 7,095,242 as of December 31, 2022 and 2021, respectively). Depreciation expenses for the vehicles under non-cancelable lease agreements amounted to $ 3,236,418 and $ 2,913,925 for the years ended December 31, 2022 and 2021, respectively. Gain on Lease Remeasurement In June 2022, the Company reassessed its finance lease estimates relating to vehicle mileage 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 Consolidated Statements of Operations and Comprehensive Income. Lease Payments The table below comprise lease payments for the periods ended December 31, 2022 and 2021, respectively: Components of total lease payment: December 31, 2022 December 31, 2021 Finance lease payment $ 2,985,568 $ 2,741,784 Short-term lease payment - - Total lease payments $ 2,985,568 $ 2,741,784 F- 31 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Lease Position as of December 31, 2022 Right-of-use lease assets and lease liabilities for the Company’s finance leases were recorded in the Consolidated Balance Sheets as follows: December 31, 2022 December 31, 2021 Assets Lease right-of-use assets $ 9,039,663 $ 9,307,113 Total lease assets $ 9,039,663 $ 9,307,113 Liabilities Current liabilities: Lease liability – current portion $ 2,732,639 $ 3,271,990 Noncurrent liabilities: Lease liability, net of current portion 5,914,164 6,867,420 Total lease liability $ 8,646,803 $ 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 December 31, 2022: Weighted average remaining lease term (in years) – finance leases 4 Weighted average discount rate – finance leases 6.0 % Undiscounted Cash Flows Future minimum lease payments under the finance leases as of December 31, 2022 are as follows: Finance Leases 2023 $ 3,156,298 2024 2,438,224 2025 2,159,661 2026 1,377,432 2027 and thereafter 468,651 Total future minimum lease payments 9,600,266 Less effects of discounting $ ( 953,463 ) Present value of future minimum lease payments $ 8,646,803 16. Other Income (Loss) The Company recognized $ 950,264 and 4,437,887 of Other income for the years ended December 31, 2022 and December 31, 2021, respectively, as follows: Years Ended December 31 2022 2021 Other income (expenses): Interest income (expense), net 762,685 ( 763,030 ) Gain on remeasurement of warrant liabilities 1,127,388 5,199,496 Gain (loss) on initial equity method investment 8,919 ( 66,818 ) Gain on remeasurement of finance leases 1,388,273 - Gain on bargain purchase 1,593,612 - Gain from PPP loan forgiveness - 142,667 Loss on disposal of fixed assets ( 21,173 ) ( 34,342 ) Goodwill impairment ( 2,921,958 ) - Other expenses ( 987,482 ) ( 40,086 ) Total other income 950,264 4,437,887 F- 32 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 17. 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 $ 960,081 and $ 702,083 for the years ended December 31, 2022, and 2021, respectively. PrideStaff provides subcontractor services for the Company. PrideStaff 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 $ 547,500 and $ 656,883 for the years ended December 31, 2022, and 2021, respectively. Included in Accounts payable were $ 86,555 and $ 230,517 due to related parties as of December 31, 2022, and 2021, respectively. 18. Income Taxes A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate consist of the following: For the Years Ended December 31, 2022 2021 Statutory federal income tax benefit 21.00 % 21.00 % Permanent items 0.56 % ( 2.71 )% State taxes, net of federal tax benefit 7.77 % 5.99 % Effects of Rates Different from Statutory 0.17 % ( 0.06 )% Rate Change 0.01 % 0.00 % Other ( 3.64 )% ( 0.71 )% Change in valuation allowance ( 54.94 )% ( 20.98 )% Income tax (benefit)/provision ( 29.07 )% 2.53 % F- 33 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The components of income tax provision (benefit) are as follows: For the Years Ended December 31, 2022 2021 Current: Federal $ 1,493,772 $ 295,956 State and local 502,872 319,741 Foreign - - $ 1,996,644 $ 615,697 Deferred: Federal $ ( 7,683,475 ) $ - State and local ( 2,649,791 ) - Foreign 375,301 - ( 9,957,965 ) - Total income tax (benefit) expense $ ( 7,961,321 ) $ 615,697 Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows: For the Years Ended December 31, 2022 2021 Deferred tax assets (liabilities): Net operating loss carryforwards $ 11,523,632 17,153,341 Allowance for doubtful accounts 893,329 874,029 Amortization ( 157,839 ) ( 582,284 ) Prepaid expenses ( 994,644 ) ( 411,798 ) Property and equipment ( 2,798,988 ) ( 2,245,003 ) Research and development expense 303,446 ( 580,497 ) Accrued bonus ( 184,724 ) 1,414,357 Stock compensation 2,780,019 883,317 Other 114,080 197,218 Net deferred tax assets 11,478,311 16,702,680 Valuation allowance ( 1,520,345 ) ( 16,702,680 ) Deferred tax assets, net of allowance $ 9,957,966 $ - The Company has determined, based upon available evidence, that it is more likely than not that all of the net deferred tax asset will not be realized and, accordingly, has provided a partial and a full valuation allowance against its net deferred tax asset as of December 31, 2022 and 2021, respectively. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential, and tax planning strategies in making these assessments. As of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards of approximately $ 35,289,184 and $ 53,573,046 , respectively. As of December 31, 2022 and 2021, the Company had approximately $ 1,520,345 and $ 202,965 of foreign net operating loss carryforwards, respectively. As of December 31, 2022 and 2021, the Company had state net operating loss carryforward of approximately $ 2,592,560 and $ 67,229,895 , respectively. The federal net operating loss carryforwards generated after December 31, 2017 of $ 35,289,184 carry forward infinitely. State and foreign net operating loss carryforwards generated in the tax years from 2017 to 2020 will begin to expire, if not utilized, by 2039. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions. F- 34 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The difference between the statutory income taxes on the Company’s pre-tax loss and the Company’s effective income tax rate during the years ended December 31, 2022 and 2021 is primarily due to a recorded valuation allowance. The valuation allowance for deferred tax assets as of December 31, 2022 and 2021 was $1,520,345 and $16,702,680, respectively. The net change in the total valuation allowance for the years ended December 31, 2022, and 2021 was a decrease of $15,182,335 and $5,328,621, respectively. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future table income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued total penalties and interest of $0 during the years ended December 31, 2022 and 2021 and in total, as of both December 31, 2022 and 2021 has recognized penalties and interest of $0. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2022, open years related to all jurisdictions are 2021, 2020, and 2019. The Company has no open tax audits with any taxing authority as of December 31, 2022. 19. 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 December 31, 2022 except for one subsidiary. Exceptional matched the 401K plan contributions amounting to $ 226,260 for the year ended December 31, 2022. 20. Legal Proceedings From time to time, the Company may be involved as a defendant in legal actions that arise in the normal course of its 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 Consolidated Financial Statements of the Company. The Company discloses 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 its Consolidated Financial Statements. As of December 31, 2022 and December 31, 2021, the Company recorded a liability of $ 1,000,000 , which represented an agreed-upon settlement of various class-based claims, both actual and potential, under California state law, as described in detail below. 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 $ 1,000,000 payment by the defendant parties, inclusive of administrative costs and fees. On September 9, 2022, the Court preliminarily approved the proposed settlement. A final approval hearing is currently scheduled for April 28, 2023. F- 35 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Risk and Uncertainties COVID-19 Risks, Impacts and Uncertainties 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 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 and fourth quarters of 2022. DocGo anticipates that COVID-19 will continue to account for a shrinking proportion of the Company’s revenues in 2023 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. 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. There were no Medicare accelerated payments reflected within accrued liabilities in the Consolidated Balance Sheets as of December 31, 2022, compared to $ 975,415 as of December 31, 2021. F- 36 DocGo Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 22. Subsequent Events On February 3, 2023, Health commenced the ABC pursuant to California law. An ABC is a liquidation process governed by state law (California law in this instance) that is an alternative to a bankruptcy case under federal law. Prior to commencing the ABC, Health ceased business operations and all of its employees were terminated and treated in accordance with California law. In the ABC, all of Health’s assets were transferred to the Assignee who acts as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee. The Assignee is responsible for liquidating the assets. Similar to a bankruptcy case, there is a claims process. Creditors of Health will receive notice of the ABC and a proof of claim form and are required to submit a proof of claim in order to participate in distribution of net liquidation proceeds by the Assignee. F- 37 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.